MUNICIPAL SECURITIES INCOME TRUST, 485APOS, 1997-09-10

MUNICIPAL SECURITIES INCOME TRUST
485APOS, 1997-09-10

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1933 Act File No. 33-36729
1940 Act File No. 811-6165

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
---

Pre-Effective Amendment No. ...........................

Post-Effective Amendment No. 23 .......................... X
---- ---

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
---

Amendment No. 22 ....................................... X
---- ---

MUNICIPAL SECURITIES INCOME TRUST

(Exact Name of Registrant as Specified in Charter)

Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)

(412) 288-1900
(Registrant's Telephone Number)

John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)

It is proposed that this filing will become effective:

_ immediately upon filing pursuant to paragraph (b).
on pursuant to paragraph (b).
X 60 days after filing pursuant to paragraph (a)(i).
on pursuant to paragraph (a)(i).
75 days after filing pursuant to paragraph (a)(ii).
on _________________ pursuant to paragraph (a)(ii) of Rule 485.

If appropriate, check the following box:

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

Registrant has filed with the Securities and Exchange Commission a declaration
pursuant to Rule 24f-2 under the Investment Company Act of 1940, and:

_ filed the Notice required by that Rule on ___________; or intends to file
the Notice required by that Rule on or about
; or
during the most recent fiscal year did not sell any securities pursuant
to Rule 24f-2 under the Investment Company Act of 1940, and, pursuant to Rule
24f-2(b)(2), need not file the Notice.

Copies to:

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

<PAGE>

CROSS-REFERENCE SHEET

This Amendment to the Registration Statement of MUNICIPAL SECURITIES
INCOME TRUST, which is comprised of five portfolios: (1) Federated Pennsylvania
Municipal Income Fund, (a) Class A Shares and (b) Class B Shares; (2) Federated
Ohio Municipal Income Fund, (a) Class F Shares; (3) Federated Michigan
Intermediate Municipal Trust; (4) Federated California Municipal Income Fund,
(a) Class F Shares; and (5) Federated New York Municipal Income Fund, (a) Class
F Shares, and is comprised of the following:

PART A. INFORMATION REQUIRED IN A PROSPECTUS.

Prospectus Heading
(Rule 404(c) Cross Reference)

Item 1. Cover Page................(1-5) Cover Page.
----------

Item 2. Synopsis..................(1-5) Summary of Fund Expenses.
--------

Item 3. Condensed Financial
Information...............(1-5) Financial Highlights;
(1-5) Performance Information.

Item 4. General Description of
Information ..............(1-5) General Information;
(1-5) Investment Information;
(1-5) Investment Objective;
(1-5) Investment Policies
(1-5) Investment Limitations;
(1-5) Investment
Risks; (1-5)
Non-Diversification;
(1) Pennsylvania
Municipal
Securities; (2)
Ohio Municipal
Securities; (3)
Michigan Municipal
Securities; (4)
California
Municipal
Securities; (5)
New York Municipal
Securities.

Item 5. Management of the Fund....(1-5) Trust Information; (1-5) Management
of the Trust; (1) Distribution of Shares;
(3) Distribution of Fund Shares; (2,4,5)
Distribution of
----------------------
Class F Shares; (1-5) Administration of the
Fund.

Item 6. Capital Stock and Other
Securities................(1) Investing in
the Fund; (1-5)
Certificates and
Confirmations;
(1-5) Dividends
and Distributions;
(1-5) Accounts
with Low Balances;
(1-5) Shareholder
Information; (1-5)
Voting Rights;
(1-5) Tax
Information; (1-5)
Federal Income
Tax; (1)
Pennsylvania
Taxes; (2) State
of Ohio Income
Taxes; (3)
Michigan Taxes;
(4) California
Income Taxes; (5)
New York Taxes;
(1-5) State and
Local Taxes.

<PAGE>

Item 7. Purchase of Securities
Being Offered.............(1) Expenses of the Fund; (1-5) Net Asset
Value; (1,3) Investing in the Fund;
(2,4,5) Investing in Class F Shares; (1)
How to Purchase Shares;
(1) Investing in Class A Shares;
(1) Investing in Class B Shares;
(2-5) Share
Purchases; (2-5)
Minimum Investment
Required; (2-5)
What Shares Cost;
(1-5)
Eliminating/Reducing
the Sales Charge;
(1-5) Systematic
Investment
Program; (1-5)
Certificates and
Confirmations;
(2,4,5)
Distribution of
Class F Shares.

Item 8. Redemption or Repurchase..(1-5) Exchange Privilege; (1,3)
Requirements for Exchange; (1,3)Tax
Consequences; (1,3) Making an Exchange;
(1) How to Redeem Shares; (2,4,5)
------------------------
Redeeming Class F Shares; (3) Redeeming
Shares; (1-5) Through a Financial
Institution; (1,3) Directly from the Fund; (2,4,5) Directly By Mail;
(1-5) Contingent Deferred Sales Charge; (1)
Elimination of Contingent Deferred Sales
Charge;(1-5) Systematic Withdrawal Program;
(1-5) Accounts
with Low Balances.

Item 9. Pending Legal Proceeding None.

<PAGE>

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

Item 10. Cover Page..........................(1-5) Cover Page.
----------

Item 11. Table of Contents (1-5) Table of Contents.

Item 12. General Information and
History............................1-5) General Information
about the Fund; (1-5) About
Federated Investors.

Item 13. Investment Objectives
and Policies........................(1-5) Investment Objectives and
Policies.

Item 14. Management of the Fund..............(1-5) Municipal Securities
Income Trust Management.
----------------------

Item 15. Control Persons and Principal
Holders of Securities...............(2-5) Municipal Securities
Income Trust Management.

Item 16. Investment Advisory and Other
Services............................(1-5) Investment Advisory
Services; (1-5) Other
Services; (3) Shareholder
Services Agreement.

Item 17. Brokerage Allocation (1-5) Brokerage Transactions.

Item 18. Capital Stock and Other
Securities Not applicable.

Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered.......................(1,3) Purchasing Shares;
(2,4,5) Purchasing Class F
Shares; (1-5) Determining Net
Asset Value; (1,3) Redeeming
Shares; (2,4,5) Redeeming
Class F Shares.

Item 20. Tax Status (1-5) Tax Status.

Item 21. Underwriters Not applicable.

Item 22. Calculation of Performance
Data................................(1-5) Total Return;(1-5) Yield;
(1-5) Tax-Equivalent Yield;
(1-5) Performance Comparisons.

Item 23. Financial Statements................To be filed by Amendment.
--------------------

Federated California Municipal Income Fund
(Formerly, California Municipal Income Fund)
(A Portfolio of Municipal Securities Income Trust)

Class F Shares
(Formerly, Fortress Shares)

Prospectus

The Class F Shares of Federated California Municipal Income Fund (the "Fund")
offered by this prospectus represent interests in a non-diversified portfolio of
securities which is one of a series of investment portfolios in Municipal
Securities Income Trust (the "Trust"), an open-end management investment company
(a mutual fund). The investment objective of the Fund is to provide current
income which is exempt from federal regular income tax and the personal income
taxes imposed by the state of California and California municipalities. The Fund
invests primarily in a portfolio of California municipal securities.

The shares offered by this prospectus are not deposits or obligations of any
bank, are not endorsed or guaranteed by any bank, and are not insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in these shares involves investment risks
including the possible loss of principal.

This prospectus contains the information you should read and know before you
invest in Class F Shares. Keep this prospectus for future reference.

The Fund has also filed a Statement of Additional Information for Class F Shares
dated October 31, 1996, with the Securities and Exchange Commission ("SEC"). The
information contained in the Statement of Additional Information is incorporated
by reference into this prospectus. You may request a copy of the Statement of
Additional Information or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-341-7400. To
obtain other information or make inquiries about the Fund, contact your
financial institution. The Statement of Additional Information, material
incorporated by reference into this document, and other information regarding
the Fund is maintained electronically with the SEC at Internet Web site
(http://www.sec.gov).

These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission nor has the Securities
and Exchange Commission or any state securities commission passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.

Prospectus dated October 31, 1996

<PAGE>

Summary of Fund Expenses.............................1

Financial Highlights.................................2

General Information..................................3

Investment Information...............................3
Investment Objective..............................3
Investment Policies...............................3
California Municipal Securities...................5
Investment Risks..................................6
Non-Diversification...............................6
Investment Limitations............................7

Net Asset Value......................................7

Investing in Class F Shares..........................7
Share Purchases...................................7
Minimum Investment Required.......................8
What Shares Cost..................................8
Eliminating/Reducing the Sales Charge.............9
Systematic Investment Program....................11
Exchange Privilege...............................11
Certificates and Confirmations...................11
Dividends and Distributions......................12

Redeeming Class F Shares............................12
Through a Financial Institution..................12
Directly by Mail.................................13
Contingent Deferred Sales Charge.................13
Systematic Withdrawal Program....................14
Accounts with Low Balances.......................14

Trust Information...................................15
Management of the Trust..........................15
Distribution of Class F Shares...................16
Administration of the Fund.......................17

Shareholder Information.............................17
Voting Rights....................................17

Tax Information.....................................18
Federal Income Tax...............................18
California Income Taxes..........................19
State and Local Taxes............................19

Performance Information............................ 19

Financial Statements................................20

Independent Auditors' Report........................30

<PAGE>

Shares of the Fund are designed for customers of financial institutions such as
broker/dealers, banks, fiduciaries, and investment advisers as a convenient
means of accumulating an interest in a professionally managed, non-diversified
portfolio investing primarily in California municipal securities. A minimum
initial investment of $1,500 is required. Subsequent investments must be in
amounts of at least $100. The Fund is not likely to be a suitable investment for
non-California taxpayers or retirement plans since California municipal
securities are not likely to produce competitive after-tax yields for such
persons and entities when compared to other investments.

Except as otherwise noted in this prospectus, Shares are sold at net asset value
plus an applicable sales charge and are redeemed at net asset value. However, a
contingent deferred sales charge is imposed on certain Shares, other than Shares
purchased through reinvestment of dividends, which are redeemed within four
years of their purchase dates. Fund assets may be used in connection with the
distribution of Shares.

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

Investment Objective
The investment objective of the Fund is to provide current income exempt from
federal regular income tax (federal regular income tax does not include the
federal alternative minimum tax) and the personal income taxes imposed by the
state of California and California municipalities. The investment objective
cannot be changed without approval of shareholders. While there is no assurance
that the Fund will achieve its investment objective, it endeavors to do so by
following the investment policies described in this prospectus.

Under normal circumstances, the Fund invests its assets so that at least 80% of
its annual interest income is exempt from federal regular income tax and the
personal income taxes imposed by the state of California and California
municipalities. Interest income of the Fund that is exempt from the income taxes
described above retains its exempt status when distributed to the Fund's
shareholders. Income distributed by the Fund may not necessarily be exempt from
state or municipal taxes in states other than California.

Investment Policies
The Fund 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 California and California municipalities. At least 65%
of the value of the Fund's total assets will be invested in obligations issued
by or on behalf of the state of California, its political subdivisions, or
agencies. Unless indicated otherwise, investment policies of the Fund may be
changed by the Trustees without approval of shareholders. Shareholders will be
notified before any material changes in these policies become effective.

Acceptable Investments
The securities in which the Fund invests include:

n obligations issued by or on behalf of the state of California, its political
subdivisions, or agencies;

n 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

n participation interests, as described below, in any of the above obligations,
the interest from which is, in the opinion of bond counsel for the issuers or
in the opinion of officers of the Fund and/or the investment adviser to the
Fund, exempt from both federal regular income tax and the personal income tax
imposed by the state of California and California municipalities.

The prices of fixed income securities fluctuate inversely to the direction of
interest rates.

Characteristics
The California municipal securities which the Fund buys are investment grade
bonds rated Aaa, Aa, A, or Baa by Moody's Investors Service, Inc. ("Moody's"),
or AAA, AA, A, or BBB by Standard & Poor's Ratings Group ("S&P") or Fitch
Investors Service, Inc. ("Fitch"). In certain cases the Fund's adviser may
choose bonds which are unrated if it judges the bonds to have the same
characteristics as the investment grade bonds described above. If a bond is
rated below investment grade according to the characteristics set forth here
after the Fund has purchased it, the Fund is not required to drop the bond from
the portfolio, but will consider appropriate action. Bonds rated "BBB" by S&P or
Fitch or "Baa" by Moody's have speculative characteristics. Changes in economic
or other circumstances are more likely to lead to weakened capacity to make
principal and interest payments than higher rated bonds. A description of the
rating categories is contained in the Appendix to the Statement of Additional
Information.

Participation Interests
The Fund may purchase participation interests from financial institutions such
as commercial banks, savings associations, and insurance companies. The se
participation interests give the Fund an undivided interest in California
municipal securities. The financial institutions from which the Fund purchases
participation interests frequently provide or secure irrevocable letters of
credit or guarantees to assure that the participation interests are of high
quality. The Trustees of the Trust will determine that participation interests
meet the prescribed quality standards for the Fund.

Variable-Rate Municipal Securities
Some of the California municipal securities which the Fund purchases may have
variable interest rates. Variable interest rates are ordinarily based on a
published interest rate, interest rate index, or a similar standard, such as the
91-day U.S. Treasury bill rate. Many variable-rate municipal securities are
subject to payment of principal on demand by the Fund in not more than seven
days. All variable-rate municipal securities will meet the quality standards for
the Fund. The Fund's investment adviser has been instructed by the Trustees to
monitor the pricing, quality, and liquidity of the variable-rate municipal
securities, including participation interests held by the Fund on the basis of
published financial information and reports of the rating agencies and other
analytical services.

Municipal Leases
Municipal leases are obligations issued by state and local governments or
authorities to finance the acquisition of equipment and facilities and may be
considered to be illiquid. The y may take the form of a lease, an installment
purchase contract, a conditional sales contract or a participation certificate
on any of the above. Lease obligations may be subject to periodic appropriation.
If the entity does not appropriate funds for future lease payments, the entity
cannot be compelled to make such payments. In the event of failure of
appropriation, unless the participation interests are credit enhanced, it is
unlikely that the participants would be able to obtain an acceptable substitute
source of payment.

Restricted Securities
The Fund may invest up to 10% of its total assets in restricted securities.
Restricted securities are any securities in which the Fund may otherwise invest
pursuant to its investment objective and policies but which are subject to
restriction upon resale under federal securities laws. To the extent these
securities are deemed to be illiquid, the Fund will limit its purchases,
together with other securities considered to be illiquid, to 15% of its net
assets.

The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.

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

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

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

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

Temporary Investments
Under normal circumstances, the Fund invests its assets so that at least 80% of
its annual interest income is exempt from federal regular income tax and the
personal income taxes imposed by the state of California and California
municipalities. This policy cannot be changed without shareholder approval.
However, from time to time, when the investment adviser determines that market
conditions call for a temporary defensive posture, the Fund may invest in
short-term non-California municipal tax-exempt obligations or taxable temporary
investments. The se temporary investments include: notes issued by or on behalf
of municipal or corporate issuers; obligations issued or guaranteed by the U.S.
government, its agencies, or instrumentalities; other debt securities;
commercial paper; certificates of deposit of banks; and repurchase agreements
(arrangements in which the organization selling the Fund a bond or temporary
investment agrees at the time of sale to repurchase it at a mutually agreed upon
time and price).

Although the Fund is permitted to make taxable, temporary investments, there is
no current intention of generating income subject to federal regular income tax
or personal income taxes imposed by the state of California or California
municipalities.

California Municipal Securities
California municipal securities are generally issued to finance public works,
such as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. The y are also issued to
repay outstanding obligations, to raise funds for general operating expenses,
and to make loans to other public institutions and facilities.

California municipal securities include industrial development bonds issued by
or on behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.

The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.

Investment Risks
Yields on California municipal securities depend on a variety of factors,
including: the general conditions of the short-term municipal note market and of
the municipal bond market; the size of the particular offering; the maturity of
the obligations; and the rating of the issue. The ability of the Fund to achieve
its investment objective also depends on the continuing ability of the issuers
of California municipal securities and demand features, or the credit enhancers
of either, to meet their obligations for the payment of interest and principal
when due. Investing in California municipal securities meeting the Fund's
quality standards may not be possible if the state of California or its
municipalities do not maintain their current credit ratings. In addition,
certain California constitutional amendments, legislative measures, executive
orders, administrative regulations, and voter initiatives could result in
adverse consequences affecting California municipal securities. Further, any
adverse economic conditions or developments affecting the state of California or
its municipalities could have an impact on the Fund's portfolio.

A further discussion of the risks of a portfolio which invests largely in
California municipal securities is contained in the Statement of Additional
Information.

Any economic, political, or regulatory developments affecting the value of the
securities in the Fund's portfolio will have a greater impact on the total value
of the portfolio than would be the case if the portfolio were diversified among
more issuers.

The Fund intends to comply with Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). This undertaking requires that at the end of each
quarter of the taxable year: (a) with regard to at least 50% of the Fund's total
assets, no more than 5% of its total assets are invested in the securities of a
single issuer and (b) no more than 25% of its total assets are invested in the
securities of a single issuer.

Investment Limitations
The Fund will not borrow money directly through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a percentage of
its cash value with an agreement to buy it back on a set date) or pledge
securities except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets and pledge up to 10% of the value of
those assets to secure such borrowings.

The above investment limitation cannot be changed without shareholder approval.
The following limitation, however, can be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in this limitation becomes effective.

The Fund will not invest 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 Fund's net asset value per Share fluctuates. It is determined by dividing
the sum of the market value of all securities and all other assets, less
liabilities, by the number of Shares outstanding.

Share Purchases
Shares are sold on days on which the New York Stock Exchange is open. Shares may
be purchased through an investment dealer who has a sales agreement with the
distributor, Federated Securities Corp., or directly from Federated Securities
Corp. (once an account has been established), either by mail or by wire. The
Fund reserves the right to reject any purchase request.

Through a Financial Institution
An investor may call his financial institution (such as a bank or an investment
dealer) to place an order to purchase Shares. Orders through a financial
institution are considered received when the Fund is notified of the purchase
order. Purchase orders through a registered broker/dealer must be received by
the broker before 4:00 p.m. (Eastern time) and must be transmitted by the broker
to the Fund before 5:00 p.m. (Eastern time) in order for Shares to be purchased
at that day's price. Purchase orders through other financial institutions must
be received by the financial institution and transmitted to the Fund before 4:00
p.m.
(Eastern time) in order for Shares to be purchased at that day's price. It is
the financial institution's responsibility to transmit orders promptly.

The financial institution which maintains investor accounts with the Fund must
do so on a fully disclosed basis unless it accounts for share ownership periods
used in calculating the contingent deferred sales charge (see "Contingent
Deferred Sales Charge"). In addition, advance payments made to financial
institutions may be subject to reclaim by the distributor for accounts
transferred to financial institutions which do not maintain investor accounts on
a fully disclosed basis and do not account for share ownership periods (see
"Supplemental Payments to Financial Institutions").

Directly by Mail
To purchase Shares by mail directly from Federated Securities Corp. once an
account has been established:

n complete and sign the new account form available from the Fund;

n enclose a check made payable to Federated California Municipal Income Fund--
Class F Shares; and

n send both to the Fund's transfer agent, Federated Shareholder Services
Company, P.O. Box 8600, Boston, MA 02266-8600.

Purchases by mail are considered received after payment by check is converted by
the transfer agent's bank, State Street Bank and Trust Company ("State Street
Bank"), into federal funds. This is generally the next business day after State
Street Bank receives the check.

Directly by Wire
To purchase Shares directly from Federated Securities Corp. by Federal Reserve
wire once an account has been established, call the Fund. All information needed
will be taken over the telephone, and the order is considered received when
State Street Bank receives payment by wire. Federal funds should be wired as
follows: Federated Shareholder Services Company, c/o State Street Bank and Trust
Company, Boston, MA; Attention: EDGEWIRE; For Credit to: Federated California
Municipal Income Fund--Class F Shares; (Fund Number--this number can be found on
the account statement or by contacting the Fund); Account Number; Trade Date and
Order Number; Group Number or Dealer Number; Nominee or Institution Name; and
ABA Number 011000028. Shares cannot be purchased by wire on holidays when wire
transfers are restricted. Questions on wire purchases should be directed to your
shareholder services representative at the telephone number listed on your
account statement.

Minimum Investment Required
The minimum initial investment in Shares is $1,500. Subsequent investments must
be in amounts of at least $100.

What Shares Cost
Shares are sold at their net asset value next determined after an order is
received, plus a sales charge of 1% of the offering price (which is 1.01% of the
net amount invested). Further, there is no sales charge for purchases of $1
million or more. In addition, no sales charge is imposed for Shares purchased
through bank trust departments or investment advisers registered under the
Investment Advisers Act of 1940 purchasing on behalf of their clients, or by
sales representatives, Trustees, and employees of the Fund, Federated Advisers,
and Federated Securities Corp., or their affiliates, or any investment dealer
who has a sales agreement with Federated Securities Corp., their spouses and
children under age 21, or any trusts or pension or profit-sharing plans for
these persons. Investors who purchase Shares through a financial intermediary
may be charged a service fee by that financial intermediary. This prospectus
should, therefore, be read together with any agreement between the customer and
the institution with regard to services provided, the fees charged for these
services, and any restrictions and limitations imposed.

The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of
the Fund's portfolio securities that its net asset value might be materially
affected; (ii) days during which no Shares are tendered for redemption and no
orders to purchase Shares are received; and (iii) the following holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, and Christmas Day.

Under certain circumstances, described under "Redeeming Class F Shares,"
shareholders may be charged a contingent deferred sales charge by the
distributor at the time Shares are redeemed.

Dealer Concession
For sales of Shares, the distributor will normally offer to pay broker/dealers
up to 100% of the sales charge retained by it. Any portion of the sales charge
which is not paid to a broker/dealer will be retained by the distributor.
However, from time to time, and at the sole discretion of the distributor, all
or part of that portion may be paid to a dealer.

The sales charge for Shares sold other than through registered broker/dealers
will be retained by Federated Securities Corp. Federated Securities Corp. may
pay fees to banks out of the sales charge in exchange for sales and/or
administrative services performed on behalf of the bank's customers in
connection with the initiation of customer accounts and purchases of Shares.

Eliminating/Reducing the Sales Charge
The sales charge can be reduced or eliminated on the purchase of Shares through:

n quantity discounts and accumulated purchases;

n signing a 13-month letter of intent;

n using the reinvestment privilege;

n purchases with proceeds from redemptions of unaffiliated investment
companies; or

n concurrent purchases.

Quantity Discounts and Accumulated Purchases
There is no sales charge for purchases of $1 million or more. The Fund will
combine purchases made on the same day by the investor, his spouse, and his
children under age 21 when it calculates the sales charge.

If an additional purchase of Shares is made, the Fund will consider the previous
purchases still invested in the Fund. For example, if a shareholder already owns
Shares having a current value at the public offering price of $900,000 and he
purchases $100,000 more at the current public offering price, there will be no
sales charge on the additional purchase. The Fund will also combine purchases
for the purpose of reducing the contingent deferred sales charge imposed on some
Share redemptions. For example, if a shareholder already owns Shares having a
current value at public offering price of $1 million and purchases an additional
$1 million at the current public offering price, the applicable contingent
deferred sales charge would be reduced to 0.50% of those additional Shares. For
more information on the levels of contingent deferred sales charges and holding
periods, see the section entitled "Contingent Deferred Sales Charge."

To receive the sales charge elimination and/or the contingent deferred sales
charge reduction, Federated Securities Corp. must be notified by the shareholder
in writing or by the shareholder's financial institution at the time the
purchase is made that Shares are already owned or that purchases are being
combined. The Fund will eliminate the sales charge and/or reduce the contingent
deferred sales charge after it confirms the purchases.

Letter of Intent
If a shareholder intends to purchase at least $1 million of Shares over the next
13 months, the sales charge may be reduced by signing a letter of intent to that
effect. This letter of intent includes a provision for a sales charge
elimination depending on the amount actually purchased within the 13-month
period and a provision for the Fund's custodian to hold 1.00% of the total
amount intended to be purchased in escrow (in Shares) until such purchase is
completed.

The 1.00% held in escrow will be applied to the shareholder's account at the end
of the 13-month period unless the amount specified in the letter of intent,
which must be $1 million or more of Shares, is not purchased. In this event, an
appropriate number of escrowed Shares may be redeemed in order to realize the
1.00% sales charge.

This letter of intent also includes a provision for reductions in the contingent
deferred sales charge and holding period depending on the amount actually
purchased within the 13-month period. For more information on the various levels
of contingent deferred sales charges and holding periods, see the section
entitled "Contingent Deferred Sales Charge."

This letter of intent will not obligate the shareholder to purchase Shares. The
letter may be dated as of a prior date to include any purchases made within the
past 90 days. Purchases within the prior 90 days may be used to fulfill the
requirements of the letter of intent; however, the sales charge on prior
purchases will not be adjusted to reflect a lower sales charge.

Reinvestment Privilege
If Shares have been redeemed, the shareholder has a one-time right, within 120
days, to reinvest the redemption proceeds at the next-determined net asset value
without any sales charge. Federated Securities Corp. must be notified by the
shareholder in writing or by his financial institution of the reinvestment in
order to receive this elimination of the sales charge. If the shareholder
redeems his Shares, there may be tax consequences.

Purchases With Proceeds From Redemptions of Unaffiliated Investment Companies
Investors may purchase Shares at net asset value, without a sales charge, with
the proceeds from the redemption of shares of an investment company which was
sold with a sales charge or commission and was not distributed by Federated
Securities Corp. The purchase must be made within 60 days of the redemption, and
Federated Securities Corp. must be notified by the investor in writing, or by
his financial institution at the time the purchase is made.

Concurrent Purchases
For purposes of qualifying for a sales charge elimination, a shareholder has the
privilege of combining concurrent purchases of Class F Shares of two or more
funds for which affiliates of Federated Investors serve as investment advisers
or principal underwriter (the "Federated Funds"), the purchase prices of which
include a sales charge. For example, if a shareholder concurrently invested
$400,000 in Class F Shares of one of the other Federated Funds and $600,000 in
Shares, the sales charge would be eliminated. (Not all Federated Funds currently
offer Class F Shares. Contact your financial institution regarding the
availability of other Federated Class F Shares.)

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

Systematic Investment Program
Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account and
invested in Shares at the net asset value next determined after an order is
received by Federated Shareholder Services Company, plus the 1% sales charge for
purchases under $1 million. A shareholder may apply for participation in this
program through Federated Securities Corp. or his financial institution.

Exchange Privilege
Class F shareholders may exchange all or some of their Shares, for shares of
California Municipal Cash Trust or Class F Shares of other Federated Funds.
Exchanges are made at net asset value without being assessed a contingent
deferred sales charge. In determining the applicability of the contingent
deferred sales charge, the required holding period for your new Class F Shares
received through an exchange will include the period for which your original
Class F Shares were held.

Shareholders using this privilege must exchange shares having a net asset value
equal to the minimum investment requirements of the fund into which the exchange
is being made. Shareholders who desire to automatically exchange Shares of a
predetermined amount on a monthly, quarterly, or annual basis may take advantage
of a systematic exchange privilege.

Before a financial institution may request exchange by telephone on behalf of a
shareholder, an authorization form permitting the Fund to accept exchange by
telephone must first be completed. Telephone exchange instructions may be
recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.

The exchange privilege is available to shareholders residing in any state in
which the Shares being acquired may be legally sold.

Before making an exchange, a shareholder must receive a prospectus of the fund
for which the exchange is being made.

An exercise of the exchange privilege is treated as sale for federal income tax
purposes. Depending on the circumstances, a capital gain or loss may be
realized.

Please contact your financial institution directly or Federated Securities Corp.
at 1-800-341-7400 for more information on and prospectuses for the Federated
Funds into which your Shares may be exchanged free of charge. Instructions for
exchanging Shares must be given in writing by the shareholder. Written
instructions may require a signature guarantee.

Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly statements are sent to report dividends paid during that
month.

Dividends and Distributions
Dividends are declared daily and paid monthly. Distributions of any net realized
long-term capital gains will be made at least once every twelve months.
Dividends and distributions are automatically reinvested on payment dates in
additional Shares at net asset value without a sales charge, unless shareholders
request cash payments on the application or by writing to Federated Shareholder
Services Company.

Shares purchased through a financial institution, for which payment by wire is
received by State Street Bank on the business day following the order, begin to
earn dividends on the day the wire payment is received. Otherwise, Shares
purchased by wire begin to earn dividends on the business day after wire payment
is received by State Street Bank. Shares purchased by mail, or through a
financial institution, if the financial institution's payment is by check, begin
to earn dividends on the second business day after the check is received by
Federated Shareholder Services Company.

Shares earn dividends through the business day that proper written redemption
instructions are received by Federated Shareholder Services Company.

The Fund redeems Shares at their net asset value, less any applicable contingent
deferred sales charge, next determined after Federated Shareholder Services
Company receives the redemption request. Investors who redeem Shares through a
financial intermediary may be charged a service fee by that financial
intermediary. Redemptions will be made on days on which the Fund computes its
net asset value. Redemption requests must be received in proper form and can be
made through a financial institution or directly from the Fund by written
request.

