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. 22 ............. X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 21 ............................ 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)
-
X on March 4, 1997, pursuant to paragraph (b)
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
X 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, L.L.P.
2101 L Street, N.W.
Washington, DC 20037
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 (Class A Shares and Class B Shares), (2)
Federated Ohio Municipal Income Fund (Class F Shares), (3) Federated
Michigan Intermediate Municipal Trust, (4) Federated California Municipal
Income Fund (Class F Shares), and (5) Federated New York Municipal Income
Fund (Class F Shares), relates only to (1) Federated Pennsylvania Municipal
Income Fund (Class A Shares and Class B 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;
(1-5) Financial Highlights*.
Item 3. Condensed Financial
Information.............(1-5) Performance Information.
Item 4. General Description of
Information ............(1-5) General Information; (1,3)
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) Municipal Securities Income Trust
Information; (1-5) Management of
Municipal Securities Income 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..............(1-5) Dividends and Distributions; (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.
*Not yet available for Class B Shares of Federated Pennsylvania Municipal
Income Fund.
Item 7. Purchase of Securities
Being Offered...........(1-5) Net Asset Value; (1,3) Investing
in the Fund; (2,4,5) Investing in Class
F Shares; (1) How to Purchase Shares;
Investing in Class A Shares; 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.
Item 8. Redemption or Repurchase.(1) How to Redeem Shares; (3) Redeeming
Shares; (2,4,5) Redeeming Class F
Shares; (1-5) Through a Financial
Institution; (1,3) Directly from the
Fund; (2,4,5) Directly By Mail; (2-5)
Receiving Payment; (1-5) Contingent
Deferred Sales Charge; (1-5) Systematic
Withdrawal Program; (1-5) Accounts with
Low Balances; (1-5) Exchange Privilege;
(1,3) Requirements for Exchange; (1,3)
Tax Consequences; (1,3) Making an
Exchange.
Item 9. Pending Legal Proceedings None.
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; (1-5) Custodian and
Portfolio Accountant, Transfer Agent and
Independent Auditors.
Item 15. Control Persons and Principal
Holders of Securities....Not Applicable.
Item 16. Investment Advisory and Other
Services................(1-5) Investment Advisory Services, (1-
5) Fund Administration.
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...........(2,4,5) Purchasing Class F Shares; (1,3)
Purchasing Shares; (1-5) Determining Net
Asset Value; (2,4,5) Redeeming Class F
Shares; (1,3) Redeeming Shares;(2,4,5)
Exchange Privilege.
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 (1) Filed in Part A.
Federated Pennsylvania Municipal Income Fund
(formerly, Pennsylvania Municipal Income Fund)
(A Portfolio of Municipal Securities Income Trust)
Class A Shares
Class B Shares
Prospectus
The shares of Federated Pennsylvania 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 Commonwealth of Pennsylvania. The Fund invests
primarily in a portfolio of municipal securities which are exempt from federal
regular income tax and Pennsylvania state and local income tax (`Pennsylvania
Municipal Securities'). These securities include those issued by or on behalf
of the Commonwealth of Pennsylvania and Pennsylvania municipalities, as well as
those issued by states, territories and possessions of the United States which
are exempt from federal regular income tax and the personal income taxes imposed
by the Commonwealth of Pennsylvania and Pennsylvania municipalities.
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 CLASS A SHARES OR CLASS B 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 March 4,
1997, 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).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Prospectus dated March 4, 1997
Table of Contents
Summary of Fund Expenses 1
Financial Highlights-Class A Shares 3
General Information 4
Investment Information 4
Investment Objective 4
Investment Policies 4
Pennsylvania Municipal Securities 6
Investment Risks 6
Non-Diversification 6
Investment Limitations 7
Expenses of the Fund 7
Net Asset Value 7
Investing in the Fund 8
How to Purchase Shares 8
Investing in Class A Shares 9
Eliminating/Reducing the Sales Charges 9
Investing in Class B Shares 11
Systematic Investment Program 11
Certificates and Confirmations 11
Dividends and Distributions 11
Exchange Privilege 11
Requirements for Exchange 12
Tax Consequences 12
Making an Exchange 12
How to Redeem Shares 12
Through a Financial Institution 13
Directly from the Fund 13
Contingent Deferred Sales Charge 13
Elimination of Contingent Deferred
Sales Charge 14
Systematic Withdrawal Program 15
Accounts with Low Balances 15
Trust Information 15
Management of the Trust 15
Distribution of Shares 16
Administration of the Fund 17
Shareholder Information 17
Voting Rights 17
Tax Information 18
Federal Income Tax 18
State and Local Taxes 19
Performance Information 19
Financial Highlights-Income Shares 20
Financial Statements 21
Independent Auditors' Report 32
Addresses 33
Summary of Fund Expenses
CLASS A SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)(1)
4.50%
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable)(2) 0.00%
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(3) 0.17%
12b-1 Fee(4) 0.00%
Total Other Expenses 0.58%
Shareholder Services Fee (after waiver)(5) 0.23%
Total Operating Expenses(6) 0.75%
(1) The maximum sales charge imposed on purchases for the fiscal year ended
August 31, 1996 was 3.00%. Effective November 1, 1996, the maximum sales
charge has been increased to 4.50%
(2) Shareholders who purchased shares 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 of 0.50% for redemptions made within one
year of purchase. See ``Contingent Deferred Sales Charge.''