Through a Financial Institution
A shareholder may redeem Shares by calling his financial institution (such as a
bank or an investment dealer) to request the redemption. Shares will be redeemed
at the net asset value next determined after the Fund receives the redemption
request from the financial institution. Redemption requests through a registered
broker/dealer must be received by the broker before 4:00 p.m. (Eastern time) and
must be transmitted by the broker to the Fund before 5:00 p.m. (Eastern time) in
order for Shares to be redeemed at that day's net asset value. Redemption
requests through other financial institutions must be received by the financial
institution and transmitted to the Fund before 4:00 p.m. (Eastern time) in order
for Shares to be redeemed at that day's net asset value. The financial
institution is responsible for promptly submitting redemption requests and
providing proper written redemption instructions to the Fund. The financial
institution may charge customary fees and commissions for this service. If, at
any time, the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders will be promptly notified.

Before a financial institution may request redemption by telephone on behalf of
a shareholder, an authorization form permitting the Fund to accept redemption
requests by telephone must first be completed. In the event of drastic economic
or market changes, a shareholder may experience difficulty in redeeming by
telephone. If such a case should occur, another method of redemption, such as
"Directly by Mail," should be considered. Telephone redemption instructions may
be recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.

Directly by Mail
Shareholders may also redeem Shares by sending a written request to: Federated
Shareholder Services Company, P.O. Box 8600, Boston, MA 02266-8600. Shares will
be redeemed at their net asset value, less any applicable contingent deferred
sales charge, next determined after the transfer agent receives the redemption
request. If share certificates have been issued, they should be sent unendorsed
with the written request by registered or certified mail to the address noted
above.

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

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

The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.

Contingent Deferred Sales Charge
Shareholders redeeming Shares from their Fund accounts within certain time
periods of the purchase date of those Shares will be charged a contingent
deferred sales charge by the Fund's distributor of the lesser of the original
price or the net asset value of the Shares redeemed as follows:

Contingent Deferred
Amount of Purchase Shares Held Sales Charge
Up to $1,999,999 4 years or less 1.00%
$2,000,000 to $4,999,999 2 years or less 0.50%
$5,000,000 or more 1 year or less 0.25%
In instances in which Shares have been acquired in exchange for Class F Shares
in other Federated Funds, (i) the purchase price is the price of the shares when
originally purchased and (ii) the time period during which the shares are held
will run from the date of the original purchase. The contingent deferred sales
charge will not be imposed on Shares acquired through the reinvestment of
dividends or distributions of long-term capital gains. In computing the amount
of contingent deferred sales charge for accounts with shares subject to a single
holding period, if any, redemptions are deemed to have occurred in the following
order: (1) Shares acquired through the reinvestment of dividends and long-term
capital gains, (2) purchases of Shares occurring prior to the number of years
necessary to satisfy the applicable holding period, and (3) purchases of Shares
occurring within the current holding period. For accounts with Shares subject to
multiple Share holding periods, the redemption sequence will be determined
first, with reinvested dividends and long-term capital gains, and second, on a
first-in, first-out basis.

The contingent deferred sales charge will not be imposed when a redemption
results from a tax-free return under the following circumstances: (i) a total or
partial distribution from a qualified plan, other than an IRA, Keogh Plan, or a
custodial account, following retirement; (ii) a total or partial distribution
from an IRA, Keogh Plan, or a custodial account, after the beneficial owner
attains age 591U2; or (iii) from the death or permanent and total disability of
the beneficial owner. The exemption from the contingent deferred sales charge
for qualified plans, an IRA, Keogh Plan, or a custodial account does not extend
to account transfers, rollovers, and other redemptions made for purposes of
reinvestment. Contingent deferred sales charges are not charged in connection
with exchanges of Shares for shares in California Municipal Cash Trust or Shares
in other Federated Funds, or in connection with redemptions by the Fund of
accounts with low balances. Shares of the Fund originally purchased through a
bank trust department or investment adviser registered under the Investment
Advisers Act of 1940, as amended, are not subject to the contingent deferred
sales charge to the extent that no payment was advanced for purchases made by or
through such entities. A different contingent deferred sales charge will be
charged when Shares purchased with the proceeds of a redemption of an
unaffiliated mutual fund as described below are redeemed within one year of
purchase.

Systematic Withdrawal Program
Shareholders who desire to receive monthly or quarterly payments of a
predetermined amount may take advantage of the Systematic Withdrawal Program.
Under this program, Shares are redeemed to provide for periodic withdrawal
payments in an amount directed by the shareholder; the minimum withdrawal amount
is $100. Depending upon the amount of the withdrawal payments, the amount of
dividends paid and capital gains distributions with respect to Shares, and the
fluctuation of the net asset value of Shares redeemed under this program,
redemptions may reduce, and eventually deplete, the shareholder's investment in
the Fund. For this reason, payments under this program should not be considered
as yield or income on the shareholder's investment in the Fund. To be eligible
to participate in this program, a shareholder must have invested at least
$10,000 in the Fund (at current offering price).

A shareholder may apply for participation in this program through Federated
Securities Corp. Due to the fact that Shares are sold with a sales charge, it is
not advisable for shareholders to be purchasing Shares while participating in
this program.

Contingent deferred sales charges are charged for Shares redeemed through this
program within four years of their purchase dates.

Accounts With Low Balances
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum value of $1,500. This
requirement does not apply, however, if the balance falls below $1,500 because
of changes in the Fund's net asset value. Before Shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to purchase
additional Shares to meet the minimum requirement.

Management of the Trust
Board of Trustees
The Trust is managed by a Board of Trustees. The Trustees are responsible for
managing the business affairs of the Trust and for exercising all of the powers
of the Trust except those reserved for the shareholders. The Executive Committee
of the Board of Trustees handles the Trustees' responsibilities between meetings
of the Board.

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

Advisory Fees
The Adviser receives an annual investment advisory fee equal to 0.40% of the
Fund's average daily net assets. The Adviser may voluntarily choose to waive
a portion of its fee or reimburse the Fund for certain operating expenses.
The Adviser can terminate this voluntary waiver or reimbursement of expenses
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.

Adviser's Background
Federated Advisers, a Delaware business trust organized on April 11, 1989, is
a registered investment adviser under the Investment Advisers Act of 1940, as
amended. It is a subsidiary of Federated Investors. All of the Class A
(voting) shares of Federated Investors are owned by a trust, the Trustees of
which are John F. Donahue, Chairman and Trustee of Federated Investors, Mr.
Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.

Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private accounts.
Certain other subsidiaries also provide administrative services to a number
of investment companies. With over $80 billion invested across more than 250
funds under management and/or administration by its subsidiaries, as of
December 31, 1995, Federated Investors is one of the largest mutual fund
investment managers in the United States. With more than 1,800 employees,
Federated continues to be led by the management who founded the company in
1955. Federated funds are presently at work in and through 4,000 financial
institutions nationwide. More than 100,000 investment professionals have
selected Federated funds for their clients.

J. Scott Albrecht has been the Fund's portfolio manager since March 1995.
Mr. Albrecht joined Federated Investors in 1989 and has been a Vice
President of the Fund's investment adviser since October 1994. From 1992 to
1994, Mr. Albrecht served as an Assistant Vice President of the Fund's
investment adviser. In 1991, Mr. Albrecht acted as an investment analyst.
Mr. Albrecht is a Chartered Financial Analyst and received his M.S. in
Public Management from Carnegie Mellon University.

Jonathan C. Conley has been the Fund's portfolio manager since its
inception. Mr. Conley joined Federated Investors in 1979 and has been a
Senior Vice President of the Fund's investment adviser since 1995. Mr.
Conley was a Vice President of the Fund's investment adviser from 1982 to
1995. Mr. Conley is a Chartered Financial Analyst and received his M.B.A.
in Finance from the University of Virginia.

Distribution of Class F Shares Federated Securities Corp. is the principal
distributor for Shares of the Fund. Federated Securities Corp. is located at
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779. It is a
Pennsylvania corporation organized on November 14, 1969, and is the principal
distributor for a number of investment companies. Federated Securities Corp. is
a subsidiary of Federated Investors.

State securities laws may require certain financial institutions such as
depository institutions to register as dealers.

Distribution Plan and Shareholder Services
Under a distribution plan adopted in accordance with Investment Company Act Rule
12b-1 (the "Distribution Plan"), the Fund may pay to the distributor an amount,
computed at an annual rate of 0.50% of the average daily net asset value of
Shares to finance any activity which is principally intended to result in the
sale of Shares subject to the Distribution Plan. The distributor may select
financial institutions such as banks, fiduciaries, custodians for public funds,
investment advisers, and broker/dealers to provide sales services or
distribution related support services as agents for their clients or customers.

The Distribution Plan is a compensation-type plan. As such, the Fund makes no
payments to the distributor except as described above. The refore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amount or may earn a profit from future payments made by the Fund
under the Distribution Plan.

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

Supplemental Payments to Financial Institutions
Federated Securities Corp. will pay financial institutions, for distribution
and/or administrative services, an amount equal to 1.00% of the offering price
of the Shares acquired by their clients or customers on purchases up to
$1,999,999, 0.50% of the offering price on purchases of $2,000,000 to
$4,999,999, and 0.25% of the offering price on purchases of $5,000,000 or more.
(This fee is in addition to the 1.00% sales charge on purchases of less than $1
million.)

Furthermore, in addition to payments made pursuant to the Distribution Plan and
Shareholder Services Agreement, Federated Securities Corp. and Federated
Shareholder Services, from their own assets, may pay financial institutions
supplemental fees for the performance of substantial sales services,
distribution related support services, or shareholder services. The support may
include sponsoring sales, educational and training seminars for their employees
at recreational-type facilities, providing sales literature, and engineering
computer software programs that emphasize the attributes of the Fund. Such
assistance will be predicated upon the amount of Shares the financial
institution sells or may sell and/or upon the type and nature of sales or
marketing support furnished by the financial institution. Any payments made by
the distributor may be reimbursed by the Fund's Adviser or its affiliates.

Administration of the Fund
Administrative Services
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Fund. Federated Services Company
provides these at an annual rate which relates to the average aggregate daily
net assets of all funds advised by affiliates of Federated Investors as
specified below:

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

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

Voting Rights
Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights except that in matters
affecting only a particular fund or class, only shares of that fund or class are
entitled to vote. As of October 7, 1996, Merrill Lynch Pierce Fenner & Smith,
Jacksonville, Florida, owned 46.05% of the voting securities of the Fund, and,
therefore, may, for certain purposes, be deemed to control the Fund and be able
to affect the outcome of certain matters presented for a vote of shareholders.

As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust's or the Fund's operation and for the election of Trustees
under certain circumstances. Trustees may be removed by the Trustees or by
shareholders at a special meeting. A special meeting of the shareholders for
this purpose shall be called by the Trustees upon the written request of
shareholders owning at least 10% of the outstanding shares of all series in the
Trust entitled to vote.

Federal Income Tax
The Fund will pay no federal income tax because it expects to meet requirements
of the Code applicable to regulated investment companies and to receive the
special tax treatment afforded to such companies. The Fund will be treated as a
single, separate entity for federal income tax purposes so that income
(including capital gains) and losses realized by the Trust's other portfolios
will not be combined for tax purposes with those realized by the Fund.

Shareholders are not required to pay federal regular income tax on any dividends
received from the Fund that represent net interest on tax-exempt municipal
bonds, although tax-exempt interest will increase the taxable income of certain
recipients of social security benefits. However, under the Tax Reform Act of
1986, dividends representing net interest income earned on some municipal bonds
may be included in calculating the federal individual alternative minimum tax or
the federal alternative minimum tax for corporations.

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

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

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

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

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

California Income Taxes
Under existing California laws, distributions made by the Fund will not be
subject to California individual income taxes provided that such distributions
qualify as "exempt-interest dividends" under the California Revenue and Taxation
Code, and provided further that at the close of each quarter, at least 50
percent of the value of the total assets of the Fund consists of obligations the
interest on which is exempt from California taxation under either the
Constitution or laws of California or the Constitution or laws of the United
States. The Fund will furnish its shareholders with a written note designating
exempt-interest dividends within 60 days after the close of its taxable year.
Conversely, to the extent that distributions made by the Fund are derived from
other types of obligations, such distributions will be subject to California
individual income taxes.

Dividends of the Fund are not exempt from the California taxes payable by
corporations.

State and Local Taxes
Income from the Fund is not necessarily free from taxes in states other than
California. Shareholders are urged to consult their own tax advisers regarding
the status of their accounts under state and local tax laws.

From time to time, the Fund advertises the total return, yield, and
tax-equivalent yield for Shares.

Total return represents the change, over a specific period of time, in the value
of an investment in Shares after reinvesting all income and capital gains
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.

that Shares would have had to earn to equal its actual yield, assuming a
specific tax rate. The yield and the tax-equivalent yield do not necessarily
reflect income actually earned by Shares and, therefore, may not correlate to
the dividends or other distributions paid to shareholders.

The performance information reflects the effect of the maximum sales charge and
other similar non-recurring charges, such as the contingent deferred sales
charge, which, if excluded, would increase the total return, yield, and
tax-equivalent yield.

From time to time, advertisements for the Fund may refer to ratings, rankings
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

<PAGE>

Federated California Municipal Income Fund
(Formerly, California Municipal
Income Fund)
(A Portfolio of Municipal Securities Income Trust)

Class F Shares
(Formerly, Fortress Shares)

Prospectus
October 31, 1996

A Non-Diversified Portfolio of Municipal Securities Income Trust, An Open-End,
Management Investment Company

Federated California Municipal Income Fund
Class F Shares
Federated Investors Tower
Pittsburgh, PA 15222-3779

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

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

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

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

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

Cusip 625922109
2092918A (10/96)

Federated California Municipal Income Fund
(Formerly, California Municipal Income Fund)

Class F Shares

(Formerly, Fortress Shares)

(A Portfolio of Municipal Securities Income Trust)

Statement of Additional Information

This Statement of Additional Information should be read with the prospectus of
Federated California Municipal Income Fund (the `Fund"), a portfolio of
Municipal Securities Income Trust (the `Trust") dated October 31, 1996. This
Statement is not a prospectus. You may request a copy of a prospectus or a paper
copy of this Statement, if you have received it electronically, free of charge
by calling 1-800-341-7400.

Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

Statement Dated October 31, 1996

Cusip 625922109
2092918B (10/96)

<PAGE>

General Information About the Fund...................3

Investment Objective and Policies....................3
Acceptable Investments............................3
When-Issued and Delayed Delivery Transactions.....6
Temporary Investments.............................6
Portfolio Turnover................................8
Investment Limitations............................8
California Investment Risks......................12

Municipal Securities Income Trust Management........16
Fund Ownership...................................25
Trustees Compensation............................25
Trustee Liability................................27

Investment Advisory Services........................27
Adviser to the Fund..............................27
Advisory Fees....................................28

Other Services......................................29
Fund Administration..............................29
Custodian and Portfolio Accountant...............29
Transfer Agent...................................29
Independent Auditors.............................30

Brokerage Transactions..............................30

Purchasing Class F Shares...........................31
Distribution Plan and Shareholder Services Agreement 31
Conversion to Federal Funds......................32
Purchases by Sales Representatives, Fund Trustees, and Employees 33

Determining Net Asset Value.........................33
Valuing Municipal Bonds..........................33
Use of Amortized Cost............................33

Redeeming Class F Shares............................34
Redemption in Kind...............................34
Massachusetts Partnership Law....................35

Tax Status..........................................35
The Fund's Tax Status............................35

Total Return........................................36

Yield...............................................37

Tax-Equivalent Yield................................38
Tax-Equivalency Table............................38

Performance Comparisons.............................39
Economic and Market Information..................41

About Federated Investors...........................42
Mutual Fund Market...............................43
Institutional Clients............................43
Trust Organizations..............................43
Broker/Dealers and Bank
Broker/Dealer Subsidiaries....................43

Appendix............................................44

<PAGE>

The Fund is a portfolio of Municipal Securities Income Trust. The Trust was
established as a Massachusetts business trust under a Declaration of Trust dated
August 6, 1990. On September 16, 1992 (effective date October 31, 1992), the
Board of Trustees (the `Trustees") approved changing the name of the Trust from
Federated Municipal Income Trust to Municipal Securities Income Trust. On
February 26, 1996 (effective date March 31, 1996), the Trustees approved
changing the name of the Fund from California Municipal Income Fund to Federated
California Municipal Income Fund and also approved changing the name of the
Fund's presently offered shares from Fortress Shares to Class F Shares
(`Shares").

The Fund's investment objective is to provide current income exempt from federal
regular income tax (federal regular income tax does not include the federal
alternative minimum tax) and the personal income taxes imposed by the state of
California and California municipalities. The investment objective cannot be
changed without approval of shareholders.

Acceptable Investments
The Fund invests primarily in California municipal securities.

Characteristics
The California municipal securities in which the Fund invests have the
characteristics set forth in the prospectus. If ratings made by Moody's
Investors Service, Inc. (`Moody's"), Standard & Poor's Ratings Group (`S&P")
or Fitch's Investors Service Inc. ("Fitch") change because of changes in
those organizations or in their rating systems, the Fund will try to use
comparable ratings as standards in accordance with the investment policies
described in the Fund's prospectus.

Types of Acceptable Investments
Examples of California municipal securities include: ogovernmental lease
certificates of participation issued by state or municipal authorities where
payment is secured by installment payments for equipment, buildings, or other
facilities being leased by the state or municipality;

o municipal notes and tax-exempt commercial paper;

o serial bonds;

o tax anticipation notes sold to finance working capital needs of
municipalities in anticipation of receiving taxes;

o bond anticipation notes sold in anticipation of the issuance of long-term
bonds;

o pre-refunded municipal bonds whose timely payment of interest and principal
is ensured by an escrow of U.S. government obligations; and

o general obligation bonds.

Participation Interests
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Fund the right to
demand payment of the principal amounts of the participation interests plus
accrued interest on short notice (usually within seven days).

Variable-Rate Municipal Securities
Variable interest rates generally reduce changes in the market value of
municipal securities from their original purchase prices. Accordingly, as
interest rates decrease or increase, the potential for capital appreciation
or depreciation is less for variable rate municipal securities than for fixed
income obligations. Many municipal securities with variable interest rates
purchased by the Fund are subject to repayment of principal (usually within
seven days) on the Fund's demand. The terms of these variable-rate demand
instruments require payment of principal and accrued interest from the issuer
of the municipal obligations, the issuer of the participation interests, or a
guarantor of either issuer.

Municipal Leases
The Fund may purchase municipal securities in the form of participation
interests which represent undivided proportional interests in lease payments
by a governmental or non-profit entity. The lease payments and other rights
under the lease provide for and secure the payments on the certificates.
Lease obligations may be limited by municipal charter or the nature of the
appropriation for the lease. In particular, lease obligations may be subject
to periodic appropriation. If the entity does not appropriate funds for
future lease payments, the entity cannot be compelled to make such payments.
Furthermore, a lease may provide that the certificate trustee cannot
accelerate lease obligations upon default. The trustee would only be able to
enforce lease payments as they became due. In the event of a default or
failure of appropriation, it is unlikely that the trustee would be able to
obtain an acceptable substitute source of payment. In determining the
liquidity of municipal lease securities, the investment adviser, under the
authority delegated by the Trustees, will base its determination on the
following factors:

o whether the lease can be terminated by the lessee;

o the potential recovery, if any, from a sale of the leased property upon
termination of the lease;

o the lessee's general credit strength (e.g., its debt, administrative,
economic and financial characteristics and prospects);

o the likelihood that the lessee will discontinue appropriating funding for
the leased property because the property is no longer deemed essential to
its operations (e.g., the potential for an "event of nonappropriation ");
and

o any credit enhancement or legal recourse provided upon an event of
non-appropriation or other termination of the lease.

When-Issued and Delayed Delivery Transactions
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the Fund's
records at the trade date. The se assets are marked to market daily and are
maintained until the transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.

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

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

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

Temporary Investments
The Fund may also invest in temporary investments during times of unusual market
conditions for defensive purposes.

Repurchase Agreements
Repurchase agreements are arrangements in which banks, broker/dealers, and
other recognized financial institutions sell U.S. government securities or
certificates of deposit to the Fund and agree at the time of sale to
repurchase them at a mutually agreed upon time and price within one year from
the date of acquisition. The Fund or its custodian will take possession of
the securities subject to repurchase agreements. To the extent that the
original seller does not repurchase the securities from the Fund, the Fund
could receive less than the repurchase price on any sale of such securities.
In the event that such a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor
of the Fund and allow retention or disposition of such securities. The Fund
may only enter into repurchase agreements with banks and other recognized
financial institutions such as broker/dealers which are found by the Fund's
investment adviser to be creditworthy pursuant to guidelines established by
the Trustees.

From time to time, such as when suitable California municipal bonds are not
available, the Fund may invest a portion of its assets in cash. Any portion of
the Fund's assets maintained in cash will reduce the amount of assets in
California municipal bonds and thereby reduce the Fund's yield.

Reverse Repurchase Agreements
The Fund may also enter into reverse repurchase agreements. This transaction
is similar to borrowing cash. In a reverse repurchase agreement the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in
the future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate. The use of
reverse repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but
the ability to enter into reverse repurchase agreements does not ensure that
the Fund will be able to avoid selling portfolio instruments at a
disadvantageous time.

When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated on the Fund's records at the trade date. The se assets are
marked to market daily and are maintained until the transaction is settled.

Portfolio Turnover
The Fund may trade or dispose of portfolio securities as considered necessary to
meet its investment objective. For the fiscal years ended August 31, 1996 and
1995, the Fund's portfolio turnover rates were 21% and 63%, respectively.

Investment Limitations
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as may be necessary for clearance
of purchases and sales of securities.

Pledging Assets
The Fund will not mortgage, pledge, or hypothecate its assets except to
secure permitted borrowings. In those cases, it may mortgage, pledge, or
hypothecate assets having a market value not exceeding 10% of the value of
its total assets at the time of the pledge.

Underwriting
The Fund will not underwrite any issue of securities except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of securities in accordance with its investment objective,
policies, and limitations.

Investing in Real Estate
The Fund will not purchase or sell real estate although it may invest in
municipal bonds secured by real estate, including limited partnership interests,
or interests in real estate.

Investing in Commodities
The Fund will not buy or sell commodities, commodity contracts, or
commodities futures contracts.

Lending Cash or Securities
The Fund will not lend any of its assets except that it may acquire publicly
or non-publicly issued municipal bonds or temporary investments or enter into
repurchase agreements in accordance with its investment objective, policies,
and limitations or its Declaration of Trust.

Dealing in Puts and Calls
The Fund will not buy or sell puts, calls, straddles, spreads, or any
combination of these.

The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.

Investing in Securities of Other Investment Companies
The Fund will not purchase securities of other investment companies except as
part of a merger, consolidation, or other acquisition.

Investing in Issuers Whose Securities are Owned by Officers and Trustees of the
Fund
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Fund or its investment adviser, owning
individually more than 1/2 of 1% of the issuer's securities, together own
more than 5% of the issuer's securities.

Investing in Restricted Securities
The Fund will not invest more than 10% of the value of its total assets in
securities subject to restrictions on resale under the Securities Act of 1933.

Investing in Illiquid Securities
The Fund will not invest more than 15% of its net assets in illiquid
obligations, including repurchase agreements providing for settlement in more
than seven days after notice, and certain restricted securities.

Investing in New Issuers
The Fund will not invest more than 5% of the value of its total assets in
industrial development bonds where the principal and interest are the
responsibility of companies (or guarantors, where applicable) with less than
three years of continuous operations, including the operation of any
predecessor.

Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction. For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S. branch of
a domestic bank or savings association having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment to be `cash items."

California Investment Risks
Limits on Taxing and Spending Authority
Developments in California which constrain the taxing and spending authority
of California governmental entities could adversely affect the ability of
such entities to meet their interest and/or principal payment obligations on
securities they have issued or will issue. The following information
constitutes only a brief summary and is not intended as a complete
description.

In 1978, a statewide referendum approved Proposition 13, an amendment to the
California Constitution limiting both the valuation of real property for
property tax purposes and the power of local taxing authorities to increase
real property tax revenues. To provide revenue to local governments,
legislation was enacted shortly thereafter providing for the redistribution
to local governments of the state's then existing surplus in its General
Fund, reallocation of revenues to local governments, and assumption by the
state of certain local government obligations. More recent California
legislation has, however, reduced state assistance payments to local
governments and reallocated a portion of such payments to the state's General
Fund.

There can be no assurance that any particular level of state aid to local
governments will be maintained in future years. The U.S. Supreme Court has
accepted for review a case challenging the constitutionality of certain
provisions of Proposition 13. The outcome of such litigation could
substantially impact local property tax collections and the ability of state
agencies, local governments and districts to make future payments on
outstanding debt obligations.

In 1979, California voters again amended the California Constitution, this
time imposing an appropriations limit on the spending authority of certain
state and local government entities. The state's appropriations limit is
based on its 1978-1979 fiscal year authorizations to expend proceeds of taxes
and is adjusted annually to reflect changes in cost of living and population
and transfer of financial responsibility from one governmental unit to
another. If a California governmental entity raises revenues beyond its
appropriations limit, the excess must be returned to the entity's taxpayers
within the two subsequent fiscal years, generally by a tax credit, refund, or
temporary suspension of tax rates or fee schedules.

These spending limitations do not, however, apply to the debt service on
obligations existing or legally authorized as of January 1, 1979, or on
bonded indebtedness thereafter approved by the voters. In 1986, California
voters approved an initiative statute known as Proposition 62. This
initiative (i) requires that any tax for general governmental purposes
imposed by local governments be approved by resolution or ordinance adopted
by a two-thirds vote of the governmental entity's legislative body and by a
majority vote of the electorate of the governmental entity, (ii) requires
that any special tax (defined as taxes levied for other than general
governmental purposes) imposed by a local governmental entity be approved by
a two- thirds vote of the voters within that jurisdiction, (iii) restricts
the use of revenues from a special tax to the purposes or for the service for
which the special tax was imposed, (iv) prohibits the imposition of ad
valorem taxes on real property by local governmental entities except as
permitted by the Proposition 13 amendment, (v) prohibits the imposition of
transaction taxes and sales taxes on the sale of real property by local
governments, (vi) requires that any tax imposed by a local government on or
after August 1, 1985, be ratified by a majority vote of the electorate within
two years of the adoption of the initiative or be terminated by November 15,
1988, (vii) requires that, in the event a local government fails to comply
with the provisions of this measure, a reduction in the amount of property
tax revenue allocated to such local government occurs in an amount equal to
the revenues received by such entity attributable to the tax levied in
violation of the initiative, and (viii) permits these provisions to be
amended exclusively by the voters of the state of California.

In September 1988, the California Court of Appeals in City of Westminster v.
County of Orange held that Proposition 62 is unconstitutional to the extent
that it requires a general tax by a general law city, enacted on or after
August 1, 1985, and prior to the effective date of Proposition 62, to be
subject to approval by a majority of voters. The Court held that the
California Constitution prohibits the imposition of a requirement that local
tax measures be submitted to the electorate by either referendum or
initiative. It is not possible to predict the impact of this decision on
charter cities, on special taxes or on new taxes imposed after the effective
date of Proposition 62.

In November 1988, California voters approved Proposition 98. This initiative
requires that (i) revenues in excess of amounts permitted to be spent and
which would otherwise be returned by revision of tax rates or fee schedules,
be transferred and allocated (up to a maximum of 4%) to the State School Fund
and be expended solely for purposes of instructional improvement and
accountability. No such transfer or allocation of funds will be required if
certain designated state officials determine that annual student expenditures
and class size meet certain criteria as set forth in Proposition 98. Any
funds allocated to the State School Fund shall cause the appropriation limits
to be annually increased for any such allocation made in the prior year.

Proposition 98 also requires the state of California to provide a minimum
level of funding for public schools and community colleges. The initiative
permits the enactment of legislation, by a two-thirds vote, to suspend the
minimum funding requirement for one year. On September 28, 1995, the
California Supreme Court upheld the constitutionality of Proposition 62. this
referendum was approved by the State's voters in 1986, but not enforced due
to previous judicial decisions. Proposition 62 requires two-thirds voter
approval for special taxes and a new simple majority approval for general
taxes. Prior to the State Supreme Court's decision upholding Proposition 62
(the Santa Clara decision) various court cases interpreting Proposition 13
reaffirmed the power of cities to impose taxes other than property taxes as
long as those taxes were used for general municipal purposes. the future
effect of Proposition 62 on the financial performance of California local
governments and on note and debt security is unclear. It is possible that
court challenges, based on Proposition 62, to taxes raised or imposed after
1986 may reduce general municipal revenues available for financing municipal
operations and services, including the repayment of debt. The effect of these
various constitutional and statutory changes upon the ability of California
municipal securities issuers to pay interest and principal on their
obligations remains unclear. Furthermore, other measures affecting the taxing
or spending authority of California or its political subdivisions may be
approved or enacted in the future.

Recent Economic Developments
The California economy is in recovery. Statewide unemployment in August, 1996
was 7.1%, compared to 7.8% in August, 1995. Major sectors of employment
growth have been high tech industries and motion picture production. Gains in
these and other sectors have more than offset continued job losses in the
aerospace and financial services industries. Other positive economic
developments include greatly increased exports, new home construction and
retail sales.

As a result of the improvement in the economy, tax revenues have been higher
than budgeted. In the first quarter of fiscal year 1997, the State's general
(operating) fund revenues were $91 million (1.5%) above the budget forecast
and disbursements were $385 million (5.5%) less than the budget forecast. In
view of the improved economic climate and resulting stronger financial
results, Fitch Investors Service, Inc.
raised their rating of the State's general obligation bonds to A+ from A in
July, 1996.

Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated California Municipal Income Fund, and principal
occupations.

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA

Birthdate: July 28, 1924

Chairman and Trustee

Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director or Trustee of the Funds.

Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA

Birthdate: February 3, 1934

Trustee

Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Trustee, University
of Pittsburgh; Director or Trustee of the Funds.

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North

Naples, FL

Birthdate: June 23, 1937

Trustee

President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; Partner or Trustee in private real estate
ventures in Southwest Florida; formerly, President, Naples Property Management,
Inc. and Northgate Village Development Corporation; Director or Trustee of the
Funds.

William J. Copeland
One PNC Plaza--23rd Floor
Pittsburgh, PA

Birthdate: July 4, 1918

Trustee

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

J. Christopher Donahue*
Federated Investors Tower
Pittsburgh, PA

Birthdate: April 11, 1949

Executive Vice President and Trustee

President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global Research Corp.; President, Passport Research, Ltd.;
Trustee, Federated Shareholder Services Company, and Federated Shareholder
Services; Director, Federated Services Company; President or Executive Vice
President of the Funds; Director or Trustee of some of the Funds. Mr. Donahue is
the son of John F. Donahue, Chairman and Trustee of the Company.

James E. Dowd
571 Hayward Mill Road
Concord, MA

Birthdate: May 18, 1922

Trustee

Attorney-at-law; Director, the Emerging Germany Fund, Inc.; Trustee of the
Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA

Birthdate: October 11, 1932

Trustee

Professor of Medicine, University of Pittsburgh; Medical Director, University of
Pittsburgh Medical Center - Downtown; Member, Board of Directors, University of
Pittsburgh Medical Center; formerly, Hematologist, Oncologist, and Internist,
Presbyterian and Montefiore Hospitals; Director or Trustee of the Funds.

Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA

Birthdate: June 18, 1924

Trustee

Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western Region;
Director or Trustee of the Funds.

Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI

Birthdate: March 16, 1942

Trustee

Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.

Gregor F. Meyer
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA

Birthdate: October 6, 1926

Trustee

Attorney, Member of Miller, Ament, Henny & Kochuba; Chairman, Meritcare, Inc.;
Director, Eat'N Park Restaurants, Inc.; Director or Trustee of the Funds.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA

Birthdate: December 20, 1932

Trustee

President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA

Birthdate: September 14, 1925

Trustee

Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University, U.S. Space Foundation and Czech
Management Center; President Emeritus, University of Pittsburgh; Founding
Chairman, National Advisory Council for Environmental Policy and Technology,
Federal Emergency Management Advisory Board and Czech Management Center;
Director or Trustee of the Funds.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA

Birthdate: June 21, 1935

Trustee

Public relations/Marketing/Conference Planning, Manchester Craftsmen's Guild;
Restaurant Consultant, Frick Art & History Center; Conference Coordinator,
University of Pittsburgh Art History Department; Director or Trustee of the
Funds.

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA

Birthdate: May 17, 1923

President

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

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 22, 1930

Executive Vice President

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

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 26, 1938

Executive Vice President , Secretary and Treasurer

ExecutiveVice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and
Federated Research; Director, Federated Research Corp. and
Federated Global Research Corp.; Trustee, Federated
Shareholder Services Company; Director, Federated Services
Company; President and Trustee, Federated Shareholder
Services; Director, Federated Securities Corp.; Executive Vice
President and Secretary of the Funds; Treasurer of some of the
Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.

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

As used in the table above, `The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Annuity Management Series; Arrow
Funds; Automated Government Money Trust; Blanchard Funds; Blanchard Precious
Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc. ; DG Investor
Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated Adjustable
Rate U.S. Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated Equity Funds; Federated Equity Income Fund, Inc.;
Federated Fund for U.S. Government Securities, Inc.; Federated GNMA Trust;
Federated Government Income Securities, Inc.; Federated Government Trust;
Federated High Income Bond Fund, Inc.; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Insurance Series; Federated Investment
Portfolios; Federated Investment Trust; Federated Master Trust; Federated
Municipal Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.;
Federated Municipal Trust; Federated Short-Term Municipal Trust; Federated
Short-Term U.S. Government Trust; Federated Stock and Bond Fund, Inc.; Federated
Stock Trust; Federated Tax-Free Trust; Federated Total Return Series, Inc.;
Federated U.S. Government Bond Fund; Federated U.S. Government Securities Fund:
1-3 Years; Federated U.S. Government Securities Fund: 2-5 Years; Federated U.S.
Government Securities Fund: 5-10 Years; Federated Utility Fund, Inc.; First
Priority Funds; Fixed Income Securities, Inc.; High Yield Cash Trust;
Intermediate Municipal Trust; International Series, Inc.; Investment Series
Funds, Inc.; Investment Series Trust; Liberty Term Trust, Inc. - 1999; Liberty
U.S. Government Money Market Trust; Liquid Cash Trust; Managed Series Trust;
Money Market Management, Inc.; Money Market Obligations Trust; Money Market
Trust; Municipal Securities Income Trust; Newpoint Funds; Peachtree Funds; RIMCO
Monument Funds; Targeted Duration Trust; Tax-Free Instruments Trust; The
Planters Funds; The Starburst Funds; The Starburst Funds II; The Virtus Funds;
Trust for Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations; and
World Investment Series, Inc.

Fund Ownership
Officers and Trustees own less than 1% of the outstanding Shares. As of October
7, 1996, the following shareholder of record owned 5% or more of the outstanding
Shares of the Fund: Merrill Lynch Pierce Fenner & Smith, Jacksonville, Florida,
owned approximately 774,300 Shares (46.05%).
<TABLE>
<CAPTION>

Trustees Compensation
Aggregate
Name, Compensation
Position With From Total Compensation Paid
Trust Trust*# From Fund Complex+
<S> <C> <C>

John F. Donahue $ -0- $ -0- for the Trust and
Trustee and Chairman 54 other investment companies in the Fund Complex

Thomas G. Bigley++ $1,243.22 $86,331 for the Trust and
Trustee 54 other investment companies in the Fund Complex

John T. Conroy $1,363.10 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund Complex

William J. Copeland $1,363.10 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund Complex

J. Christopher Donahue $ -0- $ -0- for the Trust and 16 other investment companies in the Fund
Trustee and Exec. Vice Pres. Complex

James E. Dowd $1,363.10 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund Complex

Lawrence D. Ellis, M.D. $1,243.22 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund Complex

Edward L. Flaherty, Jr. $1,363.10 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund Complex

Peter E. Madden $1,243.22 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund Complex

Gregor F. Meyer $1,243.22 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund Complex

John E. Murray, Jr. $1,243.22 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund Complex

Wesley W. Posvar $1,243.22 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund Complex

Marjorie P. Smuts $1,243.22 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund Complex *
</TABLE>

Information is furnished for the fiscal year ended August 31, 1996.

# The aggregate compensation is provided for the Trust which is comprised of
five portfolios.

+ The information is provided for the last calendar year.

++ Mr Bigley served on 39 investment companies in the Federated funds Complex
from January 1 through September 30, 1995. On October 1, 1995, he was appointed
a Trustee on 15 additional Federated funds.

Trustee Liability
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.

Adviser to the Fund

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

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

Advisory Fees
For its advisory services, the Adviser receives an annual investment advisory
fee as described in the prospectus. For the fiscal years ended August 31, 1996,
1995 and 1994, the Adviser earned advisory fees of $62,691, $56,899 and $60,519,
respectively, all of which were voluntarily waived.

If the Fund's monthly projected operating expenses exceed this expense
limitation, the investment advisory fee paid will be reduced by the amount of
the excess, subject to an annual adjustment. If the expense limitation is
exceeded, the amount to be reimbursed by the Adviser will be limited, in any
single fiscal year, by the amount of the investment advisory fee.

This arrangement is not part of the advisory contract and may be amended or
rescinded in the future.

Fund Administration
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. From March 1, 1994, to March 1, 1996, Federated Administrative
Services served as the Fund's Administrator. Prior to March 1, 1994, Federated
Administrative Services, Inc. served as the Fund's Administrator. Both former
Administrators are subsidiaries of Federated Investors. For purposes of this
Statement of Additional Information, Federated Services Company, Federated
Administrative Services, and Federated Administrative Services, Inc. may
hereinafter collectively be referred to as the "Administrators". For the fiscal
years ended August 31, 1996, 1995 and 1994, the Administrators collectively
earned $125,000, $125,000 and $176,127, respectively.

Custodian and Portfolio Accountant
State Street Bank and Trust Company (`State Street Bank"), Boston,
Massachusetts, is custodian for the securities and cash of the Fund. Federated
Services Company, Pittsburgh, Pennsylvania, provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments.

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

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

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees. The Adviser may select brokers and dealers who offer
brokerage and research services. The se services may be furnished directly to
the Fund or to the Adviser and may include: advice as to the advisability of
investing in securities; security analysis and reports; economic studies;
industry studies; receipt of quotations for portfolio evaluations; and similar
services. Research services provided by brokers and dealers may be used by the
Adviser or by its affiliates in advising the Fund and other accounts. To the
extent that receipt of these services may supplant services for which the
Adviser or its affiliates might otherwise have paid, it would tend to reduce
their expenses. The Adviser and its affiliates exercise reasonable business
judgment in selecting brokers who offer brokerage and research services to
execute securities transactions. The y determine in good faith that commissions
charged by such persons are reasonable in relationship to the value of the
brokerage and research services provided. During the fiscal years ended August
31, 1996, 1995 and 1994, the Fund paid no brokerage commissions. Although
investment decisions for the Fund are made independently from those of the other
accounts managed by the Adviser, investments of the type the Fund may make may
also be made by those other accounts. When the Fund and one or more other
accounts managed by the adviser are prepared to invest in, or desire to dispose
of, the same security, available investments or opportunities for sales will be
allocated in a manner believed by the adviser to be equitable to each. In some
cases, this procedure may adversely affect the price paid or received by the
Fund or the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to participate
in volume transactions will be to the benefit of the Fund.

Except under certain circumstances described in the prospectus, Shares are sold
at their net asset value plus a sales charge on days the New York Stock Exchange
is open for business. The procedure for purchasing Shares is explained in the
prospectus under `Investing in Class F Shares."

By adopting the Distribution Plan, the Trustees expect that the Fund will be
able to achieve a more predictable flow of cash for investment purposes and to
meet redemptions. This will facilitate more efficient portfolio management and
assist the Fund in pursuing its investment objectives. By identifying potential
investors whose needs are served by the Fund's objectives, and properly
servicing these accounts, it may be possible to curb sharp fluctuations in rates
of redemptions and sales.

Other benefits, which may be realized under either arrangement, may include: (1)
providing personal services to shareholders; (2) investing shareholder assets
with a minimum of delay and administrative detail; (3) enhancing shareholder
recordkeeping systems; and (4) responding promptly to shareholders' requests and
inquiries concerning their accounts.

For the fiscal years ended August 31, 1996, 1995 and 1994, payments in the
amount of $78,364, $71,122 and $75,651, respectively, were made pursuant to the
Distribution Plan, of which $75,229, $68,277 and $55,812, respectively, were
waived. In addition, for the fiscal year ended August 31, 1996, the Fund paid
shareholder service fees in the amount of $39,182, of which $3,135 were waived.

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

Purchases by Sales Representatives, Fund Trustees, and Employees
Trustees, employees, and sales representatives of the Fund, Federated Advisers,
and Federated Securities Corp. or their affiliates, or any investment dealer who
has a sales agreement with Federated Securities Corp. and their spouses and
children under 21, may buy Shares at net asset value without a sales charge.
Shares may also be sold without a sales charge to trusts or pension or
profit-sharing plans for these persons. The se sales are made with the
purchaser's written assurance that the purchase is for investment purposes and
that the securities will not be resold except through redemption by the Fund.

Net asset value generally changes each day. The days on which net asset value is
calculated for Shares are described in the prospectus.

Valuing Municipal Bonds
The Trustees use an independent pricing service to determine the market value of
municipal bonds. The independent pricing service takes into consideration yield,
stability, risk, quality, coupon rate, maturity, type of issue, trading
characteristics, special circumstances of a security or trading market, and any
other factors or market data it considers relevant in determining valuations for
normal institutional size trading units of debt securities, and does not rely
exclusively on quoted prices.

Use of Amortized Cost
The Trustees have decided that the fair value of debt securities authorized to
be purchased by the Fund with remaining maturities of 60 days or less at the
time of purchase, shall be their amortized cost value, unless the particular
circumstances of the security indicate otherwise. Under this method, portfolio
instruments and assets are valued at the acquisition cost as adjusted for
amortization of premium or accumulation of discount rather than at current
market value. The Executive Committee continually assesses this method of
valuation and recommends changes where necessary to assure that the Fund's
portfolio instruments are valued at their fair value as determined in good faith
by the Trustees.

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

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

In the unlikely event a shareholder of the Fund is held personally liable for
the Trust's obligations on behalf of the Fund, the Trust is required to use the
property of the Fund to protect or compensate the shareholder. On request, the
Trust will defend any claim made and pay any judgment against a shareholder of
the Fund for any act or obligation of the Trust on behalf of the Fund. The
refore, financial loss resulting from liability as a shareholder of the Fund
will occur only if the Trust cannot meet its obligations to indemnify
shareholders and pay judgments against them from the assets of the Fund.

The Fund's Tax Status
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code of 1986, as amended,
applicable to regulated investment companies and to receive the special tax
treatment afforded to such companies. To qualify for this treatment, the Fund
must, among other requirements:

o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities; o derive less than 30% of its gross
income from the sale of securities held less than three months; o invest in
securities within certain statutory limits; and o distribute to its
shareholders at least 90% of its net income earned during the year.
Capital Gains
Capital gains or losses may be realized by the Fund on the sale of portfolio
securities and as a result of discounts from par value on securities held to
maturity. Sales would generally be made because of:

o the availability of higher relative yields;

o differentials in market values;

o new investment opportunities;

o changes in creditworthiness of an issuer; or

o an attempt to preserve gains or limit losses.

Distributions of long-term capital gains are taxed as such, whether they are
taken in cash or reinvested, and regardless of the length of time the
shareholder has owned Shares. Any loss by a shareholder on Shares held for less
than six months and sold after a capital gains distribution will be treated as a
long-term capital loss to the extent of the capital gains distribution.

The Fund's average annual total returns for the one-year period ended August 31,
1996, and for the period from December 2, 1992 (date of initial public
investment) to August 31, 1996, were 5.13% and 6.07%, respectively. The average
annual total return for the Fund is the average compounded rate of return for a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is computed by
multiplying the number of Shares owned at the end of the period by the offering
price per Share at the end of the period. The number of Shares owned at the end
of the period is based on the number of Shares purchased at the beginning of the
period with $1,000, adjusted over the period by any additional Shares, assuming
the monthly reinvestment of all dividends and distributions. Any applicable
contingent deferred sales charge is deducted from the ending value of the
investment based on the lesser of the original purchase price per Share or the
offering price per Share of Shares redeemed.

The Fund's yield for the thirty-day period ended August 31, 1996 was 5.53%. The
yield for the Fund is determined by dividing the net investment income per Share
(as defined by the Securities and Exchange Commission) earned by the Fund over a
thirty-day period by the maximum offering price per Share of the Fund on the
last day of the period. This value is then annualized using semi-annual
compounding. This means that the amount of income generated during the
thirty-day period is assumed to be generated each month over a twelve-month
period and is reinvested every six months. The yield does not necessarily
reflect income actually earned by the Fund because of certain adjustments
required by the Securities and Exchange Commission and, therefore, may not
correlate to the dividends or other distributions paid to shareholders. To the
extent that financial institutions and broker/dealers charge fees in connection
with services provided in conjunction with an investment in the Fund,
performance will be reduced for those shareholders paying those fees.

The Fund's tax-equivalent yield for the thirty-day period ended August 31, 1996
was 8.82%.

The tax-equivalent yield of the Fund is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that the Fund would have had to earn to
equal its actual yield, assuming a 28% tax rate and assuming that income is 100%
tax-exempt.

Tax-Equivalency Table
The Fund may also use a tax-equivalency table in advertising and sales
literature. The interest earned by the municipal obligations in the Fund's
portfolio generally remains free from federal regular income tax*, and the
income taxes imposed by the State of California. As the table below indicates, a
`tax-free" investment is an attractive choice for investors, particularly in
times of narrow spreads between tax-free and taxable yields.

TAXABLE YIELD EQUIVALENT FOR 1996
STATE OF CALIFORNIA

COMBINE FEDERAL AND STATE INCOME TAX BRACKET:
<TABLE>
<CAPTION>

21.00% 37.30% 40.30% 45.30%48.90% 48.90%
Joint $1- $40,101- $96,901- $147,701- $263,751 OVER
Return 40,100 96,900 147,700263,750 439,744 $439,744

Tax-Exempt
Yield Taxable Yield Equivalent
1.50% 1.90% 2.39% 2.51%2.74% 2.94% 2.94%
2.00% 2.53% 3.19% 3.35%3.66% 3.91% 3.91%
2.50% 3.16% 3.99% 4.19%4.57% 4.89% 4.89%
3.00% 3.80% 4.78% 5.03%5.48% 5.87% 5.87%
3.50% 4.43% 5.58% 5.86%6.40% 6.85% 6.85%
4.00% 5.06% 6.38% 6.70%7.31% 7.83% 7.83%
4.50% 5.70% 7.18% 7.54%8.23% 8.81% 8.81%
5.00% 6.33% 7.97% 8.38%9.14% 9.78% 9.78%
5.50% 6.96% 8.77% 9.21%10.05% 10.76% 10.76%
</TABLE>

Note: The maximum marginal tax rate for each bracket was used in calculating the
taxable yield equivalent. Furthermore, additional state and local taxes paid on
comparable taxable investments were not used to increase federal deductions. If
you itemize deductions, your taxable yield equivalent will be lower. The chart
above is for illustrative purposes only. It is not an indicator of past or
future performance of Fund shares.

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

The performance of Shares depends upon such variables as:

Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:

o Lipper Analytical Services, Inc. ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any change
in net asset value over a specific period of time. From time to time,
the Fund will quote its Lipper ranking in the `general municipal bond
funds"category in advertising and sales literature.

o Morningstar, Inc., an independent rating service, is the publisher of
the bi-weekly Mutual Fund Values. Mutual Fund Values rates more than
1,000 NASDAQ-listed mutual funds of all types, according to their
risk-adjusted returns. The maximum rating is five stars, and ratings
are effective for two weeks. Advertisements and other sales literature
for the Fund may quote total returns which are calculated on
non-standardized base periods. The total returns represent the
historic change in the value of an investment in the Fund based on
monthly reinvestment of dividends over a specified period of time.

Advertisements may quote performance information which does not reflect the
effect of the sales charge.

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

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

Federated Investors is dedicated to meeting investor needs which is reflected in
its investment decision making-structured, straightforward, and consistent. This
has resulted in a history of competitive performance with a range of competitive
investment products that have gained the confidence of thousands of clients and
their customers.

The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamentaland technical research. Investment decisions
are made and executed by teams of portfolio managers, analysts, andtraders
dedicated to specific market sectors. The se traders handle trillions of dollars
in annual trading volume.

In the municipal sector, as of December 31, 1995, Federated Investors managed 12
bond funds with approximately $2.0 billion in assets and 20 money market funds
with approximately $7.8 billion in total assets. In 1976, Federated introduced
one of the first municipal bond mutual funds in the industry and is now one of
the largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.

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

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

Institutional Clients
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional clients
include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division.

Trust Organizations
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios. The
marketing effort to trust clients is headed by Mark R. Gensheimer, Executive
Vice President, Bank Marketing & Sales.

Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. Federated's service to
financial professionals and institutions has earned it high rankings in several
DALBAR Surveys. The marketing effort to these firms is headed by James F. Getz,
President, Broker/Dealer Division.
Federated Investors, through it subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:

* source: Investment Company Institute

Standard & Poor's Ratings Group (`S&P") Municipal Bond Ratings
AAA--Debt rated `AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA--Debt rated `AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated `A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB--Debt rated `BBB" is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

PLUS (+) OR MINUS (-): The ratings from `AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

Moody's Investors Service, Inc., (`Moody's") Municipal Bond Ratings
Aaa--Bonds which are rated Aaa are judged to be of the best quality. The y carry
the smallest degree of investment risk and are generally referred to as `gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. The y are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.

A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Baa--Bonds which are rated Baa are considered as medium grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

NR--Not rated by Moody's.

Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its generic rating category; the modifier 1
indicates that the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic rating category.

Fitch Investors Service, Inc. (`Fitch") Long-Term Debt Ratings
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably
foreseeable events.

AA--Bonds considered to be investment grade and of very high quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated `AAA." Because bonds rated in the `AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated F-1+.

A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.

BBB--Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.

NR--NR indicates that Fitch does not rate the specific issue.

PLUS (+) OR MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the `AAA" category.

Standard & Poor's Ratings Group Municipal Note Ratings
SP-1--Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
(+) designation.

SP-2--Satisfactory capacity to pay principal and interest.

Moody's Investors Service, Inc., Short-Term Loan Ratings
MIG1/VMIG1--This designation denotes best quality. The re is a present strong
protection by established cash flows, superior liquidity support or demonstrated
broad based access to the market for refinancing.

MIG2/VMIG2--This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.

Fitch Investors Service, Inc. Short-Term Debt Ratings
F-1+--Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

F-1--Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.

F-2--Good Credit Quality. Issues carrying this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as the
F-1+ and F-1 categories.

Standard & Poor's Ratings Group Commercial Paper Ratings Definitions
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus (+) sign designation.

A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated `A-1."

Moody's Investors Service, Inc., Commercial Paper Ratings
P-1--Issuers rated PRIME-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations.

PRIME-1 repayment capacity will normally be evidenced by the following
characteristics: Leading market positions in well established industries; high
rates of return on funds employed; conservative capitalization structures with
moderate reliance on debt and ample asset protection; broad margins in earning
coverage of fixed financial charges and high internal cash generation; and well
established access to a range of financial markets and assured sources of
alternate liquidity.

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

Federated Michigan Intermediate Municipal Trust
(formerly, Michigan Intermediate Municipal Trust)
(A Portfolio of Municipal Securities Income Trust)

Prospectus

The shares of Federated Michigan Intermediate Municipal Trust (the "Fund")
offered by this prospectus represent interests in a non-diversified portfolio of
securities which is one of a series of investment portfolios in Municipal
Securities Income Trust (the "Trust"), an open-end management investment company
(a mutual fund). The investment objective of the Fund is to provide current
income exempt from federal regular income tax and the personal income taxes
imposed by the state of Michigan and Michigan municipalities. The Fund invests
primarily in a portfolio of Michigan municipal securities.

The Shares offered by this Prospectus are not deposits or obligations of any
bank, are not endorsed or guaranteed by any bank, and are not insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in these shares involves investment risks
including the possible loss of principal.

This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference. The Fund has also
filed a Statement of Additional Information dated October 31, 1996, with the
Securities and Exchange Commission ("SEC"). The information contained in the
Statement of Additional Information is incorporated by reference in this
prospectus. You may request a copy of the Statement of Additional Information or
a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-341-7400. To obtain other
information, or make inquiries about the Fund, contact your financial
institution. The Statement of Additional Information, material incorporated by
reference into this document, and other information regarding the Fund is
maintained electronically with the SEC at Internet Web site
(http://www.sec.gov).

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

Prospectus dated October 31, 1996

<PAGE>

Summary of Fund Expenses.............................. 1

Financial Highlights.................................. 2

General Information................................... 3

Investment Information................................ 3
Investment Objective............................... 3
Investment Policies................................ 3
Michigan Municipal Securities...................... 5
Investment Risks................................... 6
Non-Diversification................................ 6
Investment Limitations............................. 6

Net Asset Value....................................... 7

Investing in the Fund................................. 7
Share Purchases.................................... 7
Minimum Investment Required........................ 8
What Shares Cost................................... 8
Eliminating/Reducing the Sales Charge.............. 9
Systematic Investment Program...................... 10
Certificates and Confirmations..................... 10
Dividends and Distributions........................ 11

Exchange Privilege.................................... 11
Requirements for Exchange.......................... 11
Tax Consequences................................... 11
Making an Exchange................................. 11

Redeeming Shares...................................... 12
Through a Financial Institution.................... 12
Directly from the Fund............................. 12
Contingent Deferred Sales Charge................... 13
Systematic Withdrawal Program...................... 14
Accounts with Low Balances......................... 14

Trust Information..................................... 14
Management of the Trust............................ 14
Distribution of Fund Shares........................ 15
Administration of the Fund......................... 16

Shareholder Information............................... 17
Voting Rights...................................... 17

Tax Information....................................... 17
Federal Income Tax................................. 17
Michigan Taxes..................................... 18
State and Local Taxes.............................. 18

Performance Information............................... 19

Financial Statements.................................. 20

Independent Auditors' Report.......................... 36

Addresses Inside Back Cover

<PAGE>

The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated August 6, 1990. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes. On June 1, 1994, Michigan Municipal Income Fund
changed its name to Michigan Intermediate Municipal Trust. The Fund is designed
for customers of financial institutions such as banks, fiduciaries, investment
advisers and broker/dealers as a convenient means of accumulating an interest in
a professionally managed, non-diversified portfolio investing primarily in
Michigan municipal securities. A minimum initial investment of $1,000 is
required. Subsequent investments must be in amounts of at least $100. The Fund
is not likely to be a suitable investment for non-Michigan taxpayers or
retirement plans since Michigan municipal securities are not likely to produce
competitive after-tax yields for such persons and entities when compared to
other investments.

Except as otherwise noted in this prospectus, Fund shares are sold at net asset
value plus an applicable sales charge and are redeemed at net asset value. The
Fund's current net asset value and offering price may be found in the mutual
funds section of local newspapers under "Federated" and the appropriate class
designation listing.

Investment Objective
The investment objective of the Fund is to provide current income which is
exempt from federal regular income tax and the personal income taxes imposed by
the state of Michigan and Michigan municipalities. The investment objective
cannot be changed without approval of shareholders. While there is no assurance
that the Fund will achieve its investment objective, it endeavors to do so by
following the investment policies described in this prospectus. Interest income
of the Fund that is exempt from the income taxes described above retains its
exempt status when distributed to the Fund's shareholders. However, income
distributed by the Fund may not necessarily be exempt from state or municipal
taxes in states other than Michigan.

Investment Policies
The Fund pursues its investment objective by investing primarily in a portfolio
of Michigan municipal securities. Under normal market conditions, the
dollar-weighted average portfolio maturity of the Fund will be between three and
ten years, and the Fund's average-weight duration will be between three and
seven years. Unless indicated otherwise, the investment policies of the Fund may
be changed by the Trustees without approval of shareholders. Shareholders will
be notified before any material changes in these policies become effective.

Acceptable Investments.
The Securities in Which the Fund Invests Include:

n obligations issued by or on behalf of the state of Michigan, its
political subdivisions, or agencies;

n debt obligations of any state, territory, or possession of the United
States, or any political subdivision of any of these; and

The prices of fixed income securities fluctuate inversely to the direction of
interest rates.

Characteristics
The Michigan municipal securities which the Fund buys are investment grade bonds
rated Aaa, Aa or a by Moody's Investors Service, Inc. ("Moody's"), AAA, AA or A
by Standard & Poor's Ratings Group ("S&P"), and AAA, AA or A by Fitch Investors
Service, Inc. ("Fitch"). In certain cases the Fund's adviser may choose bonds
which are unrated if it judges the bonds to have the same characteristics as the
investment grade bonds described above. A description of the ratings categories
is contained in the Appendix to the Statement of Additional Information.

Participation Interests
The Fund may purchase participation interests from financial institutions such
as commercial banks, savings associations, and insurance companies. The se
participation interests give the Fund an undivided interest in Michigan
municipal securities. The financial institutions from which the Fund purchases
participation interests frequently provide or secure irrevocable letters of
credit or guarantees to assure that the participation interests are of high
quality. The Board of Trustees (the "Trustees") of the Trust will determine that
participation interests meet the prescribed quality standards for the Fund.

Variable Rate Municipal Securities
Some of the Michigan municipal securities which the Fund purchases may have
variable interest rates. Variable interest rates are ordinarily based on a
published interest rate, interest rate index, or a similar standard, such as the
91-day U.S. Treasury bill rate. Many variable rate municipal securities are
subject to payment of principal on demand by the Fund in not more than seven
days. All variable rate municipal securities will meet the quality standards for
the Fund. The Fund's investment adviser has been instructed by the Trustees to
monitor the pricing, quality, and liquidity of the variable rate municipal
securities, including participation interests held by the Fund on the basis of
published financial information and reports of the rating agencies and other
analytical services.

Restricted Securities
As a matter of fundamental policy, the Fund may invest up to 10% of its net
assets in restricted securities. Restricted securities are any securities in
which the Fund may otherwise invest pursuant to its investment objective and
policies but which are subject to restriction upon resale under federal
securities laws. The Fund will limit investments in illiquid securities,
including certain restricted securities not determined by the Trustees to be
liquid, to 15% of its net assets.