(3) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary waiver
at any time at its sole discretion. The maximum management fee is 0.40%.
(4) The class did not pay or accrue 12b-1 fees during the fiscal year ended
August 31, 1996. The class has no present intention of paying or accruing the
12b-1 fee during the fiscal year ending August 31, 1997. If the class were
paying or accruing the 12b-1 fee, the class would be able to pay up to 0.40%
of its average daily net assets for the 12b-1 fee. See ``Trust Information.''
(5) The shareholder services fee has been reduced to reflect the voluntary
waiver of a portion of the shareholder services fee. The shareholder services
provider can terminate this voluntary waiver at any time at its sole
discretion. The maximum shareholder services fee is 0.25%.
(6) The total operating expenses would have been 1.00% absent the voluntary
waivers of a portion of the management fee and a portion of the shareholder
services fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class A Shares of the Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see `Investing in Class A Shares'' and ``Trust
Information.''Wire-transferred redemptions of less than $5,000 may be subject
to additional fees.
LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE
MAXIMUM FRONT-END SALES CHARGES PERMITTED UNDER THE RULES OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC.
EXAMPLE 1 year 3 years 5 years 10
years
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return;
(2) redemption at the end of each time period;
and (3) payment of the maximum sales charge $52 $68 $85 $134
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Summary of Fund Expenses
CLASS B SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) None
Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, as applicable)(1) 5.50%
Redemption Fee (as a percentage of amount redeemed,
if applicable) None
Exchange Fee None
ANNUAL OPERATING EXPENSES
(As a percentage of projected average net assets)*
Management Fee (after waiver)(2) 0.18%
12b-1 Fee 0.75%
Total Other Expenses 0.57%
Shareholder Services Fee 0.25%
Total Operating Expenses(3)(4) 1.50%
(1) The contingent deferred sales charge is 5.50% in the first year declining
to 1.00% in the sixth year and 0.00% thereafter. (See ``Contingent Deferred
Sales Charge'').
(2) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of a portion of the management fee. The advisor can terminate
this voluntary waiver at any time at its sole discretion. The maximum
management fee is 0.40%.
(3) Class B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately eight years after purchase.
(4) The total operating expenses are estimated to be 1.72% absent the
anticipated voluntary waiver of a portion of the management fee.
*Total Class B Shares operating expenses are estimated based on average
expenses expected to be incurred during the period ending August 31, 1997.
During the course of this period, expenses may be more or less than the
average amount shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Class B Shares of the Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see `Investing in Class B Shares'' and ``Trust
Information.''Wire-transferred redemptions of less than $5,000 may be subject
to additional fees.
LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE
MAXIMUM FRONT-END SALES CHARGES PERMITTED UNDER THE RULES OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC.
EXAMPLE 1 year 3 years
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return;
(2) redemption at the end of each time period; and
(3) payment of the maximum sales charge. $72 $92
You would pay the following expenses on the
same investment, assuming no redemption $15 $47
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS EXAMPLE
IS BASED ON ESTIMATED DATA FOR THE FISCAL YEAR ENDING AUGUST 31, 1997.
Federated Pennsylvania Municipal Income Fund
(formerly, Pennsylvania Muncipal Income Fund)
Financial Highlights - Class A Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Independent Auditors' Report on page 32.
Year Ended August 31,
1996 1995 1994 1993 1992 1991(a)
NET ASSET VALUE, BEGINNING OF PERIOD $11.23$10.94$11.68 $10.93 $10.44
$10.00
Income from investment operations
Net investment income 0.65 .65 .60 0.60 0.627 0.588
Net realized and unrealized gain
(loss) on investments 0.12 .027 (0.75)0.75 0.493 0.456
Total from investment operations0.77 0.92 (0.15)1.35 1.120 1.044
Less distributions
Distributions from net investment
income (0.65) (0.63) (0.59)(0.60)(0.627) (0.588)
Distributions in excess of net
investment income -- -- -- -- (0.003)(c)(0.016)(c)
Total distributions (0.65) (0.63) (0.59)(0.60)(0.630) (0.604)
NET ASSET VALUE, END OF PERIOD $11.35 $11.23$10.94$11.68 $10.93 $10.44
Total return(b) 6.99% 8.76% (1.34%) 12.71% 11.06% 10.60%
Ratios to Average Net Assets
Expenses 0.75% 0.75% 0.75% 0.83% 0.73% 0.26(e)
Net investment income 5.73% 5.92% 5.27% 5.33% 5.88% 6.45 (e)
Expense waiver/reimbusement(d) 0.25% 0.28% 0.45% 0.70% 0.97% 1.24%(e)
Supplemental data
Net assets, end of period
(000 omitted) $84,116 $83,722 $85,860 $69,947 $48,261
$31,067
Portfolio Turnover 23% 59% 17% 0% 0% 10%
(a) Reflects operations for the period from October 11, 1990
(date of initial public investment) to August 31, 1991.