When-Issued and Delayed Delivery Transactions
The Fund may purchase securities on a when-issued or delayed delivery basis. The
se transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause the Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. Accordingly, the Fund may pay
more/less than the market value of the securities on the settlement date. The
Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.

Temporary Investments
The Fund invests its assets so that at least 80% of its annual interest income
is exempt from federal regular income tax and the state of Michigan and Michigan
municipalities personal income taxes. However, from time to time when the
investment adviser determines that market conditions call for a temporary
defensive posture, the Fund may invest in short-term non-Michigan municipal
tax-exempt obligations or taxable temporary investments. The se temporary
investments include: notes issued by or on behalf of municipal or corporate
issuers; obligations issued or guaranteed by the U.S. government, its agencies,
or instrumentalities; other debt securities; commercial paper; certificates of
deposit of banks; and repurchase agreements (arrangements in which the
organization selling the Fund, a bond, or temporary investment agrees at the
time of sale to repurchase it at a mutually agreed upon time and price). The re
are no rating requirements applicable to temporary investments. However, the
investment adviser will limit temporary investments to those rated within the
investment grade categories described under "Acceptable Investments --
Characteristics" (if rated) or (if unrated) those which the investment adviser
judges to have the same characteristics as such investment grade securities.
Although the Fund is permitted to make taxable, temporary investments, there is
no current intention of generating income subject to federal regular income tax
or personal income taxes imposed by the state of Michigan or Michigan
municipalities.

Michigan Municipal Securities
Michigan municipal securities are generally issued to finance public works, such
as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. The y are also issued to
repay outstanding obligations, to raise funds for general operating expenses,
and to make loans to other public institutions and facilities. Michigan
municipal securities include industrial development bonds issued by or on behalf
of public authorities to provide financing aid to acquire sites or construct and
equip facilities for privately or publicly owned corporations. The availability
of this financing encourages these corporations to locate within the sponsoring
communities and thereby increases local employment. The two principal
classifications of municipal securities are "general obligation" and "revenue"
bonds. General obligation bonds are secured by the issuer's pledge of its full
faith and credit and taxing power for the payment of principal and interest.
However, interest on and principal of revenue bonds, are payable only from the
revenue generated by the facility financed by the bond or other specified
sources of revenue. Revenue bonds do not represent a pledge of credit or create
any debt of or charge against the general revenues of a municipality or public
authority. Industrial development bonds are typically classified as revenue
bonds.

Investment Risks
Yields on Michigan municipal securities depend on a variety of factors,
including: the general conditions of the municipal bond market; the size of the
particular offering; the maturity of the obligations; and the rating of the
issue. Further, any adverse economic conditions or developments affecting the
state of Michigan or its municipalities could impact the Fund's portfolio. The
ability of the Fund to achieve its investment objective also depends on the
continuing ability of the issuers of Michigan municipal securities and
participation interests, or the guarantors of either, to meet their obligations
for the payment of interest and principal when due. Investing in Michigan
municipal securities which meet the Fund's quality standards may not be possible
if the state of Michigan or its municipalities do not maintain their current
credit ratings. In addition, any Michigan constitutional amendments, legislative
measures, executive orders, administrative regulations, and voter initiatives
could result in adverse consequences affecting Michigan municipal securities. A
further discussion of the risks of a portfolio which invests largely in Michigan
municipal securities is contained in the Statement of Additional Information.

Non-Diversification
The Fund is a non-diversified investment portfolio. As such, there is no limit
on the percentage of assets which can be invested in any single issuer. An
investment in the Fund, therefore, will entail greater risk than would exist in
a diversified portfolio of securities because the higher percentage of
investments among fewer issuers may result in greater fluctuation in the total
market value of the Fund's portfolio. Any economic, political, or regulatory
developments affecting the value of the securities in the Fund's portfolio will
have a greater impact on the total value of the portfolio than would be the case
if the portfolio were diversified among more issuers. The Fund intends to comply
with Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
This undertaking requires that at the end of each quarter of the taxable year:
(a) with regard to at least 50% of the Fund's total assets, no more than 5% of
its total assets are invested in the securities of a single issuer, and (b)
beyond that, no more than 25% of its total assets are invested in the securities
of a single issuer.

Investment Limitations
The Fund will not borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a percentage of
its cash value with an agreement to buy it back on a set date) or pledge
securities except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets and pledge up to 10% of the value of
those assets to secure such borrowings. The above investment limitation cannot
be changed without shareholder approval. The following limitation, however, can
be changed by the Trustees without shareholder approval. Shareholders will be
notified before any material change in this limitation becomes effective.

The Fund's net asset value per share fluctuates. It is determined by dividing
the sum of the market value of all securities and other assets, less
liabilities, by the number of shares outstanding.

Share Purchases
Fund shares are sold on days on which the New York Stock Exchange is open for
business. Shares of the Fund may be purchased through a financial institution
which has a sales agreement with the distributor, or directly from the
distributor, Federated Securities Corp., once an account has beenestablished.
The Fund reserves the right to reject any purchase request.

Through a Financial Institution
An investor may call his financial institution (such as a bank or broker/dealer)
to place an order to purchase shares of the Fund. Orders through a financial
institution are considered received when the Fund is notified of the purchase
order. Purchase orders through a financial institution must be received by the
financial institution before 4:00 p.m. (Eastern time) and must be transmitted by
the financial institution to the Fund before 5:00 p.m. (Eastern time) in order
for shares to be purchased at that day's price. It is the financial
institution's responsibility to transmit orders promptly.

Directly From the Distributor
An investor may place an order to purchase shares directly from the distributor,
once an account has been established. To do so: complete and sign the new
account form available from the Fund; enclose a check made payable to Federated
Michigan Intermediate Municipal Trust; and mail both to Federated Michigan
Intermediate Municipal Trust, P.O. Box 8600, Boston, MA 02266-8600. The order is
considered received after the check is converted by the transfer agent's bank,
State Street Bank and Trust Company ("State Street Bank") into federal funds.
This is generally the next business day after State Street Bank receives the
check. To purchase Shares directly from Federated Securities Corp. by Federal
Reserve wire once an account has been established, call the Fund. All
information needed will be taken over the telephone, and the order is considered
received when State Street Bank receives payment by wire. Federal funds should
be wired as follows: Federated Shareholder Services Company, c/o State Street
Bank and Trust Company, Boston, Massachusetts; Attention: EDGEWIRE; For Credit
to: Federated Michigan Intermediate Municipal Trust; (Fund Number -- this number
can be found on the account statement or by contacting the Fund); Account
Number; Trade Date and Order Number; Group Number or Dealer Number; Nominee or
Institution Name; and ABA Number 011000028. Shares cannot be purchased by wire
on holidays when wire transfers are restricted. Questions on wire purchases
should be directed to your shareholder services representative at the telephone
number listed on your account statement.

Subaccounting Services
Financial institutions are encouraged to open single master accounts. However,
certain financial institutions may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Financial institutions holding Fund shares in a fiduciary, agency,
custodial, or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. The y may also
charge fees for other services provided which may be related to the ownership of
Fund shares. This prospectus should, therefore, be read together with any
agreement between the customer and the institution with regard to the services
provided, the fees charged for those services, and any restrictions and
limitations imposed. State securities laws may require certain financial
institutions such as depository institutions to register as dealers.

Minimum Investment Required
The minimum initial investment in the Fund is $1,000. Subsequent investments
must be in amounts of at least $100.

What Shares Cost
Fund shares are sold at their net asset value, less any applicable sales charge,
next determined after an order is received: The net asset value is determined as
of the close of trading (normally 4:00 p.m., Eastern time) on the New York Stock
Exchange, Monday through Friday, except on: (i) days on which there are not
sufficient changes in the value of the Fund's portfolio securities that its net
asset value might be materially affected; (ii) days during which no shares are
tendered for redemption and no orders to purchase shares are received; and (iii)
the following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. No sales
charge is imposed for shares purchased through bank trust departments,
investment advisers registered under the Investment Advisers Act of 1940, as
amended, or to shareholders designated as Liberty Life Members. However,
investors who purchase shares through a trust department or investment adviser
may be charged an additional service fee by the institution. Additionally, no
sales charge is imposed for shares purchased through "wrap accounts" or similar
programs, under which clients pay a fee or fees for services.

Dealer Concession
For sales of shares, the distributor will normally offer to pay dealers up to
100% of the sales charge retained by it. On purchases of $1 million or more, the
investor pays no sales charge; however, the distributor will make twelve monthly
payments to the dealer totaling 0.25% of the public offering price over the
first year following the purchase. Such payments are based on the original
purchase price of shares outstanding at each month end. No sales charge is
imposed for fund shares purchased through bank trust departments or investment
advisers registered under the Investment Advisers Act of 1940, as amended.
However, investors who purchase shares through a trust department or investment
adviser may be charged an additional service fee by that institution.

Eliminating/Reducing the Sales Charge
The sales charge can be reduced or eliminated on the purchase of Fund shares
through:

n quantity discounts and accumulated purchases;

n signing a 13-month letter of intent;

n using the reinvestment privilege;
n concurrent purchases; or

n purchases with proceeds from redemptions of unaffiliated mutual fund shares.

Quantity Discounts and Accumulated Purchases
As shown in the table on the previous page, larger purchases reduce the sales
charge paid. The Fund will combine purchases made on the same day by the
investor, his spouse, and his children under age 21 when it calculates the sales
charge. If an additional purchase of Fund shares is made, the Fund will consider
the previous purchases still invested in the Fund. For example, if a shareholder
already owns shares having a current value at the public offering price of
$40,000 and he purchases $10,000 more at the current public offering price, the
sales charge on the additional purchase according to the schedule now in effect
would be 2.50%, not 3.00%. To receive the sales charge reduction, Federated
Securities Corp. must be notified by the shareholder in writing or by his
financial institution at the time the purchase is made that Fund shares are
already owned or that purchases are being combined. The Fund will reduce the
sales charge effective as of the date on which the Fund confirms the previous
purchases (which, under normal circumstances, would be the date on which the
Fund received the notice from the shareholder that Fund shares are already
owned).

Letter of Intent
If a shareholder intends to purchase a specific dollar amount of shares in the
Fund over the next 13 months, the sales charge may be reduced by signing a
letter of intent to that effect. For example, if a shareholder intends to
purchase at least $50,000 in shares, the letter of intent shall include a
provision for a sales charge adjustment depending on the amount actually
purchased within the 13-month period and a provision for the custodian to hold
3.00% of the total amount intended to be purchased in escrow (in shares) until
such purchase is completed. The applicable portion of the 3.00% held in escrow
will be applied to the shareholder's account at the end of the 13-month period
unless the amount specified in the letter of intent is not purchased. In this
event, an appropriate number of escrowed shares may be redeemed in order to
realize the difference in the sales charge. This letter of intent will not
obligate the shareholder to purchase shares, but if he does, each purchase
during the period will be at the sales charge applicable to the total amount
intended to be purchased. This letter may be dated as of a prior date to include
any purchases made within the past 90 days towards the dollar fulfillment of the
letter of intent.

Reinvestment Privilege
If shares in the Fund have been redeemed, the shareholder has a one-time right,
within 120 days, to reinvest the redemption proceeds at the next-determined net
asset value without any sales charge. Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution of the
reinvestment in order to eliminate a sales charge. If the shareholder redeems
his shares in the Fund, there may be tax consequences.

Concurrent Purchases
For purposes of qualifying for a sales charge elimination, a shareholder has the
privilege of combining concurrent purchases of Fund shares or Class A Shares of
two or more funds for which affiliates of Federated Investors serve as
investment advisers or principal underwriter (the "Federated Funds"), the
purchase prices of which include a sales charge. For example, if a shareholder
concurrently invested $400,000 in one of the other Class A Shares of the
Federated Funds and $600,000 in shares of the Fund, the sales charge would be
eliminated. To receive this sales charge elimination, Federated Securities Corp.
must be notified by the shareholder in writing or by his financial institution
at the time the concurrent purchases are made. The Fund will eliminate the sales
charge after it confirms the purchases.

Purchases With Proceeds From Redemption of Unaffiliated Mutual Fund Shares.
Investors may purchase shares of the fund at net asset value, without a sales
charge, with the proceeds from the redemption of shares of a mutual fund which
was sold with a sales charge or commission and was not distributed by Federated
Securities Corp. The purchase must be made within 60 days of the redemption, and
Federated Securities Corp. must be notified by the investor in writing or by his
financial institution at the time the purchase is made. From time to time, the
Fund may offer dealers a payment of .50 of 1% for shares purchased under this
program. If shares are purchased in this manner, Fund purchases will be subject
to a contingent deferred sales charge for one year from the date of purchase.

Systematic Investment Program
Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account and
invested in shares at the net asset value next determined after an order is
received by Federated Shareholder Services Company, plus the applicable sales
charge. A shareholder may apply for participation in this program through his
financial institution.

Certificates and Confirmations
As transfer agent for the Fund, Federated Shareholder Services Company maintains
a share account for each shareholder. Share certificates are not issued unless
requested in writing to the transfer agent. Detailed confirmations of each
purchase and redemption are sent to each shareholder. Monthly confirmations are
sent to report dividends paid during that month.

Dividends and Distributions
Dividends are declared daily and paid monthly to all shareholders invested in
the Fund on the record date. Distributions of any net realized long-term capital
gains will be made at least once every twelve months. Dividends and
distributions are automatically reinvested in additional shares on payment dates
at the ex-dividend date net asset value without a sales charge, unless
shareholders request cash payments on the new account form or by writing to
Federated Shareholder Services Company. All shareholders on the record date are
entitled to the dividend.

Shareholders may exchange all or some of their Fund shares for Class A Shares of
other Federated Funds at net asset value. Neither the Fund nor any of the
Federated Funds imposes any additional fees on exchanges. Shareholders in
certain other Federated Funds may exchange all or some of their shares for Fund
shares or Class A Shares. Please contact your financial institution directly or
Federated Securities Corp. at 1-800-341-7400 for more information on and
prospectuses for the Federated Funds into which your Fund shares may be
exchanged free of charge. Instructions for exchanging Shares must be given in
writing by the shareholder. Written instructions may require a signature
guarantee. Shareholders of Fund shares or Class A Shares who have been
designated as Liberty Life Members are exempt from sales charges on future
purchases in and exchanges between the Class A Shares of any Federated Funds, as
long as they maintain a $500 balance in one of the Federated Funds.

Requirements For Exchange
Shareholders using this privilege must exchange shares having a net asset value
equal to the minimum investment requirements of the fund into which the exchange
is being made. Before the exchange, the shareholder must receive the prospectus
of the fund into which the exchange is being made. This privilege is available
to shareholders resident in any state in which the fund shares being acquired
may be sold. Upon receipt of proper instructions and required supporting
documents, shares submitted for exchange are redeemed and the proceeds invested
in shares of the other fund. The exchange privilege may be modified or
terminated at any time. Shareholders will be notified of the modification or
termination of the exchange privilege.

Tax Consequences
An exercise of the exchange privilege is treated as a sale for federal income
tax purposes. Depending upon circumstances, a capital gain or loss may be
realized.

Making an Exchange
Instructions for exchanges for the Federated Funds may be given in writing or by
telephone. Written instructions may require a signature guarantee. Shareholders
of the Fund may have difficulty in making exchanges by telephone through brokers
and other financial institutions during times of drastic economic or market
changes. If a shareholder cannot contact his broker or financial institution by
telephone, it is recommended that an exchange request be made in writing and
sent by overnight mail to: Federated Shareholder Services Company, 1099 Hingham
Street, Rockland, Massachusetts 02370-3317. Shareholders who desire to
automatically exchange Fund shares of a predetermined amount on a monthly,
quarterly, annual or other periodic basis may take advantage of a systematic
exchange privilege. Further information on these exchange privileges is
available by calling Federated Securities Corp. or the shareholder's financial
institution.

Telephone Instructions
Telephone instructions made by the investor may be carried out only if a
telephone authorization form completed by the investor is on file with the Fund.
If the instructions are given by a broker, a telephone authorization form
completed by the broker must be on file with the Fund. Shares may be exchanged
between two funds by telephone only if the two funds have identical shareholder
registrations. Telephone exchange instructions may be recorded. If reasonable
procedures are not followed by the Fund, it may be liable for losses due to
unauthorized or fraudulent telephone instructions. Any Fund shares held in
certificate form cannot be exchanged by telephone, but must be forwarded to
Federated Shareholder Services Company, P.O. Box 8600, Boston, Massachusetts
02266-8600, and deposited to the shareholder's account before being exchanged.
Telephone instructions will be processed as of 4:00 p.m. (Eastern time) and must
be received by the Fund before that time for shares to be exchanged the same
day. Shareholders exchanging into a fund will not receive any dividend that is
payable to shareholders of record on that date. This privilege may be modified
or terminated at any time.

The Fund redeems shares at their net asset value next determined after Federated
Shareholder Services Company receives the redemption request. Redemptions will
be made on days on which the Fund computes its net asset value. Redemptions can
be made through a financial institution or directly from the Fund. Redemption
requests must be received in proper form. In the event of drastic economic or
market changes, a shareholder may experience difficulty in redeeming by
telephone. If such a case should occur, another method of redemption, such as
"By Mail," should be considered.

Through a Financial Institution
A shareholder may redeem shares of the Fund by calling his financial institution
(such as a bank or a broker/dealer) to request the redemption. Shares will be
redeemed at the net asset value next determined after the Fund receives the
redemption request from the financial institution. The financial institution is
responsible for promptly submitting redemption requests and providing proper
written redemption instructions to the Fund. The financial institution may
charge customary fees and commissions for this service.

Directly From the Fund
By Telephone
Shareholders who have not purchased through a financial institution may redeem
their shares of a Fund by telephoning the Fund. The proceeds will be mailed to
the shareholder's address of record or wire transferred to the shareholder's
account at a domestic commercial bank that is a member of the Federal Reserve
System, normally within one business day, but in no event longer than seven days
after the request. The minimum amount for a wire transfer is $1,000. Proceeds
from redemption requests received on holidays when wire transfers are restricted
will be wired the following business day. Questions about telephone redemptions
on days when wire transfers are restricted should be directed to your
shareholder services representative at the telephone number listed on your
account statement. If at any time, the Fund shall determine it necessary to
terminate or modify this method of redemption, shareholders would be promptly
notified. An authorization form permitting the Fund to accept telephone requests
must first be completed. Authorization forms and information on this service are
available from Federated Securities Corp. Telephone redemption instructions may
be recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.

By Mail
Any shareholder may redeem Fund shares by sending a written request to Federated
Shareholder Services Company, P.O. Box 8600, Boston, MA 02266-8600. If share
certificates have been issued, they should be sent unendorsed with the written
request by registered or certified mail to the address noted above. The written
request should state: Fund Name and the Class designation; the account name as
registered with the Fund; the account number; and the number of Shares to be
redeemed or the dollar amount requested. All owners of the account must sign the
request exactly as the Shares are registered. Normally, a check for the proceeds
is mailed within one business day, but in no event more than seven days, after
receipt of a proper written redemption request. Dividends are paid up to and
including the day that a redemption request is processed. Shareholders
requesting a redemption of any amount to be sent to an address other than that
on record with the Fund, or a redemption payable other than to the shareholder
of record must have their signatures guaranteed by a commercial or savings bank,
Trust company or savings association whose deposits are insured by an
organization which is administered by the Federal Deposit Insurance Corporation;
a member firm of a domestic stock exchange; or any other "eligible guarantor
institution," as defined in the Securities Exchange Act of 1934. The Fund does
not accept signatures guaranteed by a notary public. The Fund and its transfer
agent have adopted standards for accepting signature guarantees from the above
institutions. The Fund may elect in the future to limit eligible signature
guarantors to institutions that are members of a signature guarantee program.
The Fund and its transfer agent reserve the right to amend these standards at
any time without notice.

Contingent Deferred Sales Charge
Shares purchased under a periodic special offering with the proceeds of a
redemption of shares of an unaffiliated investment company purchased or redeemed
with a sales charge and not distributed by Federated Securities Corp. may be
charged a contingent deferred sales charge .50 of 1% for redemptions made within
one full year of purchase. Any applicable contingent deferred sales charge will
be imposed on the lesser of the net asset value of the redeemed shares at the
time of purchase or the net asset value of the redeemed shares at the time of
redemption. The contingent deferred sales charge will be deducted from the
redemption proceeds otherwise payable to the shareholder and will be retained by
the distributor. The contingent deferred sales charge will not be imposed with
respect to: (1) shares acquired through the reinvestment of dividends or
distributions of long-term capital gains; and (2) shares held for more than one
full year from the date of purchase with respect to applicable shares.
Redemptions will be processed in a manner intended to maximize the amount of
redemption which will not be subject to a contingent deferred sales charge. In
computing the amount of the applicable contingent deferred sales charge,
redemptions are deemed to have occurred in the following order: (1) shares
acquired through the reinvestment of dividends and long-term capital gains; (2)
shares held for more than one full year from the date of purchase with respect
to applicable shares; and (3) shares held for less than one full year from the
date of purchase with respect to applicable shares on a first-in, first-out
basis. A contingent deferred sales charge is not assessed in connection with an
exchange of Fund shares for shares of Federated Funds in the same class (see
"Exchange Privilege"). Any contingent deferred sales charge imposed at the time
the exchanged-for shares are redeemed is calculated as if the shareholder had
held the shares from the date on which he became a shareholder of the
exchanged-from shares.

Systematic Withdrawal Program
Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, Fund shares
are redeemed to provide for periodic withdrawal payments in an amount directed
by the shareholder. Depending upon the amount of the withdrawal payments, the
amount of dividends paid and capital gains distributions with respect to Fund
shares, and the fluctuation of the net asset value of Fund shares redeemed under
this program, redemptions may reduce, and eventually deplete, the shareholder's
investment in the Fund. For this reason, payments under this program should not
be considered as yield or income on the shareholder's investment in the Fund. To
be eligible to participate in this program, a shareholder must have an account
value of at least $10,000. A shareholder may apply for participation in this
program through his financial institution. Due to the fact that shares are sold
with a sales charge, it is not advisable for shareholders to be purchasing
shares while participating in this program.

Accounts With Low Balances
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum value of $1,000. This
requirement does not apply, however, if the balance falls below $1,000 because
of changes in the Fund's net asset value. Before shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to purchase
additional shares to meet the minimum requirement.

Investment Adviser
Pursuant to an investment advisory contract with the Trust, investment decisions
for the Fund are made by Federated Advisers, the Fund's investment adviser (the
"Adviser"), subject to direction by the Trustees. The Adviser continually
conducts investment research and supervision for the Fund and is responsible for
the purchase or sale of portfolio instruments, for which it receives an annual
fee from the Fund. Both the Trust and the Adviser have adopted strict codes of
ethics governing the conduct of all employees who manage the Fund and its
portfolio securities. The se codes recognize that such persons owe a fiduciary
duty to the Fund's shareholders and must place the interests of shareholders
ahead of the employees' own interest. Among other things, the codes: require
preclearance and periodic reporting of personal securities transactions;
prohibit personal transactions in securities being purchased or sold, or being
considered for purchase or sale, by the Fund; prohibit purchasing securities in
initial public offerings; and prohibit taking profits on securities held for
less than sixty days. Violation of the codes are subject to review by the
Trustees, and could result in severe penalties.

Advisory Fees
The Adviser receives an annual investment advisory fee equal to 0.40% of the
Fund's average daily net assets. The Adviser may voluntarily choose to waive a
portion of its fee or reimburse the Fund for certain operating expenses. The
Adviser can terminate this voluntary waiver or reimbursement of expenses 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.

Adviser's Background
Federated Advisers, a Delaware business trust organized on April 11, 1989, is a
registered investment adviser under the Investment Advisers Act of 1940. It is
wholly-owned by Federated Investors. All of the Class A (voting) shares of
Federated Investors are owned by a trust, the Trustees of which are John F.
Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue, who is President and Trustee of
Federated Investors. Federated Advisers and other subsidiaries of Federated
Investors serve as investment advisers to a number of investment companies and
private accounts. Certain other subsidiaries also provide administrative
services to a number of investment companies. With over $80 billion invested
across more than 250 funds under management and/or administration by its
subsidiaries, as of December 31, 1995, Federated Investors is one of the largest
mutual fund investment managers in the United States. With more than 1,800
employees, Federated continues to be led by the management who founded the
company in 1955. Federated funds are presently at work in and through 4,000
financial institutions nationwide. More than 100,000 investment professionals
have selected Federated funds for their clients. J. Scott Albrecht has been the
Fund's portfolio manager since March, 1995. Mr. Albrecht joined Federated
Investors in 1989 and has been a Vice President of the Fund's investment adviser
since October, 1994. From 1992 to 1994, Mr. Albrecht served as an Assistant Vice
President of the Fund's investment adviser. In 1991, Mr. Albrecht acted as an
investment analyst. Mr. Albrecht is a Chartered Financial Analyst and received
his M.S. in Public Management from Carnegie Mellon University. Jonathan C.
Conley has been the Fund's portfolio manager since its inception. Mr. Conley
joined Federated Investors in 1979 and has been a Senior Vice President of the
Fund's investment adviser since 1995. Mr. Conley was a Vice President of the
Fund's investment adviser from 1982 to 1995. Mr. Conley is a Chartered Financial
Analyst and received his M.B.A. in Finance from the University of Virginia.

Distribution of Fund Shares

Federated Securities Corp. is the principal distributor for shares of the Fund.
Federated Securities Corp. is located at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. It is a Pennsylvania corporation organized on November
14, 1969, and is the principal distributor for a number of investment companies.
Federated Securities Corp. is a subsidiary of Federated Investors.

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

Shareholder Services
The Fund has entered into a Shareholder Services Agreement with Federated
Shareholder Services, a subsidiary of Federated Investors, under which the Fund
may make payments up to 0.25% of the average daily net asset value of the
shares, computed at an annual rate, to obtain certain personal services for
shareholders and provide the maintenance of shareholder accounts. From time to
time and for such periods as deemed appropriate, the amount stated above may be
reduced voluntarily under the Shareholder Services Agreement. Federated
Shareholder Services will either perform shareholder services directly or will
receive fees based upon shares owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Fund and Federated Shareholder Services.
Supplemental Payments to Financial Institutions In addition to periodic payments
to financial institutions under the Services Plan, the distributor may offer to
pay a fee from its own assets to financial institutions as financial assistance
for providing substantial marketing and sales support. The support may include
participating in sales, educational and training seminars at recreational-type
facilities, providing sales literature, and engineering computer software
programs that emphasize the attributes of the Fund. Such assistance will be
predicated upon the amount of Shares the financial institution sells or may sell
and/or upon the type and nature of sales or marketing support furnished by the
financial institution. Any payments made by the distributor may be reimbursed by
the Adviser or its affiliates.

Voting Rights
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the Trust have equal voting rights except that only shares of the Fund are
entitled to vote on matters affecting only the Fund. As of October 7, 1996,
Enbanco, Traverse City, Michigan, owned 38.64% of the voting securities of the
Fund, and, therefore, may, for certain purposes, be deemed to control the Fund
and be able to affect the outcome of certain matters presented for a vote of
shareholders. As a Massachusetts business trust, the Trust is not required to
hold annual shareholder meetings. Shareholder approval will be sought only for
certain changes in the Trust's or the Fund's operation and for the election of
Trustees under certain circumstances. Trustees may be removed by the Trustees or
by shareholders at a special meeting. A special meeting of shareholders for this
purpose shall be called by the Trustees upon the written request of shareholders
owning at least 10% of the outstanding shares of all series of the Trust
entitled to vote.

Federal Income Tax
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code of 1986, as amended, applicable to regulated
investment companies and to receive the special tax treatment afforded to such
companies. The Fund will be treated as a single, separate entity for federal
income tax purposes so that income (including capital gains) and losses realized
by the Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund. In general, shareholders are not required to pay federal
regular income tax on any dividends received from the Fund that represent net
interest on tax-exempt municipal bonds, although tax exempt interest will
increase the taxable income of certain recipients of social security benefits.
However, under the Tax Reform Act of 1986, dividends representing net interest
income earned on some municipal bonds may be included in calculating the federal
individual alternative minimum tax or the federal alternative minimum tax for
corporations. The alternative minimum tax, up to 28% of alternative minimum
taxable income for individuals and 20% for corporations, applies when it exceeds
the regular tax for the taxable year. Alternative minimum taxable income is
equal to the regular taxable income of the taxpayer increased by certain "tax
preference" items not included in regular taxable income and reduced by only a
portion of the deductions allowed in the calculation of the regular tax. The Tax
Reform Act of 1986 treats interest on certain "private activity" bonds issued
after August 7, 1986, as a tax preference item for both individuals and
corporations. Unlike traditional governmental purpose municipal bonds, which
finance roads, schools, libraries, prisons, and other public facilities, private
activity bonds provide benefits to private parties. The Fund may purchase all
types of municipal bonds, including private activity bonds. Thus, should it
purchase any such bonds, a portion of the Fund's dividends may be treated as a
tax preference item. In addition, in the case of a corporate shareholder,
dividends of the Fund which represent interest on municipal bonds will become
subject to the 20% corporate alternative minimum tax because the dividends are
included in a corporation's "adjusted current earnings." the corporate
alternative minimum tax treats 75% of the excess of the taxpayer's "adjusted
current earnings" over the taxpayer's alternative minimum taxable income as a
tax preference item. "Adjusted current earnings" is based upon the concept of a
corporation's "earnings and profits." Since "earnings and profits" generally
includes the full amount of any Fund dividend, and alternative minimum taxable
income does not include the portion of the Fund's dividend attributable to
municipal bonds which are not private activity bonds, the difference will be
included in the calculation of the corporation's alternative minimum tax.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.

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

Michigan Taxes
Under existing Michigan laws, distributions made by the Fund will not be subject
to Michigan personal income taxes to the extent that such distributions qualify
as "exempt-interest dividends" under the Internal Revenue Code of 1986, as
amended, and represent (i) interest income and dividends from obligations of
Michigan, which obligations are excluded from federal adjusted gross income; or
(ii) income from obligations of the United States government which Michigan is
prohibited by law from subjecting to a net income tax. That portion of a
shareholder's shares in the Fund representing (i) bonds or other similar
obligations of Michigan or its political subdivisions, or (ii) obligations of
the United States which are exempt from taxation by a law of the United States,
and dividends paid by the Fund representing interest payments on such
securities, will be exempt from Michigan intangibles tax. 1995 Public Act 5
repeals the intangibles tax effective January 1, 1998. Distributions by the Fund
are not subject to the Michigan Single Business Tax to the extent that such
distributions are derived from interest on obligations that would be exempt if
owned directly by the shareholder, such as obligations of Michigan and the
United States government. Certain municipalities in Michigan also impose an
income tax on individuals and corporations. However, to the extent that the
dividends from the Funds are exempt from federal regular income taxes, such
dividends also will be exempt from Michigan municipal income taxes.

State and Local Taxes
Income from the Fund is not necessarily free from taxes in states other than
Michigan. Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.

From time to time, the Fund advertises the total return, yield, and
tax-equivalent yield. Total return represents the change, over a specific period
of time, in the value of an investment in the Fund after reinvesting all income
and capital gains distributions. It is calculated by dividing that change by the
initial investment and is expressed as a percentage. The yield of the Fund is
calculated by dividing the net investment income per share (as defined by the
Securities and Exchange Commission) earned by the Fund over a thirty-day period
by the offering price per share of the Fund on the last day of the period. This
number is then annualized using semi-annual compounding. The tax-equivalent
yield of the Fund is calculated similarly to the yield, but is adjusted to
reflect the taxable yield that the Fund would have had to earn to equal its
actual yield, assuming a specific tax rate. The yield and the tax-equivalent
yield do not necessarily reflect income actually earned by the Fund and,
therefore, may not correlate to the dividends or other distributions paid to
shareholders. The performance information reflects the effect of the maximum
sales charge and other similar non-recurring charges, such as the contingent
deferred sales charge, which, if excluded, would increase the total return,
yield, and tax-equivalent yield. From time to time, advertisements for the Fund
may refer to ratings, rankings and other information in certain financial
publications and/or compare the Fund's performance to certain indices.

<PAGE>

To the Board of Trustees of MUNICIPAL SECURITIES INCOME TRUST and Shareholders
of FEDERATED MICHIGAN INTERMEDIATE MUNICIPAL TRUST (formerly, Michigan
Intermediate Municipal Trust): We have audited the accompanying statement of
assets and liabilities, including the portfolio of investments, of Federated
Michigan Intermediate Municipal Trust as of August 31, 1996, the related
statement of operations for the year then ended, the statements of changes in
net assets for the years ended August 31, 1996, and 1995, and the financial
highlights for the periods presented. The se financial statements and financial
highlights are express an opinion on these financial statements and financial
highlights based on our audits. We conducted our audits in accordance with
generally accepted auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
the securities owned as of August 31, 1996, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion. In our opinion, such financial statements and
financial highlights present fairly, in all material respects, the financial
position of Federated Michigan Intermediate Municipal Trust as of August 31,
1996, the results of its operations, the changes in its net assets and its
financial highlights for the respective stated periods in conformity with
generally accepted accounting principles.

DELOITTE & TOUCHE LLP

Pittsburgh, Pennsylvania
October 11, 1996

<PAGE>

Federated

Michigan Intermediate Municipal Trust
(Formerly, Michigan Intermediate Municipal Trust)

(A Portfolio of Municipal Securities Income Trust)

Prospectus
October 31, 1996
A Non-Diversified Portfolio of Municipal Securities Income Trust, an Open-End,
Management Investment Company

Federated Michigan Intermediate Municipal Trust
Federated Investors Tower
Pittsburgh, PA 15222-3779

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

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

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

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

Independent Auditors
Deloitte & Touche LLP
2500 One PPG Place
Pittsburgh, PA 15222-5401
Federated Securities Corp., Distributors

Cusip 625922703
G01389-01 (10/96)

Federated Michigan Intermediate Municipal Trust
(formerly, Michigan Intermediate Municipal Trust)
(A Portfolio of Municipal Securities Income Trust)

Statement of Additional Information

This Statement of Additional Information should be read with the prospectus of
Federated Michigan Intermediate Municipal Trust (the `Fund"), a portfolio of
Municipal Securities Income Trust (the `Trust") dated October 31, 1996. This
Statement is not a prospectus. You may request a copy of a prospectus or a paper
copy of this Statement, if you have received it electronically, free of charge
by calling 1-800-341-7400.

Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

Statement dated October 31, 1996
Cusip 625922703
1041202B (10/96)

<PAGE>

General Information about the Fund...................3

Investment Objective and Policies....................3
Acceptable Investments............................3
When-Issued and Delayed Delivery Transactions.....6
Temporary Investments.............................6
Portfolio Turnover................................8
Investment Limitations............................8
Michigan Investment Risks........................12

Municipal Securities Income Trust Management........13
Fund Ownership...................................22
Trustees Compensation............................22
Trustee Liability................................24

Investment Advisory Services .......................24
Adviser to the Fund .............................24
Advisory Fees ...................................25

Other Services .....................................26
Fund Administration .............................26
Custodian and Portfolio Accountant ..............26
Transfer Agent.................................. 26
Independent Auditors ............................27

Shareholder Services Agreement .....................27

Brokerage Transactions .............................27

Purchasing Shares ..................................29
Conversion to Federal Funds .....................29
Purchases by Sales Representatives, Fund Trustees, and Employees 29

Determining Net Asset Value ........................30
Valuing Municipal Bonds .........................30
Use of Amortized Cost............................30

Redeeming Shares ...................................31
Redemption in Kind ..............................31
Massachusetts Partnership Law ...................31

Tax Status .........................................32
The Fund's Tax Status............................32
Shareholders' Tax Status ........................33

Total Return........................................33

Yield.............................................. 34

Tax-Equivalent Yield ...............................35
Tax-Equivalency Table............................35

Performance Comparisons ............................37
Economic and Market Information .................38

About Federated Investors ..........................39
Mutual Fund Market.............................. 40
Institutional Clients ...........................40
Trust Organizations .............................40
Broker/Dealers and Bank Broker/Dealer Subsidiaries 40

Appendix ...........................................41

<PAGE>

The Fund is a portfolio in Municipal Securities Income Trust. The Trust was
established as a Massachusetts business trust under a Declaration of Trust dated
August 6, 1990. On September 16, 1992 (effective date October 31, 1992) the
Board of Trustees (the `Trustees") approved changing the name of the Trust from
Federated Municipal Income Trust to Municipal Securities Income Trust. On June
1, 1994, Michigan Municipal Income Fund changed its name to Michigan
Intermediate Municipal Trust. On February 26, 1996 (effective date March 31,
1996), the Trustees approved changing the name of the Fund from Michigan
Intermediate Municipal Trust to Federated Michigan Intermediate Municipal Trust.

The Fund's investment objective is to provide current income exempt from federal
regular income tax and the personal income taxes imposed by the state of
Michigan and Michigan municipalities. The investment objective cannot be changed
without approval of shareholders.

Acceptable Investments
The Fund invests primarily in a portfolio of municipal securities, which are
exempt from federal regular income tax and Michigan state and local tax
(`Michigan Municipal Securities"). The se securities include those issued by or
on behalf of the State of Michigan and Michigan municipalities, and those issued
by states, territories, and possessions of the United States which are exempt
from federal regular income tax and the personal income tax imposed by the State
of Michigan and Michigan municipalities.

Characteristics
The Michigan Municipal Securities in which the Fund invests have the
characteristics set forth in the prospectus. If a rated bond loses its rating
or has its rating reduced after the Fund has purchased it, the Fund is not
required to drop the bond from the portfolio, but will consider doing so. If
ratings made by Moody's Investors Service, Inc., Standard & Poor's Ratings
Group or Fitch's Investors Service, Inc. change because of changes in those
organizations or in their rating systems, the Fund will try to use comparable
ratings as standards in accordance with the investment policies described in
the Fund's prospectus.

Types of Acceptable Investments
Examples of Michigan Municipal Securities are:

o municipal notes and municipal commercial paper;

o serial bonds sold with differing maturity dates;

o tax anticipation notes sold to finance working capital needs of
municipalities;

o bond anticipation notes sold prior to the issuance of longer-term bonds;

o pre-refunded municipal bonds; and

o general obligation bonds secured by a municipality pledge of taxation.

Variable Rate Municipal Securities
Variable interest rates generally reduce changes in the market value of
municipal securities from their original purchase prices. Accordingly, as
interest rates decrease or increase, the potential for capital appreciation
or depreciation is less for variable rate municipal securities than for fixed
income obligations. The terms of these variable rate demand instruments
require payment of principal and accrued interest from the issuer of the
municipal obligations, the issuer of the participation interests, or a
guarantor of either issuer.

Municipal Leases
The Fund may purchase municipal securities in the form of participation
interests which represent undivided proportional interests in lease payments
by a governmental or non-profit entity. The lease payments and other rights
under the lease provide for and secure the payments on the certificates.
Lease obligations may be limited by municipal charter or the nature of the
appropriation for the lease. In particular, lease obligations may be subject
to periodic appropriation. If the entity does not appropriate funds for
future lease payments, the entity cannot be compelled to make such payments.
Furthermore, a lease may provide that the certificate trustee cannot
accelerate lease obligations upon default. The trustee would only be able to
enforce lease payments as they became due. In the event of default or failure
of appropriation, it is unlikely that the trustee would be able to obtain an
acceptable substitute source of payment.

In determining the liquidity of municipal lease securities, the investment
adviser, under the authority delegated by the Trustees, will base its
determination on the following factors:

o whether the lease can be terminated by the lessee;

o the potential recovery, if any, from a sale of the leased property upon
termination of the lease;

o the lessee's general credit strength (e.g., its debt, administrative,
economic and financial characteristics and prospects);

o the likelihood that the lessee will discontinue appropriating funding for the
leased property because the property is no longer deemed essential to its
operations (e.g., the potential for an "event of
non-appropriation ");

o any credit enhancement or legal recourse provided upon an event of
non-appropriation or other termination of the lease.

Temporary Investments
The Fund may also invest in temporary investments during times of unusual market
conditions for defensive purposes.

Repurchase Agreements
Repurchase agreements are arrangements in which banks, broker/dealers, and
other recognized financial institutions sell U.S. government securities or
certificates of deposit to the Fund and agree at the time of sale to
repurchase them at a mutually agreed upon time and price within one year from
the date of acquisition. The Fund or its custodian will take possession of
the securities subject to repurchase agreements. To the extent that the
original seller does not repurchase the securities from the Fund, the Fund
could receive less than the repurchase price on any sale of such securities.
In the event that such a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor
of the Fund and allow retention or disposition of such securities. The Fund
may only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are found by the Fund's
investment adviser to be creditworthy pursuant to guidelines established by
the Trustees. From time to time, such as when suitable Michigan municipal
bonds are not available, the Fund may invest a portion of its assets in cash.
Any portion of the Fund's assets maintained in cash will reduce the amount of
assets in Michigan municipal bonds and thereby reduce the Fund's yield.

Portfolio Turnover
The Fund may trade or dispose of portfolio securities as considered necessary to
meet its investment objective. It is not anticipated that the portfolio trading
engaged in by the Fund will result in its annual rate of portfolio turnover
exceeding 100%. For the fiscal years ended August 31, 1996 and 1995, the Fund's
portfolio turnover rates were 7% and 23%, respectively.

Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the Fund may borrow
money and engage in reverse repurchase agreements in amounts up to one-third
of the value of its total assets, including the amounts borrowed. The Fund
will not borrow money or engage in reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary, or emergency
measure or to facilitate management of the portfolio by enabling the Fund to
meet redemption requests when the liquidation of portfolio securities is
deemed to be inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings in excess of 5% of its total assets are
outstanding. During the period any reverse repurchase agreements are
outstanding, but only to the extent necessary to assure completion of the
reverse repurchase agreements, the Fund will restrict the purchase of
portfolio instruments to money market instruments maturing on or before the
expiration date of the reverse repurchase agreements.

Investing in Real Estate
The Fund will not buy or sell real estate, although it may invest in
municipal bonds secured by real estate or interests in real estate.

Investing in Commodities
The Fund will not buy or sell commodities, commodity contracts, or
commodities futures contracts.

Investing in Restricted Securities
The Fund will not invest more than 10% of the value of its net assets in
securities subject to restrictions on resale under the Securities Act of 1933.

Dealing in Puts and Calls
The Fund will not buy or sell puts, calls, straddles, spreads, or any
combination of these.

The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.

Investing in Securities of Other Investment Companies
The Fund will not purchase securities of other investment companies except as
part of a merger, consolidation, or other acquisition.

Investing in Issuers Whose Securities are Owned by Officers And Trustees of the
Trust
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Fund or its investment adviser owning
individually more than 1/2 of 1% of the issuer's securities together own more
than 5% of the issuer's securities.

Investing in Minerals
The Fund will not purchase or sell, oil, gas, or other mineral exploration or
development programs, or leases, although it may invest in the securities of
issuers which invest in or sponsor such programs.

The Fund does not expect to borrow money or pledge securities or invest in
repurchase agreements in excess of 5% of the value of its net assets during
the coming fiscal year. For purposes of its policies and limitations, the
Fund considers certificates of deposit and demand and time deposits issued by
a U.S. branch of a domestic bank or savings association having capital,
surplus, and undivided profits in excess of $100,000,000 at the time of
investment to be `cash items."

Michigan Investment Risks
The Michigan economy has diversified away from durable goods manufacturing with
service sector employment currently at 25.7% of total employment. However,
manufacturing and the automobile sector in particular, still have significant
influence over the State's economy. Michigan's economy tends to fluctuate with
the cyclical trends of the manufacturing sector, which still accounts for nearly
23% of total State employment. The states unemployment rate is currently below
the national unemployment rate for the first time reflecting both the
diversification of the regional economy and significant improvement in the
automobile sector and related industries.

In March of 1994 voters approved a tax restructuring plan which replaced
property taxes with a $.02 increase in the sales tax and a $.50 increase in
cigarette taxes. This tax restructuring was in response to discontent over high
property taxes and inequality in State funding for education. The success of
these tax initiatives will not be clear for some time and may constrain the
state and its local governments ability to operate. Additional fiscal
constraints on Michigan's state and local governments ability to raise taxes
include a 5% or rate of inflation cap on property tax increases and a limit on
the amount of sales tax revenue which can be raised by the state to a percentage
of personal income.

Michigan's finances were hard hit during the 1990 and 1991 fiscal periods.
Spending cuts and an improving state economy resulted in surplus revenues of
$254 million in fiscal 1992. As a result of continuing surplus funds, Michigan
increased the budget stabilization fund to a record level of $1.003 billion at
the end of fiscal 1995. Projected fiscal 1996 results show the fund to be
maintained at about the same level.. The state of Michigan maintains a
conservative debt position with per capita debt remaining below the national
average. Michigan also uses its general obligation borrowing capacity to lower
the borrowing cost of local school districts through the School Bond Loan
Program.

<PAGE>

Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated California Municipal Income Fund, and principal
occupations.

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA

Birthdate: July 28, 1924

Chairman and Trustee

Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA

Birthdate: February 3, 1934

Trustee

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL

Birthdate: June 23, 1937

Trustee

Birthdate: July 4, 1918

Trustee

J. Christopher Donahue *
Federated Investors Tower
Pittsburgh, PA

Birthdate: April 11, 1949

Executive Vice President and Trustee

James E. Dowd
571 Hayward Mill Road
Concord, MA

Birthdate: May 18, 1922

Trustee

Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Trustee of the
Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA

Birthdate: October 11, 1932

Trustee

Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA

Birthdate: June 18, 1924

Trustee

Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western Region;
Director or Trustee of the Funds.

Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI

Birthdate: March 16, 1942

Trustee

Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.

Gregor F. Meyer
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA

Birthdate: October 6, 1926

Trustee

Attorney, Member of Miller, Ament, Henny & Kochuba; Chairman, Meritcare, Inc.;
Director, Eat'N Park Restaurants, Inc.; Director or Trustee of the Funds.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA

Birthdate: December 20, 1932

Trustee

President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA

Birthdate: September 14, 1925

Trustee

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA

Birthdate: June 21, 1935

Trustee

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA

Birthdate: May 17, 1923

President

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 22, 1930

Executive Vice President

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 26, 1938

Executive Vice President , Secretary and Treasurer

ExecutiveVice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and
Federated Research; Director, Federated Research Corp. and
Federated Global Research Corp.; Trustee, Federated
Shareholder Services Company; Director, Federated Services
Company; President and Trustee, Federated Shareholder
Services; Director, Federated Securities Corp.; Executive Vice
President and Secretary of the Funds; Treasurer of some of the
Funds.
*This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.

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

As used in the table above, `The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Annuity Management Series; Arrow
Funds; Automated Government Money Trust; Blanchard Funds; Blanchard Precious
Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc. ; DG Investor
Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated Adjustable
Rate U.S. Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated Equity Funds; Federated Equity Income Fund, Inc.;
Federated Fund for U.S. Government Securities, Inc.; Federated GNMA Trust;
Federated Government Income Securities, Inc.; Federated Government Trust;
Federated High Income Bond Fund, Inc.; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Insurance Series; Federated Investment
Portfolios; Federated Investment Trust; Federated Master Trust; Federated
Municipal Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.;
Federated Municipal Trust; Federated Short-Term Municipal Trust; Federated
Short-Term U.S. Government Trust; Federated Stock and Bond Fund, Inc.; Federated
Stock Trust; Federated Tax-Free Trust; Federated Total Return Series, Inc.;
Federated U.S. Government Bond Fund; Federated U.S. Government Securities Fund:
1-3 Years; Federated U.S. Government Securities Fund: 2-5 Years; Federated U.S.
Government Securities Fund: 5- 10 Years; Federated Utility Fund, Inc.; First
Priority Funds; Fixed Income Securities, Inc.; High Yield Cash Trust;
Intermediate Municipal Trust; International Series, Inc.; Investment Series
Funds, Inc.; Investment Series Trust; Liberty Term Trust, Inc. - 1999; Liberty
U.S. Government Money Market Trust; Liquid Cash Trust; Managed Series Trust;
Money Market Management, Inc.; Money Market Obligations Trust; Money Market
Trust; Municipal Securities Income Trust; Newpoint Funds; Peachtree Funds; RIMCO
Monument Funds; Targeted Duration Trust; Tax-Free Instruments Trust; The
Planters Funds; The Starburst Funds; The Starburst Funds II; The Virtus Funds;
Trust for Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations; and
World Investment Series, Inc.

Fund Ownership
Officers and Trustees own less than 1% of the outstanding Shares. As of October
7, 1996, the following shareholders of record owned 5% or more of the
outstanding Shares of the Fund: Charles Schwab & Co. Inc., San Francisco,
California, owned approximately 419,610 Shares (7.11%); Shoreline Co., South
Haven, Michigan, owned approximately 465,165 Shares (7.88%); First Mar & Co.,
Marquette, Michigan, owned approximately 940,513 Shares (15.94%); and Enbanco,
Traverse City, Michigan, owned approximately 2,279,743 Shares (38.64%).
<TABLE>
<CAPTION>

Trustees Compensation
AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
Trust Trust*# FROM FUND COMPLEX
John F. Donahue $0 $0 for the Trust and
Trustee 56 other investment companies in the Fund Complex

Thomas G. Bigley $2,390.92 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
John F. Donahue $ -0- $ -0- for the Trust and
Trustee and Chairman 54 other investment companies in the Fund Complex

Thomas G. Bigley $1,243.22 $86,331 for the Trust and
Trustee 54 other investment companies in the Fund Complex

John T. Conroy $1,363.10 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund Complex

William J. Copeland $1,363.10 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund Complex

J. Christopher Donahue $ -0- $ -0- for the Trust and
Trustee and Exec. Vice Pres. 16 other investment companies in the Fund Complex

James E. Dowd $1,363.10 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund Complex

Lawrence D. Ellis, M.D. $1,243.22 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund Complex

Edward L. Flaherty, Jr. $1,363.10 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund Complex

Peter E. Madden $1,243.22 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund Complex

Gregor F. Meyer $1,243.22 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund Complex

John E. Murray, Jr. $1,243.22 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund Complex

Wesley W. Posvar $1,243.22 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund Complex

Marjorie P. Smuts $1,243.22 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund Complex
</TABLE>

* Information is furnished for the fiscal year ended August 31, 1996.

# The aggregate compensation is provided for the Trust which is comprised of
five portfolios.

The information is provided for the last calendar year.

Mr Bigley served on 39 investment companies in the Federated funds Complex
from January 1 through September 30, 1995. On October 1, 1995, he was appointed
a Trustee on 15 additional Federated funds.

Adviser to the Fund

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

Advisory Fees
For its advisory services, the Adviser receives an annual investment advisory
fee as described in the prospectus. For the fiscal years ended August 31, 1996,
1995 and 1994, the Adviser earned advisory fees of $248,517, $233,527, and
$229,413, respectively, all of which were voluntarily waived.

This arrangement is not part of the advisory contract and may be amended or
rescinded in the future.

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

This arrangement permits the payment of fees to Federated Shareholder Services
and financial institutions to cause services to be provided which are necessary
for the maintenance of shareholder accounts and to encourage personal services
to shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. The se activities and services may include,
but are not limited to, providing office space, equipment, telephone facilities,
and various clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and addresses. By
adopting the Shareholder Services Agreement, the Trustees expect that the Fund
will benefit by: (1) providing personal services to shareholders; (2) investing
shareholder assets with a minimum of delay and administrative detail; (3)
enhancing shareholder record-keeping systems; and (4) responding promptly to
shareholder's requests and inquiries concerning their accounts. For the fiscal
year ended August 31, 1996, the Fund paid shareholder service fees in the amount
of $155,329, of which $111,838 were voluntarily waived.

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees. The Adviser may select brokers and dealers who offer
brokerage and research services. These services may be furnished directly to the
Fund or to the Adviser and may include: advice as to the advisability of
investing in securities; security analysis and reports; economic studies;
industry studies; receipt of quotations for portfolio evaluations; and similar
services. Research services provided by brokers and dealers may be used by the
Adviser or by its affiliates in advising the Fund and other accounts. To the
extent that receipt of these services may supplant services for which the
Adviser or its affiliates might otherwise have paid, it would tend to reduce
their expenses. The Adviser and its affiliates exercise reasonable business
judgment in selecting brokers who offer brokerage and research services to
execute securities transactions. The y determine in good faith that commissions
charged by such persons are reasonable in relationship to the value of the
brokerage and research services provided. During the fiscal years ended August
31, 1996, 1995 and 1994, the Fund paid no brokerage commissions. Although
investment decisions for the Fund are made independently from those of the other
accounts managed by the Adviser, investments of the type the Fund may make may
also be made by those other accounts. When the Fund and one or more other
accounts managed by the adviser are prepared to invest in, or desire to dispose
of, the same security, available investments or opportunities for sales will be
allocated in a manner believed by the adviser to be equitable to each. In some
cases, this procedure may adversely affect the price paid or received by the
Fund or the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to participate
in volume transactions will be to the benefit of the Fund.

Except under certain circumstances described in the prospectus, shares are sold
at their net asset value plus a sales charge on days the New York Stock Exchange
is open for business. The procedure for purchasing shares is explained in the
prospectus under `Investing in the Fund."

Purchases by Sales Representatives, Fund Trustees, and Employees
Trustees, employees, and sales representatives of the Fund, Federated Advisers,
and Federated Securities Corp. or their affiliates, or any investment dealer who
has a sales agreement with Federated Securities Corp. and their spouses and
children under 21, may buy shares at net asset value without a sales charge.
Shares may also be sold without a sales charge to trusts or pension or
profit-sharing plans for these persons. These sales are made with the
purchaser's written assurance that the purchase is for investment purposes and
that the securities will not be resold except through redemption by the Fund.

Net asset value generally changes each day. The days on which net asset value is
calculated by the Fund are described in the prospectus.

Valuing Municipal Bonds
The Trustees use an independent pricing service to value municipal bonds. The
independent pricing service takes into consideration yield, stability, risk,
quality, coupon rate, maturity, type of issue, trading characteristics, special
circumstances of a security or trading market, and any other factors or market
data it considers relevant in determining valuations for normal institutional
size trading units of debt securities, and does not rely exclusively on quoted
prices.

Use of Amortized Cost
The Trustees have decided that the fair value of debt securities authorized to
be purchased by the Fund with remaining maturities of 60 days or less, at the
time of purchase, shall be their amortized cost value, unless the particular
circumstances of the security indicate otherwise. Under this method, portfolio
instruments and assets are valued at the acquisition cost as adjusted for
amortization of premium or accumulation of discount rather than at current
market value. The Executive Committee continually assesses this method of
valuation and recommends changes where necessary to assure that the Fund's
portfolio instruments are valued at their fair value as determined in good faith
by the Trustees.

The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under `Redeeming Shares." Although the Fund does not charge for
telephone redemptions, it reserves the right to charge a fee for the cost of
wire-transferred redemptions of less than $5,000.

o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities; o derive less than 30% of its gross
income from the sale of securities held less than three months; o invest in
securities within certain statutory limits; and o distribute to its
shareholders at least 90% of its net income earned during the year.
Shareholders' Tax Status
Capital Gains
Capital gains or losses may be realized by the Fund on the sale of portfolio
securities and as a result of discounts from par value on securities held to
maturity. Sales would generally be made because of:

o the availability of higher relative yields;

o differentials in market values;

o new investment opportunities;

o changes in creditworthiness of an issuer; or

o an attempt to preserve gains or limit losses.

Distribution of long-term capital gains are taxed as such, whether they are
taken in cash or reinvested, and regardless of the length of time the
shareholder has owned the shares. Any loss by a shareholder on Fund shares held
for less than six months and sold after a capital gains distribution will be
treated as a long-term capital loss to the extent of the capital gains
distribution.

The Fund's average annual total returns for the one-year period ended August 31,
1996, and for the period from September 18, 1991 (date of initial public
investment) to August 31, 1996, were 1.04% and 6.08%, respectively.

The average annual total return of the Fund is the average compounded rate of
return for a given period of time that would equate a $1,000 initial investment
to the ending redeemable value of that investment. The ending redeemable value
is computed by multiplying the number of shares owned at the end of the period
by the offering price per share at the end of the period. The number of shares
owned at the end of the period is based on the number of shares purchased at the
beginning of the period with $1,000 less any applicable sales charge, adjusted
over the period by any additional shares, assuming a monthly reinvestment of all
dividends and distributions. Any applicable contingent deferred sales charge is
deducted from the ending value of the investment based on the lesser of the
original purchase price or the offering price of shares redeemed. Yield

The Fund's yield for the thirty-day period ended August 31, 1996 was 4.38%. The
yield for the Fund is determined by dividing the net investment income per share
(as defined by the Securities and Exchange Commission) earned by the Fund over a
thirty-day period by the maximum offering price per share of the Fund on the
last day of the period. This value is then annualized using semi-annual
compounding. This means that the amount of income generated during the
thirty-day period is assumed to be generated each month over a twelve-month
period and is reinvested every six months. The yield does not necessarily
reflect income actually earned by the Fund because of certain adjustments
required by the Securities and Exchange Commission and, therefore, may not
correlate to the dividends or other distributions paid to shareholders. To the
extent that financial institutions and broker/dealers charge fees in connection
with services provided in conjunction with an investment in the Fund,
performance will be reduced for those shareholders paying those fees.

The Fund's tax-equivalent yield for the thirty-day period ended August 31, 1996
was 7.82%. The tax-equivalent yield for the Fund is calculated similarly to the
yield, but is adjusted to reflect the taxable yield that the Fund would have had
to earn to equal its actual yield, assuming a 28% tax rate and assuming that
income is 100% tax-exempt.

Tax-Equivalency Table
The Fund may also use a tax-equivalency table in advertising and sales
literature. The interest earned by the municipal obligations in the Fund's
portfolio generally remains free from federal regular income tax* and the income
taxes imposed by the State of Michigan. As the table below indicates, a
`tax-free" investment is an attractive choice for investors, particularly in
times of narrow spreads between `tax-free" and taxable yields.

TAXABLE YIELD EQUIVALENT FOR 1996
STATE OF MICHIGAN

COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
19.40% 32.40% 35.40%40.40% 44.00%
JOINT $1- $40,101- $96,901- $147,701- OVER
RETURN 40,100 96,900 147,700 263,750 $263,750
SINGLE $1- $24,001- $58,151- $121,301- OVER
RETURN 24,000 58,150 121,300 263,750 $263,750

Tax-Exempt
Yield Taxable Yield Equivalent
1.50% 1.86% 2.22%....2.32% 2.52% ..2.68%

2.00% 2.48% 2.96% ..3.10% 3.36% ..3.57%

2.50% 3.10% 3.70% ...3.87% 4.19% ..4.46%

3.00% 3.72% 4.44% ...4.64% 5.03% .5.36%

3.50% 4.34% 5.18% ...5.42% 5.87%... 6.25%

4.00% 4.96% 5.92% ...6.19% 6.71% .7.14%

4.50% 5.58% 6.66%.... 6.97% 7.55% .8.04%

5.00% 6.20% 7.40% ...7.74% 8.39% ..8.93%

5.50% 6.82% 8.14% ..8.51% 9.23%.. 9.82%

6.00% 7.44% 8.88% ..9.29% 10.07% .10.71%

Note: The maximum marginal tax rate for each bracket was used in calculating the
taxable yield equivalent. Furthermore, additional state and local taxes paid on
comparable taxable investments were not used to increase federal deductions. The
chart above is for illustrative purposes only. It is not an indicator of past or
future performance of Fund Shares. *Some portion of the Fund's income may be
subject to the federal alternative minimum tax and state and local income taxes.

The Fund's performance depends upon such variables as:

o Lehman Brothers Seven Year State General Obligation Bond Index is an
index of general obligation bonds rated A or better with 6-8 years to
maturity.
o Lipper Analytical Services, Inc. ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all capital gains distributions and income
dividends and takes into account any change in net asset value over a
specific period of time. From time to time, the Fund will quote its
Lipper ranking in the `general municipal bond funds" category in
advertising and sales literature.
o Morningstar, Inc. an independent rating service, is the publisher of
the bi-weekly MUTUAL FUND VALUES.
o Mutual Fund Values rates more than 1,000 NASDAQ listed mutual funds of
all types, according to their risk-adjusted returns. The maximum rating is five
stars, and ratings are effective for two weeks. Advertisements and other sales
literature for the Fund may refer to total return. Total return is the historic
change in the value of an investment in the Fund based on monthly reinvestment
of dividends over a specific period of time.

Advertisements may quote performance information which does not reflect the
effect of the sales charge.

The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment decisions
are made and executed by teams of portfolio managers, analysts, and traders
dedicated to specific market sectors. The se traders handle trillions of dollars
in annual trading volume.

<PAGE>

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

Institutional Clients
Federated meets the needs of more than 4,000 institutional clients nationwide by
managing and servicing separate accounts and mutual funds for a variety of
applications, including defined benefit and defined contribution programs, cash
management, and asset/liability management. Institutional clients include
corporations, pension funds, tax-exempt entities, foundations/endowments,
insurance companies, and investment and financial advisors.

The marketing effort to theses institutional clients is headed by John B.
Fisher, President, Institutional Sales Division.

* Source: Investment Company Institute

<PAGE>

Standard & Poor's Ratings Group ("S&P") Municipal Bond Ratings
AAA--Debt rated `AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA--Debt rated `AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.

A--Debt rated `A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

PLUS (+) OR MINUS (-): The ratings from `AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

Moody's Investors Service, Inc. ("Moody's") Municipal Bond Ratings
AAA--Bonds which are rated Aaa are judged to be of the best quality. The y carry
the smallest degree of investment risk and are generally referred to as `gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

AA--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. The y are rated lower than the best because margins of protection may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.

BAA--Bonds which are rated Baa are considered as medium grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

NR--Not rated by Moody's.

Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate or municipal bond rating
system. The modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.

Fitch Investors Service, Inc. ("Fitch") Long-Term Debt Ratings

AAA--Bonds considered to be investment grade and of very high quality. The
obligor has an exceptionally strong ability to pay interest and repay principal,
which is unlikely to be affected by reasonably foreseeable events.

A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

NR--NR indicates that Fitch does not rate the specific issue.

SP-2--Satisfactory capacity to pay principal and interest.

Moody's Investors Service, Inc. Short-Term Loan Ratings

MIG1/VMIG1--This designation denotes best quality. The re is a present strong
protection by established cash flows, superior liquidity support or demonstrated
broad based access to the market for refinancing.

MIG2/VMIG2--This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.

Fitch Investors Service, Inc. Short-Term Debt Ratings F-1+--Exceptionally Strong
Credit Quality. Issues assigned this rating are regarded as having the strongest
degree of assurance for timely payment.

F-1--Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.

F-2--Good Credit Quality. Issues carrying this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as the
F-1+ and F-1 categories.

Standard & Poor's Ratings Group Commercial Paper Ratings
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus (+) sign designation.

A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high for issues
designated A-1.

Moody's Investors Service, Inc. Commercial Paper Ratings
P-1--Issuers rated PRIME-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations.

PRIME-1 repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well established industries; high
rates of return on funds employed; conservative capitalization structures with
moderate reliance on debt and ample asset protection; broad margins in earning
coverage of fixed financial charges and high internal cash generation; and well
established access to a range of financial markets and assured sources of
alternate liquidity.

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

Federated New York Municipal Income Fund
(formerly, New York Municipal Income Fund)
(A Portfolio of Municipal Securities Income Trust)
Class F Shares
(formerly, Fortress Shares)

Prospectus

The Class F Shares of Federated New York Municipal Income Fund (the "Fund")
offered by this prospectus represent interests in a non-diversified portfolio of
securities which is one of a series of investment portfolios in Municipal
Securities Income Trust (the "Trust"), an open-end management investment company
(a mutual fund). The investment objective of the Fund is to provide current
income which is exempt from federal regular income tax and the personal income
taxes imposed by the State of New York and New York municipalities. The Fund
invests primarily in a portfolio of New York municipal securities.

This prospectus contains the information you should read and know before you
invest in Class F Shares. Keep this prospectus for future reference.

The Fund has also filed a Statement of Additional Information for Class F Shares
dated October 31, 1996, with the Securities and Exchange Commission ("SEC"). The
information contained in the Statement of Additional Information is incorporated
by reference into this prospectus. You may request a copy of the Statement of
Additional Information or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-341-7400. To
obtain other information or to make inquiries about the Fund, contact your
financial institution. The Statement of Additional Information, material
incorporated by reference into this document, and other information regarding
the Fund is maintained electronically with the SEC at Internet Web site
(http://www.sec.gov).

Prospectus dated October 31, 1996

<PAGE>

Summary of Fund Expenses.............................. 1

Financial Highlights.................................. 2

General Information................................... 3

Investment Information................................ 3
Investment Objective............................... 3
Investment Policies................................ 3
New York Municipal Securities...................... 5
Investment Risks................................... 6
Non-Diversification................................ 6
Investment Limitations............................. 6

Net Asset Value....................................... 7

Investing in Class F Shares........................... 7
Share Purchases.................................... 7
Minimum Investment Required........................ 8
What Shares Cost................................... 8
Eliminating/Reducing the Sales Charge.............. 9
Systematic Investment Program...................... 10
Exchange Privilege................................. 10
Certificates and Confirmations..................... 11
Dividends and Distributions........................ 11

Redeeming Class F Shares.............................. 11
Through a Financial Institution.................... 12
Directly by Mail................................... 12
Contingent Deferred Sales Charge................... 13
Systematic Withdrawal Program...................... 13
Accounts with Low Balances......................... 14

Trust Information..................................... 14
Management of the Trust............................ 14
Distribution of Class F Shares..................... 15
Administration of the Fund......................... 16

Shareholder Information............................... 17
Voting Rights...................................... 17

Tax Information....................................... 17
Federal Income Tax................................. 17
New York Taxes..................................... 18
State and Local Taxes.............................. 18

Performance Information............................... 19

Financial Statements.................................. 20

Independent Auditors' Report.......................... 30

Addresses............................................. 31

<PAGE>

Shares of the Fund are designed for customers of financial institutions such as
broker/dealers, banks, fiduciaries, and investment advisers as a convenient
means of accumulating an interest in a professionally managed, non-diversified
portfolio investing primarily in New York municipal securities. A minimum
initial investment of $1,500 is required. Subsequent investments must be in
amounts of at least $100. The Fund is not likely to be a suitable investment for
non-New York taxpayers or retirement plans since New York municipal securities
are not likely to produce competitive after-tax yields for such persons and
entities when compared to other investments.

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

Investment Objective
The investment objective of the Fund is to provide current income exempt from
federal regular income tax (federal regular income tax does not include the
federal alternative minimum tax) and the personal income taxes imposed by the
State of New York and New York municipalities. The investment objective cannot
be changed without approval of shareholders. While there is no assurance that
the Fund will achieve its investment objective, it endeavors to do so by
following the investment policies described in this prospectus.

Under normal circumstances, the Fund invests its assets so that at least 80% of
its annual interest income is exempt from federal regular income tax and the
personal income taxes imposed by the state of New York and New York
municipalities. Interest income of the Fund that is exempt from the income taxes
described above retains its exempt status when distributed to the Fund's
shareholders. Income distributed by the Fund may not necessarily be exempt from
state or municipal taxes in states other than New York.

Investment Policies
The Fund 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 York and New York municipalities. At least 65% of
the value of the Fund's total assets will be invested in obligations issued by
or on behalf of the state of New York, its political subdivisions, or agencies.
Unless indicated otherwise, investment policies of the Fund may be changed by
the Trustees without approval of shareholders. Shareholders will be notified
before any material changes in these policies become effective.

Acceptable Investments
The securities in which the Fund invests include:

n obligations issued by or on behalf of the state of New York, its
political subdivisions, or agencies;

n 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

The prices of fixed income securities fluctuate inversely to the direction of
interest rates.

Characteristics
The New York municipal securities which the Fund buys are investment grade bonds
rated Aaa, Aa, A, or Baa by Moody's Investors Service Inc., ("Moody's"), or AAA,
AA, A, or BBB by Standard & Poor's Ratings Group ("S&P") or by Fitch Investors
Service, Inc. ("Fitch") Bonds rated "BBB" by S&P or Fitch or "Baa" by Moody's
have speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to weakened capacity to make principal and
interest payments than higher rated bonds. In certain cases the Fund's adviser
may choose bonds which are unrated if it judges the bonds to have the same
characteristics as the investment grade bonds described above. If a bond is
rated below investment grade according to the characteristics set forth here
after the Fund has purchased it, the Fund is not required to drop the bond from
the portfolio, but will consider appropriate action. A description of the rating
categories is contained in the Appendix to the Statement of Additional
Information.

Participation Interests
The Fund may purchase participation interests from financial institutions such
as commercial banks, savings associations, and insurance companies. These
participation interests give the Fund an undivided interest in New York
municipal securities. The financial institutions from which the Fund purchases
participation interests frequently provide or secure irrevocable letters of
credit or guarantees to assure that the participation interests are of high
quality. The Trustees of the Trust will determine that participation interests
meet the prescribed quality standards for the Fund.

Variable Rate Municipal Securities
Some of the New York municipal securities which the Fund purchases may have
variable interest rates. Variable interest rates are ordinarily based on a
published interest rate, interest rate index, or a similar standard, such as the
91-day U.S. Treasury bill rate. Many variable rate municipal securities are
subject to payment of principal on demand by the Fund in not more than seven
days. All variable rate municipal securities will meet the quality standards for
the Fund. The Fund's investment adviser has been instructed by the Trustees to
monitor the pricing, quality, and liquidity of the variable rate municipal
securities, including participation interests held by the Fund on the basis of
published financial information and reports of the rating agencies and other
analytical services.

Municipal Leases
Municipal leases are obligations issued by state and local governments or
authorities to finance the acquisition of equipment and facilities and may be
considered to be illiquid. They may take the form of a lease, an installment
purchase contract, a conditional sales contract or a participation certificate
on any of the above. Lease obligations may be subject to periodic appropriation.
If the entity does not appropriate funds for future lease payments, the entity
cannot be compelled to make such payments. In the event of failure of
appropriation, unless the participation interests are credit enhanced, it is
unlikely that the participants would be able to obtain an acceptable substitute
source of payment.

Temporary Investments
Under normal circumstances, the Fund invests its assets so that at least 80% of
its annual interest income is exempt from federal regular income tax and the
personal income taxes imposed by the state of New York and New York
municipalities. This policy cannot change without shareholder approval. However,
from time to time, when the investment adviser determines that market conditions
call for a temporary defensive posture, the Fund may invest in short-term
non-New York municipal tax-exempt obligations or taxable temporary investments.
These temporary investments include: notes issued by or on behalf of municipal
or corporate issuers; obligations issued or guaranteed by the U.S. government,
its agencies, or instrumentalities; other debt securities; commercial paper;
certificates of deposit of banks; and repurchase agreements (arrangements in
which the organization selling the Fund a bond or temporary investment agrees at
the time of sale to repurchase it at a mutually agreed upon time and price).

New York Municipal Securities
New York municipal securities are generally issued to finance public works, such
as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also issued to
repay outstanding obligations, to raise funds for general operating expenses,
and to make loans to other public institutions and facilities.

New York municipal securities include industrial development bonds issued by or
on behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.

Investment Risks
Yields on New York municipal securities depend on a variety of factors,
including, but not limited to: the general conditions of the short-term
municipal note market and the municipal bond market; the size of the particular
offering; the maturity of the obligations; and the rating of the issue. Further,
any adverse economic conditions or developments affecting the state or city of
New York could impact the Fund's portfolio. The ability of the Fund to achieve
its investment objective also depends on the continuing ability of the issuers
of New York municipal securities and participation interests, or the guarantors
of either, to meet their obligations for the payment of interest and principal
when due. Investing in New York municipal securities which meet the Fund's
quality standards may not be possible if the state and city of New York do not
maintain their current credit ratings.

A further discussion of the risks of a portfolio which invests largely in New
York municipal securities is contained in the Statement of Additional
Information.

Share Purchases
Shares are sold on days on which the New York Stock Exchange is open. Shares may
be purchased through an investment dealer who has a sales agreement with the
distributor, Federated Securities Corp. or directly from the distributor,
Federated Securities Corp., either by mail or by wire, once an account has been
established. The Fund reserves the right to reject any purchase request.

Directly by Mail To purchase Shares by mail directly from Federated Securities
Corp. once an account has been established:

n complete and sign the new account form available from the Fund;

n enclose a check made payable to New York Municipal Income Fund--Fortress
Shares; and

n send both to the Fund's transfer agent, Federated Services, P.O. Box 8600,
Boston, MA 02266-8600.

Purchases by mail are considered received after payment by check is converted by
the transfer agent's bank, State Street Bank and Trust Company ("State Street
Bank") into federal funds. This is generally the next business day after State
Street Bank receives the check.

Directly by Wire
To purchase Shares directly from Federated Securities Corp. by Federal Reserve
Wire once an account has been established, call the Fund. All information needed
will be taken over the telephone, and the order is considered received when
State Street Bank receives payment by wire. Federal funds should be wired as
follows: Federated Shareholder Services Company, c/o State Street Bank and Trust
Company, Boston, MA; Attention: EDGEWIRE; For Credit to: Federated New York
Municipal Income Fund -- Class F Shares; (Fund Number -- this number can be
found on the account statement or by contacting the Fund); Account Number; Trade
Date and Order Number; Group Number or Dealer Number; Nominee or Institution
Name; and ABA Number 011000028. Shares cannot be purchased by wire on holidays
when wire transfers are restricted. Questions on wire purchases should be
directed to your shareholder services representative at the telephone number
listed on your account statement.

Minimum Investment Required
The minimum initial investment in Shares is $1,500. Subsequent investments must
be in amounts of at least $100.

What Shares Cost
Shares are sold at their net asset value next determined after an order is
received, plus a sales charge of 1% of the offering price (which is 1.01% of the
net amount invested). Further, there is no sales charge for purchases of $1
million or more. In addition, no sales charge is imposed for Shares purchased
through bank trust departments or investment advisers registered under the
Investment Advisers Act of 1940 purchasing on behalf of their clients, or by
sales representatives, Trustees, and employees of the Fund, Federated Advisers,
and Federated Securities Corp., or their affiliates, or any investment dealer
who has a sales agreement with Federated Securities Corp., their spouses and
children under age 21, or any trusts or pension or profit-sharing plans for
these persons. Investors who purchase Shares through a financial intermediary
may be charged a service fee by that financial intermediary. This prospectus
should, therefore, be read together with any agreement between customer and
institution with regard to services provided, the fees charged for these
services, and any restrictions and limitations imposed.

Under certain circumstances, described under "Redeeming Class F Shares,"
shareholders may be charged a contingent deferred sales charge by the
distributor at the time Shares are redeemed.

Dealer Concession
For sales of Shares, the distributor will normally offer to pay dealers up to
100% of the sales charge retained by it. Any portion of the sales charge which
is not paid to a broker/dealer will be retained by the distributor. However,
from time to time, and at the sole discretion of the distributor, all or part of
that portion may be paid to a dealer.

Eliminating/Reducing the Sales Charge
The sales charge can be reduced or eliminated on the purchase of Shares through:

n quantity discounts and accumulated purchases;

n signing a 13-month letter of intent;

n using the reinvestment privilege; or

n concurrent purchases.

If an additional purchase of Shares is made, the Fund will consider the previous
purchases still invested in the Fund. For example, if a shareholder already owns
Shares having a current value at the public offering price of $900,000 and he
purchases $100,000 more at the current public offering price, there will be no
sales charge on the additional purchase. The Fund will also combine purchases
for the purpose of reducing the contingent deferred sales charge imposed on some
Share redemptions. For example, if a shareholder already owns Shares having a
current value at public offering price of $1 million and purchases an additional
$1 million at the current public offering price, the applicable contingent
deferred sales charge would be reduced to .50% of those additional Shares. For
more information on the levels of contingent deferred sales charges and holding
periods, see the section entitled "Contingent Deferred Sales Charge."

To receive the sales charge elimination and/or the contingent deferred sales
charge reduction, Federated Securities Corp. must be notified by the shareholder
in writing or by their financial institution at the time the purchase is made
that Shares are already owned or that purchases are being combined. The Fund
will eliminate the sales charge and/or reduce the contingent deferred sales
charge after it confirms the purchases.

Letter of Intent
If a shareholder intends to purchase at least $1 million of Shares over the next
13 months, the sales charge may be eliminated by signing a letter of intent to
that effect. This letter of intent includes a provision for a sales charge
elimination depending on the amount actually purchased within the 13-month
period and a provision for the Fund's custodian to hold 1.00% of the total
amount intended to be purchased in escrow (in Shares) until such purchase is
completed.

This letter of intent also includes a provision for reductions in the contingent
deferred sales charge and holding period depending on the amount actually
purchased within the 13 month period. For more information on the various levels
of contingent deferred sales charges and holding periods, see the section
entitled "Contingent Deferred Sales Charge."

This letter of intent will not obligate the shareholder to purchase Shares. This
letter may be dated as of a prior date to include any purchases made within the
past 90 days purchases within the prior 90 days may be used to fulfill the
requirements of the letter of intent; however, the sales charge on prior
purchases will not be adjusted to reflect a lower sales charge.

Exchange Privilege
Class F shareholders may exchange all or some of their Shares for shares of New
York Municipal Cash Trust or Class F Shares of other Federated Funds. Exchanges
are made at net asset value without being assessed a contingent deferred sales
charge. In determining the applicability of the contingent deferred sales
charge, the required holding period for your new Class F Shares received through
an exchange will include the period for which your original Class F Shares were
held.

The exchange privilege is available to shareholders residing in any state in
which the Shares being acquired may be legally sold.

Before making an exchange, a shareholder must receive a prospectus of the fund
for which the exchange is being made.

An exercise of the exchange privilege is treated as sale for federal income tax
purposes. Depending on the circumstances, a capital gain or loss may be
realized.

Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly statements are sent to report dividends paid during the
month.

Shares earn dividends through the business day that proper written redemption
instructions are received by Federated Shareholder Services Company.

Directly by Mail
Shareholders may also redeem Shares by sending a written request to Federated
Shareholder Services Company, P.O. Box 8600, Boston, MA 02266-8600. Shares will
be redeemed at their net asset value, less any applicable contingent deferred
sales charge, next determined after the transfer agent receives the redemption
request. If share certificates have been issued, they should be sent unendorsed
with the written request by registered or certified mail to the address noted
above.

Contingent Deferred
Amount of Purchase Shares Held Sales Charge Up to $1,999,999 4 years or less
1.00% $2,000,000 to $4,999,9992 years or less0.50% $5,000,000 or more 1 year or
less 0.25%

In instances in which Shares have been acquired in exchange for Class F Shares
in other Federated Funds, (i) the purchase price is the price of the Shares when
originally purchased and (ii) the time period during which the shares are held
will run from the date of the original purchase. The contingent deferred sales
charge will not be imposed on Shares acquired through the reinvestment of
dividends or distributions of long-term capital gains. In computing the amount
of contingent deferred sales charge for accounts with Shares subject to a single
holding period, if any, redemptions are deemed to have occurred in the following
order: (1) Shares acquired through the reinvestment of dividends and long-term
capital gains, (2) purchases of Shares occurring prior to the number of years
necessary to satisfy the applicable holding period, and (3) purchases of Shares
occurring within the current holding period. For accounts with Shares subject to
multiple Share holding periods, the redemption sequence will be determined
first, with reinvested dividends and long-term capital gains, and second, on a
first-in, first-out basis.

The contingent deferred sales charge will not be imposed when a redemption
results from a tax-free return under the following circumstances: (i) a total or
partial distribution from a qualified plan, other than an IRA, Keogh Plan, or a
custodial account, following retirement; (ii) a total or partial distribution
from an IRA, Keogh Plan, or a custodial account, after the beneficial owner
attains age 591U2; or (iii) from the death or permanent and total disability of
the beneficial owner. The exemption from the contingent deferred sales charge
for qualified plans, an IRA, Keogh Plan, or a custodial account does not extend
to account transfers, rollovers, and other redemptions made for purposes of
reinvestment. Contingent deferred sales charges are not charged in connection
with exchanges of Shares for shares in New York Municipal Cash Trust or Shares
in other Federated Funds, or in connection with redemptions by the Fund of
accounts with low balances. Shares of the Fund originally purchased through a
bank trust department or investment adviser registered under the Investment
Advisers Act of 1940, as amended, are not subject to the contingent deferred
sales charge to the extent that no payment was advanced for purchases made by or
through such entities.

Contingent deferred sales charges are charged for Shares redeemed through this
program within four years of their purchase dates.

Accounts with Low Balances
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum value of $1,500. This
requirement does not apply, however, if the balance falls below $1,500 because
of changes in the Fund's net asset value. Before Shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to purchase
additional Shares to meet the minimum requirement.

Management of the Trust
Board of Trustees
The Trust is managed by a Board of Trustees. The Board of Trustees are
responsible for managing the business affairs of Municipal Securities Income
Trust and for exercising all of the powers of the Trust except those reserved
for the shareholders. The Executive Committee of the Board of Trustees handles
the Trustees' responsibilities between meetings of the Board. Investment Adviser
Pursuant to an investment advisory contract with the Trust, investment decisions
for the Fund are made by Federated Advisers (the "Adviser"), the Fund's
investment adviser, subject to direction by the Trustees. The Adviser
continually conducts investment research and supervision for the Fund and is
responsible for the purchase and sale of portfolio instruments, for which it
receives an annual fee from the Fund.

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

Advisory Fees
The Fund's Adviser receives an annual investment advisory fee equal to .40%
of the Fund's average daily net assets. The Adviser may voluntarily choose to
waive a portion of its fee or reimburse the Fund for certain operating
expenses. The Adviser can modify or terminate this voluntary waiver of
expenses at any time at its sole discretion. The Adviser can terminate this
voluntary waiver or reimbursement of expenses at any time at its sole
discretion. The Adviser has also undertaken to reimburse the Fund for
operating expenses in excess of limitations established by certain states.

Distribution of Class F Shares

Federated Securities Corp. is the principal distributor for Shares of the Fund.
Federated Securities Corp. is located at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. It is a Pennsylvania corporation organized on November
14, 1969, and is the principal distributor for a number of investment companies.
Federated Securities Corp. is a subsidiary of Federated Investors.

State securities laws may require certain financial institutions such as
depository institutions to register as dealers.

The Distribution Plan is a compensation-type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amount or may earn a profit from future payments made by the Fund
under the Distribution Plan.

Supplemental Payments to Financial Institutions
Federated Securities Corp. will pay financial institutions, for distribution
and/or administrative services, an amount equal to 1.00% of the offering price
of the Shares acquired by their clients or customers on purchases up to
$1,999,999, .50% of the offering price on purchases of $2,000,000 to $4,999,999,
and .25% of the offering price on purchases of $5,000,000 or more. (This fee is
in addition to the 1.00% sales charge on purchases of less than $1 million.)

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

Voting Rights
Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the Trust have equal voting rights except that in matters affecting only a
particular fund, only shares of that fund are entitled to vote. As of October 7,
1996, Merrill Lynch Pierce Fenner & Smith, Jacksonville, Florida, owned 46.57%
of the voting securities of the Fund, and, therefore, may, for certain purposes,
be deemed to control the Fund and be able to affect the outcome of certain
matters presented for a vote of shareholders.

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

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

New York Taxes
Under existing New York laws, distributions made by the Fund will not be subject
to New York State or New York City personal income taxes to the extent that such
distributions qualify as "exempt-interest dividends" under the Code, and
represent interest income attributable to obligations of the State of New York
and its political subdivisions, as well as certain other obligations, the
interest on which is exempt from New York State and New York City personal
income taxes, such as, for example, certain obligations of the Commonwealth of
Puerto Rico. Conversely, to the extent that distributions made by the Fund are
derived from other types of obligations, such distributions will be subject to
New York State and New York City personal income taxes.

The Fund cannot predict in advance the exact portion of its dividends that will
be exempt from New York State and New York City personal income taxes. However,
the Fund will report to shareholders at least annually what percentage of the
dividends it actually paid is exempt from such taxes.

Dividends paid by the Fund are exempt from the New York City unincorporated
business tax to the extent that they are exempt from the New York City personal
income tax.

Dividends paid by the Fund are not excluded from net income in determining New
York State or New York City franchise taxes on corporations or financial
institutions.

State and Local Taxes
Income from the Fund is not necessarily free from taxes in states other than New
York. Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.

From time to time, the Fund advertises the total return, yield, and
tax-equivalent yield for Shares.

The yield of Shares is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by Shares
over a thirty-day period by the maximum offering price per share of Shares on
the last day of the period. This number is then annualized using semi-annual
compounding. The tax-equivalent yield of Shares is calculated similarly to the
yield, but is adjusted to reflect the taxable yield that Shares would have had
to earn to equal its actual yield, assuming a specific tax rate. The yield and
the tax-equivalent yield do not necessarily reflect income actually earned by
Shares and, therefore, may not correlate to the dividends or other distributions
paid to shareholders.

The performance information reflects the effect of the maximum sales charge and
other similar non-recurring changes, such as the contingent deferred sales
charge, which, if excluded, would increase the total return, yield, and
tax-equivalent yield.

From time to time, advertisements for the Fund may refer to ratings, rankings
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

<PAGE>

Federated New York Municipal Income Fund
Class F Shares
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

Distributor
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

Investment Adviser
Federated Advisers
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

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

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

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

Federated New York Municipal Income Fund
(formerly, New York Municipal Income Fund)
(A Portfolio of Municipal Securities Income Trust)

Class F Shares
(formerly, Fortress Shares)

Prospectus
October 31, 1996
A Non-Diversified Portfolio of Municipal Securities Income Trust,

An Open-End, Management Investment Company

Federated Securities Corp., Distributors

Cusip 625922208
2092919A-FS (10/96)

Federated New York Municipal Income Fund
(formerly, New York Municipal Income Fund)

(A Portfolio of Municipal Securities Income Trust)

Class F Shares

(formerly, Fortress Shares)

Statement of Additional Information

This Statement of Additional Information should be read with the prospectus of
Federated New York Municipal Income Fund (the `Fund"), a portfolio of Municipal
Securities Income Trust (the `Trust") dated October 31, 1996. This Statement is
not a prospectus. You may request a copy of a prospectus or a paper copy of this
Statement, if you have received it electronically, free of charge by calling
1-800-341-7400.

Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

Statement dated October 31, 1996
Cusip 625922208
2092919B (10/96)

<PAGE>

General Information About the Fund.................134

Investment Objective and Policies..................134
Acceptable Investments..........................134
When-Issued and Delayed Delivery Transactions...137
Temporary Investments...........................137
Portfolio Turnover..............................139
Investment Limitations..........................139
New York Investment Risks.......................143

Municipal Securities Income Trust Management.......144
Fund Ownership..................................153
Trustees Compensation...........................153
Trustee Liability...............................155

Investment Advisory Services.......................155
Adviser to the Fund.............................155
Advisory Fees...................................156

Other Services.....................................157
Fund Administration.............................157
Custodian and Portfolio Accountant..............157
Transfer Agent..................................157
Independent Auditors............................158

Brokerage Transactions.............................158

Purchasing Class F Shares..........................159
Distribution Plan and Shareholder Services Agreement 159
Conversion to Federal Funds.....................160
Purchases by Sales Representatives, Fund Trustees, and Employees 161

Determining Net Asset Value........................161
Valuing Municipal Bonds.........................161
Use of Amortized Cost...........................161

Redeeming Class F Shares...........................162
Redemption in Kind..............................162
Massachusetts Partnership Law...................163

Tax Status.........................................163
The Fund's Tax Status...........................163

Total Return.......................................164

Yield..............................................165

Tax-Equivalent Yield...............................166
Tax-Equivalency Table...........................166

Performance Comparisons............................168
Economic and Market Information.................170

About Federated Investors..........................170
Mutual Fund Market..............................171
Institutional Clients...........................171
Trust Organizations.............................171
Broker/Dealers and Bank Broker/
Dealer Subsidiaries..........................172

Appendix...........................................172

<PAGE>

The Fund is a portfolio of Municipal Securities Income Trust. The Trust was
established as a Massachusetts business trust under a Declaration of Trust dated
August 6, 1990. On September 16, 1992 (effective date October 31, 1992), the
Board of Trustees (the `Trustees") approved changing the name of the Trust from
Federated Municipal Income Trust to Municipal Securities Income Trust. On
February 26, 1996 (effective date March 31, 1996), the Trustees approved
changing the name of the Fund from New York Municipal Income Fund to Federated
New York Municipal Income Fund and also approved changing the name of the Fund's
presently offered shares from Fortress Shares to Class F Shares (`Shares").

The Fund's investment objective is to provide current income exempt from federal
regular income tax (federal regular income tax does not include the federal
alternative minimum tax) and the personal income taxes imposed by the state of
New York and New York municipalities. The investment objective cannot be changed
without approval of shareholders.

Acceptable Investments
The Fund invests primarily in New York municipal securities.

Characteristics
The New York municipal securities in which the Fund invests have the
characteristics set forth in the prospectus. If ratings made by Moody's
Investors Service, Inc., Standard & Poor's Ratings Group or Fitch's change
because of changes in those organizations or in their rating systems, the
Fund will try to use comparable ratings as standards in accordance with the
investment policies described in the Fund's prospectus.

Types of Acceptable Investments
Examples of New York municipal securities include:

o governmental lease certificates of participation issued by state or
municipal authorities where payment is secured by installment payments for
equipment, buildings, or other facilities being leased by the state or
municipality;

o municipal notes and tax-exempt commercial paper;

o serial bonds;

o tax anticipation notes sold to finance working capital needs of
municipalities in anticipation of receiving taxes;

o bond anticipation notes sold in anticipation of the issuance of long-term
bonds;

o pre-refunded municipal bonds whose timely payment of interest and principal
is ensured by an escrow of U.S. government obligations; and

o general obligation bonds.

Variable Rate Municipal Securities
Variable interest rates generally reduce changes in the market value of
municipal securities from their original purchase prices. Accordingly, as
interest rates decrease or increase, the potential for capital appreciation
or depreciation is less for variable rate municipal securities than for
fixed-income obligations. Many municipal securities with variable-interest
rates purchased by the Fund are subject to repayment of principal (usually
within seven days) on the Fund's demand. The terms of these variable rate
demand instruments require payment of principal and accrued interest from the
issuer of the municipal obligations, the issuer of the participation
interests, or a guarantor of either issuer.

o whether the lease can be terminated by the lessee;

o the potential recovery, if any, from a sale of the leased property upon
termination of the lease;

o the lessee's general credit strength (e.g., its debt, administrative,
economic and financial characteristics and prospects);

o any credit enhancement or legal recourse provided upon an event of
non-appropriation or other termination of the lease.

When-Issued and Delayed Delivery Transactions
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the Fund's
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.

Temporary Investments
The Fund may also invest in temporary investments during times of unusual market
conditions for defensive purposes.

From time to time, such as when suitable New York municipal bonds are not
available, the Fund may invest a portion of its assets in cash. Any portion
of the Fund's assets maintained in cash will reduce the amount of assets in
New York municipal bonds and thereby reduce the Fund's yield.

When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated on the Fund's records at the trade date. These assets are
marked to market daily and are maintained until the transaction is settled.

Investing in Real Estate
The Fund will not purchase or sell real estate including limited partnership
interests although it may invest in municipal bonds secured by real estate or
interests in real estate.

Investing in Commodities
The Fund will not buy or sell commodities, commodity contracts, or
commodities futures contracts.

Dealing in Puts and Calls
The Fund will not buy or sell puts, calls, straddles, spreads, or any
combination of these.

The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.

Investing in Securities of Other Investment Companies
The Fund will not purchase securities of other investment companies except as
part of a merger, consolidation, or other acquisition.

Investing in Issuers Whose Securities are Owned by Officers and Trustees Of the
Fund
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Fund or its investment adviser, owning
individually more than 1/2 of 1% of the issuer's securities, together own
more than 5% of the issuer's securities.

Investing in Restricted Securities
The Fund will not invest more than 10% of the value of its total assets in
securities subject to restrictions on resale under the Securities Act of 1933.

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

New York Investment Risks
The Fund invests in obligations of New York issuers which results in the Fund's
performance being subject to risks associated with the overall conditions
present within the State. The following information is a brief summary of the
recent prevailing economic conditions and a general summary of the state's
financial status. This information is based on official statements relating to
securities that have been offered by New York issuers and from other sources
believed to be accurate but should not be relied upon as a complete description
of all relevant information.

The State of New York has begun to see economic improvement after several
difficult years. At 9% annually, job growth in 1996 is projected to exceed the
1995 growth rate , but remains below the rest of the country. Future economic
growth will be hampered by corporate downsizing and continued defense cut backs.
The State's economy remains highly developed with a large emphasis in service,
trade, financial services, and real estate. In addition, per capita income
remains high and continues to grow at a relatively strong pace.

Year-end fiscal 1996 budget basis results indicate that the State ended the year
with a $445 million surplus. This is the result of better than anticipated
revenue performance and lower than anticipated social service spending, mostly
Medicaid and public assistance. However, the fiscal 1997 State budget was a
record 104 days late and fails to contain significant out-year gaps and reliance
on one-shots. Chronic structural imbalance reflects the State's weak credit
position and indicates that the State will continue to experience contentious
debate over program eliminations and spending reductions.

The importance of New York City to the State's economy is also an important
consideration since it represents a significant portion of the overall economy
of the State. The City has struggled to maintain fiscal stability and has
performed adequately in contrast to the difficult economic conditions in the New
York/New Jersey metropolitan area. Any major changes to the financial condition
of the City would ultimately have an effect on the State.

The Fund's concentration in securities issued by the State and its political
subdivisions provides a greater level of risk than a fund which is diversified
across numerous states and municipal entities. The ability of the State or its
municipalities to meet their obligations will depend on the availability of tax
and other revenues; economic, political, and demographic conditions within the
State; and the underlying fiscal condition of the State and its municipalities.

<PAGE>

Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated California Municipal Income Fund, and principal
occupations.

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA

Birthdate: July 28, 1924

Chairman and Trustee

Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA

Birthdate: February 3, 1934

Trustee

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL

Birthdate: June 23, 1937

Trustee

William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA

Birthdate: July 4, 1918

Trustee

J. Christopher Donahue *
Federated Investors Tower
Pittsburgh, PA

Birthdate: April 11, 1949

Executive Vice President and Trustee

President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company, and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee of the Company. James E. Dowd 571 Hayward Mill Road Concord, MA

Birthdate: May 18, 1922

Trustee

Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Trustee of the
Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA

Birthdate: October 11, 1932

Trustee

Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA

Birthdate: June 18, 1924

Trustee

Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western Region;
Director or Trustee of the Funds.

Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI

Birthdate: March 16, 1942

Trustee

Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.

Gregor F. Meyer
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA

Birthdate: October 6, 1926

Trustee

Attorney, Member of Miller, Ament, Henny & Kochuba; Chairman, Meritcare, Inc.;
Director, Eat'N Park Restaurants, Inc.; Director or Trustee of the Funds.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA

Birthdate: December 20, 1932

Trustee

President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA

Birthdate: September 14, 1925

Trustee

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA

Birthdate: June 21, 1935

Trustee

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA

Birthdate: May 17, 1923

President

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 22, 1930

Executive Vice President

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 26, 1938

Executive Vice President , Secretary and Treasurer

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

Fund Ownership
Officers and Trustees own less than 1% of the outstanding Shares. As of October
7, 1996, the following shareholders of record owned 5% or more of the
outstanding Shares of the Fund: North Fork Bank & Trust Co., Mattituck, New
York, owned approximately 125,341 Shares (5.75%); and Merrill Lynch Pierce
Fenner & Smith, Jacksonville, Florida, owned approximately 1,014,901 Shares
(46.57%).

<PAGE>

Trustees Compensation
AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
Trust Trust*# FROM FUND COMPLEX
John F. Donahue $ -0- $ -0- for the Trust and
Trustee and Chairman 54 other investment companies in the Fund Complex

Thomas G. Bigley $1,243.22 $86,331 for the Trust and
Trustee 54 other investment companies in the Fund Complex

John T. Conroy $1,363.10 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund Complex

William J. Copeland $1,363.10 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund Complex

J. Christopher Donahue $ -0- $ -0- for the Trust and
Trustee and Exec. Vice Pres. 16 other investment companies in the Fund Complex

James E. Dowd $1,363.10 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund Complex

Lawrence D. Ellis, M.D. $1,243.22 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund Complex

Edward L. Flaherty, Jr. $1,363.10 $115,760 for the Trust and
Trustee 54other investment companies in the Fund Complex

Peter E. Madden $1,243.22 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund Complex

Gregor F. Meyer $1,243.22 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund Complex

John E. Murray, Jr. $1,243.22 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund Complex

Wesley W. Posvar $1,243.22 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund Complex

Marjorie P. Smuts $1,243.22 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund Complex *
</TABLE>

Information is furnished for the fiscal year ended August 31, 1996.

# The aggregate compensation is provided for the Trust which is comprised of
five portfolios.

The information is provided for the last calendar year.

Mr Bigley served on 39 investment companies in the Federated funds Complex from
January 1 through September 30, 1995. On October 1, 1995, he was appointed a
Trustee on 15 additional Federated funds.

Adviser to the Fund

For its advisory services, the Adviser receives an annual investment advisory
fee as described in the prospectus. For the fiscal years ended August 31, 1996,
1995 and 1994, the Adviser earned advisory fees of $86,941, $87,317 and $84,319,
respectively, all of which were voluntarily waived.

State Expense Limitations
The Adviser has undertaken to comply with the expense limitations established
by certain states for investment companies whose shares are registered for
sale in those states. If the Fund's normal operating expenses (including the
investment advisory fee, but not including brokerage commissions, interest,
taxes, and extraordinary expenses) exceed 2.5% per year of the first $30
million of average net assets, 2% per year of the next $70 million of average
net assets, and 1.5% per year of the remaining average net assets, the
Adviser will reimburse the Trust for its expenses over the limitation. If the
Fund's monthly projected operating expenses exceed this expense limitation,
the investment advisory fee paid will be reduced by the amount of the excess,
subject to an annual adjustment. If the expense limitation is exceeded, the
amount to be reimbursed by the Adviser will be limited, in any single fiscal
year, by the amount of the investment advisory fee.

This arrangement is not part of the advisory contract and may be amended or
rescinded in the future.

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

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees. The Adviser may select brokers and dealers who offer
brokerage and research services. These services may be furnished directly to the
Fund or to the Adviser and may include: advice as to the advisability of
investing in securities; security analysis and reports; economic studies;
industry studies; receipt of quotations for portfolio evaluations; and similar
services. Research services provided by brokers and dealers may be used by the
Adviser or by its affiliates in advising the Fund and other accounts. To the
extent that receipt of these services may supplant services for which the
Adviser or its affiliates might otherwise have paid, it would tend to reduce
their expenses. The Adviser and its affiliates exercise reasonable business
judgment in selecting brokers who offer brokerage and research services to
execute securities transactions. They determine in good faith that commissions
charged by such persons are reasonable in relationship to the value of the
brokerage and research services provided. During the fiscal years ended August
31, 1996, 1995 and 1994, the Fund paid no brokerage commissions. Although
investment decisions for the Fund are made independently from those of the other
accounts managed by the Adviser, investments of the type the Fund may make may
also be made by those other accounts. When the Fund and one or more other
accounts managed by the adviser are prepared to invest in, or desire to dispose
of, the same security, available investments or opportunities for sales will be
allocated in a manner believed by the adviser to be equitable to each. In some
cases, this procedure may adversely affect the price paid or received by the
Fund or the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to participate
in volume transactions will be to the benefit of the Fund.

Distribution Plan and Shareholder Services Agreement
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services, to stimulate distribution
activities and to cause services to be provided to shareholders by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to,
marketing efforts; providing office space, equipment, telephone facilities, and
various clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and addresses. By
adopting the Distribution Plan, the Trustees expect that the Fund will be able
to achieve a more predictable flow of cash for investment purposes and to meet
redemptions. This will facilitate more efficient portfolio management and assist
the Fund in pursuing its investment objectives. By identifying potential
investors whose needs are served by the Fund's objectives, and properly
servicing these accounts, it may be possible to curb sharp fluctuations in rates
of redemptions and sales. Other benefits, which may be realized under either
arrangement, may include: (1) providing personal services to shareholders; (2)
investing shareholder assets with a minimum of delay and administrative detail;
(3) enhancing shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts. For the fiscal
years ended August 31, 1996, 1995 and 1994, payments in the amount of $108,676,
$109,146 and $105,399, respectively, were made pursuant to the Distribution
Plan, of which $104,329, $104,780 and $61,717, respectively, were waived. In
addition, for the fiscal year ended August 31, 1996, the Fund paid shareholder
service fees in the amount of $54,338, of which $4,347 were waived.

Purchases by Sales Representatives, Fund Trustees, and Employees
Trustees, employees, and sales representatives of the Fund, Federated Advisers,
and Federated Securities Corp. or their affiliates, or any investment dealer who
has a sales agreement with Federated Securities Corp. and their spouses and
children under 21, may buy Shares at net asset value without a sales charge.
Shares may also be sold without a sales charge to trusts or pension or
profit-sharing plans for these persons. These sales are made with the
purchaser's written assurance that the purchase is for investment purposes and
that the securities will not be resold except through redemption by the Fund.

Net asset value generally changes each day. The days on which net asset value is
calculated for Shares are described in the prospectus.

Any redemption beyond this amount will also be in cash unless the Trustees
determine that further cash payments will have a material adverse effect on
remaining shareholders. In such a case, the Trust will pay all or a portion of
the remainder of the redemption in portfolio instruments, valued in the same way
that net asset value is determined. The portfolio instruments will be selected
in a manner that the Trustees deem fair and equitable. Redemption in kind is not
as liquid as a cash redemption. If redemption is made in kind, shareholders
receiving their securities and selling them before their maturity could receive
less than the redemption value of their securities and could incur certain
transactions costs.

In the unlikely event a shareholder of the Fund is held personally liable for
the Trust's obligations on behalf of the Fund, the Trust is required to use the
property of the Fund to protect or compensate the shareholder. On request, the
Trust will defend any claim made and pay any judgment against a shareholder of
the Fund for any act or obligation of the Trust on behalf of the Fund.
Therefore, financial loss resulting from liability as a shareholder of the Fund
will occur only if the Trust cannot meet its obligations to indemnify
shareholders and pay judgments against them from the assets of the Fund.

o the availability of higher relative yields;

o differentials in market values;

o new investment opportunities;
o changes in creditworthiness of an issuer; or

o an attempt to preserve gains or limit losses.

Distributions of long-term capital gains are taxed as such, whether they are
taken in cash or reinvested, and regardless of the length of time the
shareholder has owned Shares. Any loss by a shareholder on Shares held for
less than six months and sold after a capital gains distribution will be
treated as a long-term capital loss to the extent of the capital gains
distribution.

The Fund's average annual total returns for the one-year period ended August 31,
1996, and for the period from December 2, 1992 (date of initial public
investment) to August 31, 1996 were 4.11% and 5.72%, respectively. The average
annual total return for the Fund is the average compounded rate of return for a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is computed by
multiplying the number of Shares owned at the end of the period by the offering
price per Share at the end of the period. The number of Shares owned at the end
of the period is based on the number of Shares purchased at the beginning of the
period with $1,000, adjusted over the period by any additional Shares, assuming
the monthly reinvestment of all dividends and distributions. Any applicable
contingent deferred sales charge is deducted from the ending value of the
investment based on the lesser of the original purchase price per Share of
redeemed Shares at the time of purchase or the offering price per Share of
Shares redeemed.

The Fund's yield for the thirty-day period ended August 31, 1996 was 5.55%. The
yield for the Fund is determined by dividing the net investment income per Share
(as defined by the Securities and Exchange Commission) earned by the Fund over a
thirty-day period by the maximum offering price per Share of the Fund on the
last day of the period. This value is then annualized using semi-annual
compounding. This means that the amount of income generated during the
thirty-day period is assumed to be generated each month over a twelve-month
period and is reinvested every six months. The yield does not necessarily
reflect income actually earned by the Fund because of certain adjustments
required by the Securities and Exchange Commission and, therefore, may not
correlate to the dividends or other distributions paid to shareholders. To the
extent that financial institutions and broker/dealers charge fees in connection
with services provided in conjunction with an investment in the Fund,
performance will be reduced for those shareholders paying those fees.

The Fund's tax-equivalent yield for the thirty-day period ended August 31, 1996
was 7.71%.

The tax-equivalent yield of the Fund is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that the Fund would have had to earn to
equal its actual yield, assuming a tax rate of 28% and assuming that income is
100% tax-exempt.

Tax-Equivalency Table
The Fund may also use a tax-equivalency table in advertising and sales
literature. The interest earned by the municipal obligations in the Fund's
portfolio generally remains free from federal regular income tax,* and the
income taxes imposed by the State of New York. As the table below indicates, a
`tax-free" investment is an attractive choice for investors, particularly in
times of narrow spreads between tax-free and taxable yields.

TAXABLE YIELD EQUIVALENT FOR 1996
STATE OF NEW YORK

FEDERAL INCOME TAX BRACKET:
15.00% 28.00% 31.00%36.00% 39.60%
JOINT $1- $40,101- $96,901- $147,701- OVER
RETURN 40,100 96,900 147,700 263,750 $263,750
SINGLE $1- $24,001- $58,151- $121,301- OVER
RETURN 24,000 58,150 121,300 263,750 $263,750

Tax-Exempt
Yield Taxable Yield Equivalent
1.00% 1.18% 1.39% 1.45%1.56% 1.66%
7.50% 8.82% 10.42% 10.87%11.72% 12.42%
8.00% 9.41% 11.11% 11.59%12.50% 13.25%

COMBINED FEDERAL AND STATE:
22.125% 35.125 % 38.125%43.125% 46.725%
1.50% 1.93% 2.31% 2.42% 2.64% 2.82%
2.00% 2.57% 3.08% 3.23% 3.52% 3.75%
2.50% 3.21% 3.85% 4.04% 4.40% 4.69%
3.00% 3.85% 4.62% 4.85% 5.27% 5.63%
3.50% 4.49% 5.39% 5.66% 6.15% 6.57%
4.00% 5.14% 6.17% 6.46% 7.03% 7.51%
4.50% 5.78% 6.94% 7.27% 7.91% 8.45%
5.00% 6.42% 7.71% 8.08% 8.79% 9.39%
5.50% 7.06% 8.48% 8.89% 9.67% 10.32%
6.00% 7.70% 9.25% 9.70% 10.55% 11.26%

Note: The maximum marginal tax rate for each bracket was used in calculating the
taxable yield equivalent. Furthermore, additional state and local taxes paid on
comparable taxable investments were not used to increase federal deductions. The
chart above is for illustrative purposes only. It is not an indicator of past or
future performance of Fund shares.

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

The performance of Shares depends upon such variables as:

o Lehman Brothers Revenue Bond Index is a total return performance
benchmark for the long-term, investment grade, revenue bond market.
Returns and attributes for the index are calculated semi-monthly.
o Lipper Analytical Services, Inc. ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all capital gains distributions and income
dividends and takes into account any change in net asset value over a
specific period of time. From time to time, the Fund will quote its
Lipper ranking in the `New York Municipal Bond Funds"category in
advertising and sales literature.
o Morningstar, Inc., an independent rating service, is the publisher of
the bi-weekly MUTUAL FUND VALUES. MUTUAL FUND VALUES rates more than
1,000 NASDAQ-listed mutual funds of all types, according to their
risk-adjusted returns. The maximum rating is five stars, and ratings
are effective for two weeks.
Advertisements and other sales literature for the Fund may quote total returns
which are calculated on non-standardized base periods. The total returns
represent the historic change in the value of an investment in the Fund based on
monthly reinvestment of dividends over a specified period of time.

Advertisements may quote performance information which does not reflect the
effect of the sales charge.

The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment decisions
are made and executed by teams of portfolio managers, analysts, and traders
dedicated to specific market sectors. These traders handle trillions of dollars
in annual trading volume.

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

Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated mutual funds are available to consumers through major brokerage firms
nationwide -- including 200 New York Stock Exchange firms -- supported by more
wholesalers than any other mutual fund distributor. Federated's service to
financial professionals and institutions has earned it high rankings in several
DALBAR Surveys. The marketing effort to these firms is headed by James F. Getz,
President, Broker/Dealer Division.

* Source: Investment Company Institute

<PAGE>

Standard & Poor's Ratings Group (`S&P") Municipal Bond Ratings
AAA--Debt rated `AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA--Debt rated `AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.

NR--Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy. PLUS (+) OR MINUS (-): The
ratings from `AA" to "CCC" may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories.

Moody's Investors Service, Inc., (`Moody's") Municipal Bond Ratings
AAA--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as `gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

AA--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.

BAA--Bonds which are rated Baa are considered as medium grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

NR--Not rated by Moody's.

A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

NR--NR indicates that Fitch does not rate the specific issue.

SP-2--Satisfactory capacity to pay principal and interest.

Moody's Investors Service, Inc., Short-Term Loan Ratings
MIG1/VMIG1--This designation denotes best quality. There is a present strong
protection by established cash flows, superior liquidity support or demonstrated
broad based access to the market for refinancing.

MIG2/VMIG2--This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.

Fitch Investors Service, Inc. Short-Term Debt Ratings

F-1+--Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

F-1--Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.

F-2--Good Credit Quality. Issues carrying this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as the
F-1+ and F-1 categories.

A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated `A-1."

Moody's Investors Service, Inc., Commercial Paper Ratings
P-1--Issuers rated PRIME-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations.

Federated Ohio Municipal Income Fund
(formerly, Ohio Municipal Income Fund)
(A Portfolio of Municipal Securities Income Trust)
Class F Shares
(formerly, Fortress Shares)

Prospectus

The Class F Shares of Federated Ohio Municipal Income Fund (the "Fund") offered
by this prospectus represent interests in a non-diversified portfolio of
securities which is one of a series of investment portfolios in Municipal
Securities Income Trust (the "Trust"), an open-end management investment company
(a mutual fund). The investment objective of the Fund is to provide current
income exempt from federal regular income tax and the personal income taxes
imposed by the state of Ohio and Ohio municipalities. The Fund invests primarily
in a portfolio of Ohio municipal securities.

The shares offered by this prospectus are not deposits or obligations of any
Bank, are not endorsed or guaranteed by any bank, and are not insured by the
Federal deposit insurance corporation, the federal reserve board, or any Other
government agency. Investment in these shares involves investment Risks
including the possible loss of principal.

This prospectus contains the information you should read and know before you
invest in Class F Shares. Keep this prospectus for future reference.

The Fund has also filed a Statement of Additional Information for Class F Shares
dated October 31, 1996, with the Securities and Exchange Commission ("SEC"). The
information contained in the Statement of Additional Information is incorporated
by reference in this prospectus. You may request a copy of the Statement of
Additional Information or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-341-7400. To
obtain other information, or to make inquiries about the Fund, contact your
financial institution. The Statement of Additional Information, material
incorporated by reference into this document, and other information regarding
the Fund is maintained electronically with the SEC at Internet Web site
(http://www.sec.gov).

Prospectus dated October 31, 1996

<PAGE>

Summary of Fund Expenses.............................. 1

Financial Highlights.................................. 2

General Information................................... 3

Investment Information................................ 3
Investment Objective............................... 3
Investment Policies................................ 3
Ohio Municipal Securities.......................... 6
Investment Risks................................... 6
Non-Diversification................................ 6
Investment Limitations............................. 7

Net Asset Value....................................... 7

Investing in Class F Shares........................... 7
Share Purchases.................................... 7
Minimum Investment Required........................ 8
What Shares Cost................................... 8
Eliminating/Reducing the Sales Charge.............. 9
Systematic Investment Program...................... 10
Exchange Privilege................................. 11
Certificates and Confirmations..................... 11
Dividends and Distributions........................ 11

Redeeming Class F Shares.............................. 12
Through a Financial Institution.................... 12
Directly by Mail................................... 12
Contingent Deferred Sales Charge................... 13
Systematic Withdrawal Program...................... 14
Accounts with Low Balances......................... 14

Shareholder Information............................... 17
Voting Rights...................................... 17

Tax Information....................................... 17
Federal Income Tax................................. 17
State of Ohio Income Taxes......................... 18
State and Local Taxes.............................. 19

Performance Information............................... 19

Financial Statements.................................. 20

Independent Auditors' Report.......................... 33

Addresses............................................. 34

<PAGE>

The Fund is designed for customers of financial institutions such as
broker/dealers, banks, fiduciaries, and investment advisers as a convenient
means of accumulating an interest in a professionally managed, non-diversified
portfolio investing primarily in Ohio municipal securities.

A minimum initial investment of $1,500 is required. Subsequent investments must
be in amounts of at least $100. The Fund is not likely to be a suitable
investment for non-Ohio taxpayers or retirement plans since Ohio municipal
securities are not likely to produce competitive after-tax yields for such
persons and entities when compared to other investments.

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

Investment Objective
The investment objective of the Fund is to provide current income exempt from
federal regular income tax (federal regular income tax does not include the
federal alternative minimum tax) and the personal income taxes imposed by the
state of Ohio and Ohio municipalities. The investment objective cannot be
changed without approval of shareholders. While there is no assurance that the
Fund will achieve its investment objective, it endeavors to do so by following
the investment policies described in this prospectus.

The Fund invests its assets so that at least 80% of its annual interest income
is exempt from federal regular income tax and the personal income taxes imposed
by the state of Ohio and Ohio municipalities. Interest income of the Fund that
is exempt from the income taxes described above retains its exempt status when
distributed to the Fund's shareholders. Income distributed by the Fund may not
necessarily be exempt from state or municipal taxes in states other than Ohio.

Investment Policies
The Fund pursues its investment objective by investing primarily in Ohio
municipal securities. Unless indicated otherwise, the investment policies of the
Fund may be changed by the Trustees without approval of shareholders.
Shareholders will be notified before any material changes in these policies
become effective.

Acceptable Investments
The securities in which the Fund invests include:

n obligations issued by or on behalf of the state of Ohio, its political
subdivisions, or agencies;

n 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

The prices of fixed income securities fluctuate inversely to the direction of
interest rates.

Characteristics
The municipal securities which the Fund buys are investment grade bonds rated
Aaa, Aa, A, or Baa by Moody's Investors Service, Inc. ("Moody's"), or AAA, AA,
A, or BBB by Standard & Poor's Ratings Group ("S&P"), or Fitch Investors
Service, Inc. ("Fitch"). In certain cases the Fund's investment adviser may
choose bonds which are unrated if it judges the bonds to have the same
characteristics as the investment grade bonds described above. If a bond is
rated below investment grade according to the characteristics set forth here
after the Fund has purchased it, the Fund is not required to drop the bond from
the portfolio, but will consider appropriate action. Bonds rated "BBB" by S&P or
Fitch or "Baa" by Moody's have speculative characteristics. Changes in economic
or other circumstances are more likely to lead to weakened capacity to make
principal and interest payments than higher rated bonds. A description of the
rating categories is contained in the Appendix to the Statement of Additional
Information.

Participation Interests
The Fund may purchase participation interests from financial institutions such
as commercial banks, savings associations, and insurance companies. The se
participation interests give the Fund an undivided interest in Ohio municipal
securities. The financial institutions from which the Fund purchases
participation interests frequently provide or secure irrevocable letters of
credit or guarantees to assure that the participation interests are of high
quality. The Trustees of the Trust will determine that participation interests
meet the prescribed quality standards for the Fund.

Variable Rate Municipal Securities
Some of the Ohio municipal securities which the Fund purchases may have variable
interest rates. Variable interest rates are ordinarily based on a published
interest rate, interest rate index, or a similar standard, such as the 91-day
U.S. Treasury bill rate. Many variable rate municipal securities are subject to
payment of principal on demand by the Fund in not more than seven days. All
variable rate municipal securities will meet the quality standards for the Fund.
The Fund's investment adviser has been instructed by the Trustees to monitor the
pricing, quality, and liquidity of the variable rate municipal securities,
including participation interests held by the Fund on the basis of published
financial information and reports of the rating agencies and other analytical
services.

The Fund may dispose of a commitment prior to settlement if the investment
adviser deems it appropriate to do so. In addition, the Fund may enter in
transactions to sell its purchase commitments to third parties at current market
values and simultaneously acquire other commitments to purchase similar
securities at later dates. The Fund may realize short-term profits or losses
upon the sale of such commitments.

Temporary Investments
The Fund invests its assets so that at least 80% of its annual interest income
is exempt from federal regular income tax and the personal income taxes imposed
by the state of Ohio and Ohio municipalities. However, from time to time, when
the investment adviser determines that market conditions call for a temporary
defensive posture, the Fund may invest in short-term non-Ohio municipal
tax-exempt obligations or taxable temporary investments. The se temporary
investments include: notes issued by or on behalf of municipal or corporate
issuers; obligations issued or guaranteed by the U.S. government, its agencies,
or instrumentalities; other debt securities; commercial paper; certificates of
deposit of banks; and repurchase agreements (arrangements in which the
organization selling the Fund, a bond, or temporary investment agrees at the
time of sale to repurchase it at a mutually agreed upon time and price).

Ohio Municipal Securities
Ohio municipal securities are generally issued to finance public works, such as
airports, bridges, highways, housing, hospitals, mass transportation projects,
schools, streets, and water and sewer works. The y are also issued to repay
outstanding obligations, to raise funds for general operating expenses, and to
make loans to other public institutions and facilities.

Ohio municipal securities include industrial development bonds issued by or on
behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.

The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. However, interest on and principal of revenue bonds are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.

Investment Risks
Yields on Ohio municipal securities depend on a variety of factors, including:
the general conditions of the municipal bond market; the size of the particular
offering; the maturity of the obligations; and the rating of the issue. Further,
any adverse economic conditions or developments affecting the state of Ohio or
its municipalities could impact the Fund's portfolio. The state of Ohio and
certain underlying municipalities face potential economic problems over the
longer term. The state economy has grown more slowly than that of the nation as
a whole, resulting in a gradual erosion of its relative economic affluence. The
causes of this relative decline are varied and complex, involving in many cases
national and international demographic and economic trends beyond the influence
of the state. The ability of the Fund to achieve its investment objective also
depends on the continuing ability of the issuers of Ohio municipal securities
and participation interests, or the guarantors of either, to meet their
obligations for the payment of interest and principal when due. Investing in
Ohio municipal securities which meet the Fund's quality standards may not be
possible if the state of Ohio or its municipalities do not maintain their
current credit ratings. In addition, certain Ohio constitutional amendments,
legislative measures, executive orders, administrative regulations, and voter
initiatives could result in adverse consequences affecting Ohio municipal
securities.

A further discussion of the risks of a portfolio which invests largely in Ohio
municipal securities is contained in the Statement of Additional Information.

The Fund's net asset value per share fluctuates. It is determined by dividing
the sum of the market value of all securities and all other assets, less
liabilities, by the number of shares outstanding.

Share Purchases
Shares are sold on days on which the New York Stock Exchange is open. Shares may
be purchased through an investment dealer who has a sales agreement with the
distributor, Federated Securities Corp., or directly from the distributor,
Federated Securities Corp. either by mail or by wire once an account has been
established. The Fund reserves the right to reject any purchase request.

Through a Financial Institution
An investor may call his financial institution (such as a bank or an investment
dealer) to place an order to purchase Shares. Orders through a financial
institution are considered received when the Fund is notified of the purchase
order. Purchase orders through a registered broker/dealer must be received by
the broker before 4:00 p.m. (Eastern time) and must be transmitted by the broker
to the Fund before 5:00 p.m. (Eastern time) in order for Shares to be purchased
at that day's price. Purchase orders through financial institutions other than
broker/dealers must be received by the financial institution and transmitted to
the Fund before 4:00 p.m. (Eastern time) in order for Shares to be purchased at
that day's price. It is the financial institution's responsibility to transmit
orders promptly.

Directly by Mail

To purchase Shares by mail directly from Federated Securities Corp. once an
account has been established:

n complete and sign the new account form available from the Fund;

n enclose a check made payable to Federated Ohio Municipal Income Fund --
Class F Shares; and

n send both to the Fund's transfer agent, Federated Shareholder Services
Company, P.O. Box 8600, Boston, MA 02266-8600.

Directly by Wire
To purchase Shares directly from Federated Securities Corp. by Federal Reserve
Wire once an account has been established, call the Fund. All information needed
will be taken over the telephone, and the order is considered received when
State Street Bank receives payment by wire. Federal funds should be wired as
follows: Federated Shareholder Services Company, c/o State Street Bank and Trust
Company, Boston, MA; Attention: EDGEWIRE; For Credit to: Federated Ohio
Municipal Income Fund -- Class F Shares; (Fund Number -- this number can be
found on the account statement or by contacting the Fund); Trade Date and Order
Number; Group Number or Dealer Number; Nominee or Institution Name; and ABA
Number 011000028. Shares cannot be purchased by wire on holidays when wire
transfers are restricted. Questions on wire purchases should be directed to your
shareholder services representative at the telephone number listed on your
account statement.

Minimum Investment Required
The minimum initial investment in Shares is $1,500. Subsequent investments must
be in amounts of at least $100.

What Shares Cost
Shares are sold at their net asset value next determined after an order is
received, plus a sales charge of 1% of the offering price (which is 1.01% of the
net amount invested). Further, there is no sales charge for purchases of $1
million or more. In addition, no sales charge is imposed for Shares purchased
through bank trust departments or investment advisers registered under the
Investment Advisers Act of 1940 purchasing on behalf of their clients, or by
sales representatives, Trustees, and employees of the Fund, Federated Advisers,
and Federated Securities Corp., or their affiliates, or any investment dealer
who has a sales agreement with Federated Securities Corp., their spouses and
children under age 21, or any trusts or pension or profit-sharing plans for
these persons. Unaffiliated institutions through whom Shares are purchased may
charge fees for services provided which may be related to the ownership of Fund
Shares. This prospectus should, therefore, be read together with any agreement
between customer and institution with regard to services provided, the fees
charged for these services, and any restrictions and limitations imposed.

Under certain circumstances, described under "Redeeming Class F Shares,"
shareholders may be charged a contingent deferred sales charge by the
distributor at the time Shares are redeemed.

Eliminating/Reducing the Sales Charge
The sales charge can be eliminated on the purchase of Shares through:

n quantity discounts and accumulated purchases;

n signing a 13-month letter of intent;

n using the reinvestment privilege; or

n concurrent purchases.

If an additional purchase of Shares is made, the Fund will consider the previous
purchases still invested in the Fund. For example, if a shareholder already owns
Shares having a current value at the public offering price of $900,000 and he
purchases $100,000 more at the current public offering price, there will be no
sales charge on the additional purchase. The Fund will also combine purchases
for the purpose of reducing the contingent deferred sales charge imposed on some
Share redemptions. For example, if a shareholder already owns Shares having a
current value at public offering price of $1 million and purchases an additional
$1 million at the current public offering price, the applicable contingent
deferred sales charge would be reduced to .50% of those additional Shares. For
more information on the levels of contingent deferred sales charges and holding
periods, see the section entitled "Contingent Deferred Sales Charge."

To receive the sales charge elimination and/or the contingent deferred sales
charge reduction, Federated Securities Corp. must be notified by the shareholder
in writing or by their financial institution at the time the purchase is made
that Shares are already owned or that purchases are being combined. The Fund
will eliminate the sales charge and/or reduce the contingent deferred sales
charge after it confirms the purchases.

This letter of intent will not obligate the shareholder to purchase Shares. This
letter may be dated as of a prior date to include any purchases made within the
past 90 days towards the dollar fulfillment of the letter of intent. Prior trade
prices will not be adjusted.

Systematic Investment Program
Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account and
invested in Shares at the net asset value next determined after an order is
received by Federated Shareholder Services Company, plus the 1.00% sales charge
for purchases under $1 million. A shareholder may apply for participation in
this program through Federated Securities Corp. or his financial institution.

Exchange Privilege
Class F shareholders may exchange all or some of their Shares for shares of Ohio
Municipal Cash Trust or Class F Shares of other Federated Funds. Exchanges are
made at net asset value without being assessed a contingent deferred sales
charge. In determining the applicability of the contingent deferred sales
charge, the required holding period for your new Class F Shares received through
an exchange will include the period for which your original Class F Shares were
held.

The exchange privilege is available to shareholders residing in any state in
which the Shares being acquired may be legally sold.

Before making an exchange, a shareholder must receive a prospectus of the fund
for which the exchange is being made.

An exercise of the exchange privilege is treated as sale for federal income tax
purposes. Depending on the circumstances, a capital gain or loss may be
realized.

Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly statements are sent to report dividends paid during the
month.

Dividends and Distributions
Dividends are declared and paid monthly. Distributions of any net realized
long-term capital gains will be made at least once every twelve months.
Dividends and distributions are automatically reinvested in additional Shares at
net asset value without a sales charge, unless shareholders request cash
payments on the application or by writing to Federated Shareholder Services
Company.

Shares earn dividends through the business day that proper written redemption
instructions are received by Federated Shareholder Services Company.

The Fund redeems Shares at their net asset value, less any applicable contingent
deferred sales charge, next determined after Federated Shareholder Services
Company receives the redemption request. Redemptions will be made on days on
which the Fund computes its net asset value. Redemption requests must be
received in proper form and can be made through a financial institution or
directly from the Fund by written request.

Through a Financial Institution
A shareholder may redeem Shares by calling his financial institution (such as a
bank or a broker/dealer) to request the redemption. Shares will be redeemed at
the net asset value next determined after the Fund receives the redemption
request from the financial institution. Redemption requests through a registered
broker/dealer must be received by the broker before 4:00 p.m. (Eastern time) and
must be transmitted by the broker to the Fund before 5:00 p.m. (Eastern time) in
order for Shares to be redeemed at that day's net asset value. Redemption
requests through other financial institutions must be received by the financial
institution and transmitted to the Fund before 4:00 p.m. (Eastern time) in order
for Shares to be redeemed at that day's net asset value. The financial
institution is responsible for promptly submitting redemption requests and
providing proper written redemption instructions to Federated Services Company.
The financial institution may charge customary fees and commissions for this
service. If, at any time, the Fund shall determine it necessary to terminate or
modify this method of redemption, shareholders will be promptly notified.

Contingent Deferred Amount of Purchase Shares Held Sales Charge Up to $1,999,999
4 years or less 1.00% $2,000,000 to $4,999,999 2 years or less 0.50% $5,000,000
or more 1 year or less 0.25%

In instances in which Shares have been acquired in exchange for Class F Shares
in other Federated Funds, (i) the purchase price is the price of the shares when
originally purchased and (ii) the time period during which the shares are held
will run from the date of the original purchase. The contingent deferred sales
charge will not be imposed on Shares acquired through the reinvestment of
dividends or distributions of long-term capital gains. In computing the amount
of contingent deferred sales charge for accounts with Shares subject to a single
holding period, if any, redemptions are deemed to have occurred in the following
order: (1) Shares acquired through the reinvestment of dividends and long-term
capital gains, (2) purchases of Shares occurring prior to the number of years
necessary to satisfy the applicable hold period, and (3) purchases of Shares
occurring within the current hold period. For accounts with Shares subject to
multiple share holding periods, the redemption sequence will be determined
first, with reinvested dividends and long-term capital gains, and second, on a
first-in, first-out basis.

The contingent deferred sales charge will not be imposed when a redemption
results from a tax-free return under the following circumstances: (i) a total or
partial distribution from a qualified plan, other than an IRA, Keogh Plan, or a
custodial account, following retirement; (ii) a total or partial distribution
from an IRA, Keogh Plan, or a custodial account, after the beneficial owner
attains age 591U2; or (iii) from the death or permanent and total disability of
the beneficial owner. The exemption from the contingent deferred sales charges
for qualified Plans, an IRA, Keogh Plan or a custodial account does not extend
to account transfers, rollovers, and other redemptions made for purposes of
reinvestment. Contingent deferred sales charges are not charged in connection
with exchanges of Shares for shares in Ohio Municipal Cash Trust or Shares in
other Federated Funds, or in connection with redemptions by the Fund of accounts
with low balances. Shares of the Fund originally purchased through a bank trust
department or investment adviser registered under the Investment Advisers Act of
1940, as amended, are not subject to the contingent deferred sales charge to the
extent that no payment was advanced for purchases made by or through such
entities.

Systematic Withdrawal Program
Shareholders who desire to receive monthly or quarterly payments of
predetermined amounts may take advantage of the Systematic Withdrawal Program.
Under this program, Shares are redeemed to provide for periodic withdrawal
payments in an amount directed by the shareholder; the minimum withdrawal amount
is $100. Depending upon the amount of the withdrawal payments, the amount of
dividends paid and capital gains distributions with respect to Shares, and the
fluctuation of the net asset value of Shares redeemed under this program,
redemptions may reduce, and eventually deplete, the shareholder's investment in
the Fund. For this reason, payments under this program should not be considered
as yield or income on the shareholder's investment in the Fund. To be eligible
to participate in this program, a shareholder must have an account value of at
least $10,000 in the Fund (at current offering price).

Contingent deferred sales charges are charged for Shares redeemed through this
program within four years of their purchase dates.

Management of the Trust
Board of Trustees
The Trust is managed by a Board of Trustees. The Trustees are responsible for
managing the business affairs of Municipal Securities Income Trust and for
exercising all of the powers of the Trust except those reserved for the
shareholders. An Executive Committee of the Board of Trustees handles the
Trustees' responsibilities between meetings of the Board.

Advisory Fees
The Fund's Adviser receives an annual investment advisory fee equal to .40%
of the Fund's average daily net assets. The Adviser may voluntarily choose to
waive a portion of its fee or reimburse the Fund for certain operating
expenses. The Adviser can terminate this voluntary waiver or reimbursement of
expenses at any time at its sole discretion. The Adviser has also undertaken
to reimburse the Fund for operating expenses in excess of limitations
established by certain states.

J. Scott Albrecht has been the Fund's portfolio manager since March, 1995.
Mr. Albrecht joined Federated Investors in 1989 and has been a Vice
President of the Fund's investment adviser since October, 1994. From 1992
to 1994, Mr. Albrecht served as an Assistant Vice President of the Fund's
investment adviser. In 1991, Mr. Albrecht acted as an investment analyst.
Mr. Albrecht is a Chartered Financial Analyst and received his M.S. in
Public Management from Carnegie Mellon University.

Distribution of Class F Shares

Federated Securities Corp. is the principal distributor for Shares of the
Fund. Federated Securities Corp. is located at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779. It is a Pennsylvania corporation
organized on November 14, 1969, and is the principal distributor for a
number of investment companies. Federated Securities Corp. is a subsidiary
of Federated Investors.

State securities laws may require certain financial institutions such as
depository institutions to register as dealers.

Distribution Plan and Shareholder Services
Under a distribution plan adopted in accordance with Investment Company Act Rule
12b-1 (the "Distribution Plan"), the Fund may pay to the distributor an amount,
computed at an annual rate of 0.40% of the average daily net asset value of the
Shares to finance any activity which is principally intended to result in the
sale of Shares subject to the Distribution Plan. The distributor may select
financial institutions such as banks, fiduciaries, custodians for public funds,
investment advisers, and broker/dealers to provide sales services or
distribution related support services as agents for their clients or customers.

Supplemental Payments to Financial Institutions
Federated Securities Corp. will pay financial institutions, for distribution
and/or administrative services, an amount equal to 1.00% of the offering price
of the Shares acquired by their clients or customers on purchases up to
$1,999,999, .50% of the offering price on purchases of $2,000,000 to $4,999,999,
and .25% of the offering price on purchases of $5,000,000 or more. (This fee is
in addition to the 1.00% sales charge on purchases of less than $1 million.)

Administration of the Fund
Administrative Services. Federated Services Company, a subsidiary of Federated
Investors, provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Fund. Federated
Services Company provides these at an annual rate which relates to the average
aggregate daily net assets of all funds advised by affiliates of Federated
Investors as specified below:

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

Voting Rights
Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the Trust have equal voting rights except that in matters affecting only a
particular fund, only shares of that fund are entitled to vote. As of October 7,
1996, Merrill Lynch Pierce Fenner & Smith, Jacksonville, Florida owned 37.33% of
the voting securities of the Fund, and therefore, may, for certain purposes, be
deemed to control the Fund and be able to affect the outcome of certain matters
presented for a vote of shareholders.

Federal Income Tax
The Fund does not expect to pay federal income tax because it expects to meet
requirements of the Code, as amended, applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.

In general, shareholders are not required to pay federal regular income tax on
any dividends received from the Fund that represent net interest on tax-exempt
municipal bonds, although tax exempt interest will increase the taxable income
of certain recipients of social security benefits. However, under the Tax Reform
Act of 1986, dividends representing net interest income earned on some municipal
bonds may be included in calculating the federal individual alternative minimum
tax or the federal alternative minimum tax for corporations.

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

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

State of Ohio Income Taxes
Under existing Ohio laws, distributions made by the Fund will not be subject to
Ohio individual income taxes to the extent that such distributions qualify as
"exempt-interest dividends" under the Code and represent (i) interest from
obligations of Ohio or its subdivisions which is exempt from federal income tax;
or (ii) interest of dividends from obligations issued by the United States and
its territories or possessions or by any authority, commission or
instrumentality of the United States which are exempt from state income tax
under federal laws. Conversely, to the extent that distributions made by the
Fund are derived from other types of obligations, such distributions will be
subject to Ohio individual income taxes.

Distributions made by the Fund will not be subject to Ohio corporate franchise
tax to the extent that such distributions qualify as "exempt-interest dividends"
under the Code and represent (i) interest from obligations of Ohio or its
subdivisions which is exempt from federal income tax; or (ii) net interest
income from obligations issued by the United States and its territories or
possessions or by any authority, commission or instrumentality of the United
States, which is included in federal taxable income and which is exempt from
state income tax under federal laws.

Exempt-interest dividends that represent interest from obligations held by the
Fund which are issued by Ohio or its political subdivisions will be exempt from
any Ohio municipal income tax (even if the municipality is permitted under Ohio
law to levy a tax on intangible income).

State and Local Taxes
Income from the Fund is not necessarily free from taxes in states other than
Ohio. Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.

From time to time, the Fund advertises the total return, yield, and
tax-equivalent yield for Shares.

The performance information reflects the effect of the maximum sales charge and
other similar non- recurring charges, such as the contingent deferred sales
charge, which, if excluded, would increase the total return, yield, and
tax-equivalent yield.

From time to time, advertisements for the Fund may refer to ratings, rankings
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

<PAGE>

Federated Ohio Municipal Income Fund
Class F Shares
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

Distributor
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

Investment Adviser
Federated Advisers
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

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

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

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

Federated Ohio Municipal Income Fund
(formerly, Ohio Municipal Income Fund)
(A Portfolio of Municipal Securities Income Trust)
Class F Shares
(formerly, Fortress Shares)

Prospectus
October 31, 1996
A Non-Diversified Portfolio of
Municipal Securities Income Trust,
An Open-End, Management
Investment Company

Federated Securities Corp., Distributor

Cusip 625922307
0090702A-F (10/96)

Federated Ohio Municipal Income Fund
(Formerly, Ohio Municipal Income Fund)

(A Portfolio of Municipal Securities Income Trust)

Class F Shares

(Formerly, Fortress Shares)

Statement of Additional Information

This Statement of Additional Information should be read with the prospectus of
Federated Ohio Municipal Income Fund (the `Fund"), a portfolio of Municipal
Securities Income Trust (the `Trust") dated October 31, 1996. This Statement is
not a prospectus. You may request a copy of a prospectus or a paper copy of this
Statement, if you have received it electronically, free of charge by calling
1-800-341-7400.

Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

Statement dated October 31, 1996
Federated Investors Tower
Pittsburgh, PA 15222-3779
Cusip 625922307
0090702B (10/96)

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General Information About the Fund...................3

Investment Objective and Policies....................3
Acceptable Investments 3
When-Issued and Delayed Delivery Transactions 6
Temporary Investments 6
Portfolio Turnover 8
Investment Limitations 8
Ohio Investment Risks 12

Municipal Securities Income Trust Management........14
Fund Ownership 22
Trustees Compensation 22
Trustee Liability 24

Investment Advisory Services........................25
Adviser to the Fund 25
Advisory Fees 25

Other Services .....................................26
Fund Administration 26
Custodian and Portfolio Accountant 27
Transfer Agent 27
Independent Auditors 27

Brokerage Transactions..............................27

Purchasing Class F Shares...........................28
Distribution Plan and Shareholder Services Agreement 29
Conversion to Federal Funds 30
Purchases by Sales Representatives, Fund Trustees, and Employees 30

Determining Net Asset Value.........................30
Valuing Municipal Bonds 31
Use of Amortized Cost 31

Redeeming Class F Shares ...........................31
Redemption in Kind 32
Massachusetts Partnership Law 32

Tax Status..........................................33
The Fund's Tax Status 33
Shareholders' Tax Status 33

Total Return .......................................34

Yield...............................................34

Tax-Equivalent Yield................................35
Tax-Equivalency Table 35

Performance Comparisons.............................37
Economic and Market Information 39

About Federated Investors...........................39
Mutual Fund Market 40
Institutional Clients 40
Trust Organizations 41
Broker/Dealers and
Bank Broker/Dealer Subsidiaries 41

Appendix............................................42

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The Fund is a portfolio of Municipal Securities Income Trust. The Trust was
established as a Massachusetts business trust under a Declaration of Trust dated
August 6, 1990. On September 16, 1992, (effective October 31, 1992), the
Trustees approved changing the name of the Trust from Federated Municipal Income
Trust to Municipal Securities Income Trust. On February 26,1996 (effective date
March 31, 1996), the Trustees approved changing the name of the Fund from Ohio
Municipal Income Fund to Federated Ohio Municipal Income Fund and also approved
changing the name of the Fund's presently offered shares from Fortress Shares to
Class F Shares (`Shares").

The Fund's investment objective is to provide current income exempt from federal
regular income and the personal income taxes imposed by the state of Ohio and
Ohio municipalities. The investment objective cannot be changed without approval
of shareholders.

Acceptable Investments
The Fund invests primarily in Ohio municipal securities.

Characteristics
The Ohio municipal securities in which the Fund invests have the
characteristics set forth in the prospectus. If a rated bond loses its rating
or has its rating reduced after the Fund has purchased it, the Fund is not
required to drop the bond from the portfolio, but will consider doing so. If
ratings made by Moody's Investors Service, Inc., Standard & Poor's Ratings
Group or Fitch's Investors Service, Inc. change because of changes in those
organizations or in their rating systems, the Fund will try to use comparable
ratings as standards in accordance with the investment policies described in
the Fund's prospectus.

Types of Acceptable Investments
Examples of Ohio municipal securities are: ogovernmental lease certificates
of participation issued by state or municipal authorities where payment is
secured by installment payments for equipment, buildings, or other facilities
being leased by the state or municipality. Government lease certificates
purchased by the Fund will not contain non-appropriation clauses; omunicipal
notes and tax-exempt commercial paper; oserial bonds; otax anticipation notes
sold to finance working capital needs of municipalities; obond anticipation
notes sold in anticipation of the issuance of long-term bonds; opre-refunded
municipal bonds whose timely payment of interest and principal is ensured by
an escrow of U.S. government obligations; and ogeneral obligation bonds.

Variable Rate Municipal Securities
Variable interest rates generally reduce changes in the market value of
municipal securities from their original purchase prices. Accordingly, as
interest rates decrease or increase, the potential for capital appreciation
or depreciation is less for variable rate municipal securities than for fixed
income obligations. Many municipal securities with variable interest rates
purchased by the Fund are subject to repayment of principal (usually within
seven days) on the Fund's demand. The terms of these variable rate demand
instruments require payment of principal and accrued interest from the issuer
of the municipal obligations, the issuer of the participation interests, or a
guarantor of either issuer.

o whether the lease can be terminated by the lessee: othe potential recovery,
if any, from a sale of the leased property upon termination of the lease;

o the lessee's general credit strength (e.g., its debt, administrative,
economic and financial characteristics and prospects);

o any credit enhancement or legal recourse provided upon an event of
non-appropriation or other termination of the lease.

Temporary Investments
The Fund may also invest in temporary investments during times of unusual market
conditions for defensive purposes.

Portfolio Turnover
The Fund may trade or dispose of portfolio securities as considered necessary to
meet its investment objective. It is not anticipated that the portfolio trading
engaged in by the Fund will result in its annual portfolio turnover rate
exceeding 100%. For the fiscal years ended August 31, 1996 and 1995, the
portfolio turnover rates were 11% and 33%, respectively.

Investing in Real Estate
The Fund will not buy or sell real estate although it may invest in municipal
bonds secured by real estate or interests in real estate.

Investing in Commodities
The Fund will not buy or sell commodities, commodity contracts, or
commodities futures contracts.

Investing in Restricted Securities
The Fund will not invest more than 10% of the value of its net assets in
securities subject to restrictions on resale under the Securities Act of 1933.

Dealing in Puts and Calls
The Fund will not buy or sell puts, calls, straddles, spreads, or any
combination of these.

Concentration of Investments
The Fund will not purchase securities if, as a result of such purchase, 25%
or more of the value of its total assets would be invested in any one
industry or in industrial development bonds or other securities, the interest
upon which is paid from revenues of similar types of projects. However, the
Fund may invest as temporary investments more than 25% of the value of its
assets in cash or cash items, securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or instruments secured by
these money market instruments, such as repurchase agreements. The above
investment limitations cannot be changed without shareholder approval. The
following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.

Investing in Securities of Other Investment Companies
The Fund will not purchase securities of other investment companies except as
part of a merger, consolidation, or other acquisition.

Investing in Minerals
The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, although it may invest in
securities of issuers which invest in or sponsor such programs. In addition,
in order to comply with certain state restrictions, the Fund may not invest
in real estate limited partnerships. Except with respect to borrowing money,
if a percentage limitation is adhered to at the time of investment, a later
increase or decrease in percentage resulting from any change in value or net
assets will not result in a violation of such restriction. For purposes of
its policies and limitations, the Fund considers certificates of deposit and
demand and time deposits issued by a U.S. branch of a domestic bank or
savings association having capital, surplus, and undivided profits in excess
of $100,000,000 at the time of investment to be `cash items."

Ohio Investment Risks
The economy of the State of Ohio is reliant in part on durable goods
manufacturing, largely concentrated in motor vehicles and equipment, steel,
rubber products and household appliances. During the past decade, competition in
various industries in the State of Ohio has changed from being domestic to
international in nature. In addition, these industries may be characterized as
having excess capacity in particular product segments. The steel industry, in
particular, and the automobile industry, to a lesser extent, share these
characteristics. Because the State of Ohio and certain underlying municipalities
have large exposure to these industries and their respective aftermarkets,
trends in these industries may, over the long term, impact the demographic and
financial position of the State of Ohio and its municipalities. To the degree
that domestic manufacturers in industries to which Ohio municipalities have
exposure fail to make competitive adjustments, employment statistics and
disposable income of residents in Ohio may deteriorate, possibly leading to
population declines and erosion of municipality tax bases. Both the economic
trends above and the political climate in various municipalities may have
contributed to the decisions of various businesses and individuals to relocate
outside the State. A municipality's political climate in particular may affect
its own credit standing. For both the State of Ohio and underlying Ohio
municipalities, adjustment of credit ratings by the rating agencies may affect
the ability to issue securities and thereby affect the supply of obligations
meeting the quality standards for investment by the Fund. The State acted
quickly in response to the national recession. Expenditure reductions in excess
of $700 million coupled with various revenue adjustments enabled the State to
maintain its General Fund balances and restore $21 million to its budget
stabilization reserve during fiscal 1993. Strong performance in fiscal 1994 and
1995, resulted in additional revenue levels that were well above the 1990
levels. Ohio's budget stabilization fund is currently over $800 million. The
State has relatively modest debt outstanding as compared to its economic base.
Economic restructuring continues as the State's traditional manufacturing
sectors are gradually replaced by trade and service sectors. This transformation
will reduce the State's sensitivity to economic cycles. The State has
established procedures for municipal fiscal emergencies under which joint
state/local commissions are established to monitor the fiscal affairs of a
financially troubled municipality. When these procedures are invoked, the
municipality must develop a financial plan to eliminate deficits and cure any
defaults. Since their adoption in 1979, these procedures have been applied to
approximately twenty-one cities and villages, including the City of Cleveland;
in sixteen of these communities, the fiscal situation has been resolved and the
procedures terminated. The foregoing discussion only highlights some of the
significant financial trends and problems affecting the State of Ohio and
underlying municipalities.

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Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated California Municipal Income Fund, and principal
occupations.

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA

Birthdate: July 28, 1924

Chairman and Trustee

Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA

Birthdate: February 3, 1934

Trustee

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL

Birthdate: June 23, 1937

Trustee

William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA

Birthdate: July 4, 1918

Trustee

J. Christopher Donahue *
Federated Investors Tower
Pittsburgh, PA

Birthdate: April 11, 1949

Executive Vice President and Trustee

James E. Dowd
571 Hayward Mill Road
Concord, MA

Birthdate: May 18, 1922

Trustee

Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Trustee of the
Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA

Birthdate: October 11, 1932

Trustee

Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA

Birthdate: June 18, 1924

Trustee

Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western Region;
Director or Trustee of the Funds.

Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI

Birthdate: March 16, 1942

Trustee

Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.

Gregor F. Meyer
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA

Birthdate: October 6, 1926

Trustee

Attorney, Member of Miller, Ament, Henny & Kochuba; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director or Trustee of
the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA

Birthdate: December 20, 1932

Trustee

President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA

Birthdate: September 14, 1925

Trustee

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA

Birthdate: June 21, 1935

Trustee

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA

Birthdate: May 17, 1923

President

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 22, 1930

Executive Vice President

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

Birthdate: October 26, 1938

Executive Vice President , Secretary and Treasurer

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

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Trustees Compensation
AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
Trust Trust*# FROM FUND COMPLEX
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