(b) Based on net asset value, which does not reflect the
sales charge or contingent deferred sales charge, if applicable.
(c) Distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principals.
These distributions do not represent a return of capital for federal income tax
purposes.
(d) This voluntary expense decrease is reflected in both
the expense and net investment income ratios shown above.
(e) Computed on an annualized basis.
(See Notes which are integral part of the Financial Statements)
Further Information above the Fund's performance is contained in the Fund's
annual report for the fiscal year ended August 31, 1996, which can be obtained
free of charge.
General Information
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. With respect to the Fund, as of the date of this
prospectus, the Board of Trustees (the `Trustees'') has established two classes
of shares, known as Class A Shares and Class B Shares (individually and
collectively as the context requires, `Shares'').
Shares of the Fund are 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 Pennsylvania Municipal Securities. The minimum
initial investment is $1,000 for Class A Shares and $1,500 for Class B Shares.
The Fund is not likely to be a suitable investment for non-Pennsylvania
taxpayers or retirement plans since Pennsylvania 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 Information
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income which is
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 Commonwealth of Pennsylvania. 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 at least 80% of its annual interest income is
exempt from federal regular income tax and the Commonwealth of Pennsylvania
personal income taxes. 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 Pennsylvania.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
Pennsylvania 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:
o obligations issued by or on behalf of the Commonwealth of Pennsylvania, its
political subdivisions, or agencies;
o debt obligations of any state, territory, or possession of the United
States, or any political subdivision of any of these; and
o 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 taxes imposed by the Commonwealth of Pennsylvania. At least
80% of the value of the Fund's total assets will be invested in
Pennsylvania Municipal Securities.
The prices of fixed income securities fluctuate inversely to the direction of
interest rates.
CHARACTERISTICS. The securities which the Fund buys are investment grade bonds
rated, at the time of purchase, 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 determines
that such bonds are of comparable quality or have similar characteristics to the
investment grade bonds described above. If the Fund purchases an investment
grade bond, and the rating of such bond is subsequently downgraded so that the
bond is no longer classified as investment grade, the Fund is not required to
drop the bond from the portfolio, but will consider whether such action is
appropriate. 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. These participation interests give the Fund an undivided
interest in Pennsylvania 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 will determine that participation
interests meet the prescribed quality standards for the Fund.
VARIABLE RATE MUNICIPAL SECURITIES. Some of the Pennsylvania 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.
RESTRICTED AND ILLIQUID 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. As a matter of operating policy which may
be changed by the Trustees without shareholder approval, 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. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete the transaction 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.
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
Commonwealth of Pennsylvania 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-Pennsylvania
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).
There 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 those which the investment adviser judges to
have the same characteristics as such investment grade securities (if unrated).
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 the Commonwealth of Pennsylvania personal income taxes.
PENNSYLVANIA MUNICIPAL SECURITIES
Pennsylvania 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.
Pennsylvania 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 Pennsylvania Municipal Securities depend on a variety of factors,
including, but not limited to: 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 Commonwealth of Pennsylvania 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
Pennsylvania 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 Pennsylvania Municipal Securities which meet the Fund's
quality standards may not be possible if the Commonwealth of Pennsylvania or its
municipalities do not maintain their current credit ratings. In addition, any
Pennsylvania constitutional amendments, legislative measures, executive orders,
administrative regulations, and voter initiatives could result in adverse
consequences affecting Pennsylvania Municipal Securities.
A further discussion of the risks of a portfolio which invests largely in
Pennsylvania 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) 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
total assets to secure such borrowings.
In order to pass-through to investors the tax-free income from the Fund for
purposes of the Commonwealth of Pennsylvania personal income taxes, the Fund
will invest in securities for income earnings rather than trading for profit.
The Fund will not vary its investments, except to: (i) eliminate unsafe
investments and investments not consistent with the preservation of the capital
or the tax status of the investments of the Fund; (ii) honor redemption orders,
meet anticipated redemption requirements, and negate gains from discount
purchases; (iii) reinvest the earnings from securities in like securities; or
(iv) defray normal administrative expenses (the `Pennsylvania Investment
Restrictions'). Legislation enacted in December 1993, eliminates the necessity
of the Pennsylvania Investment Restrictions.
The above investment limitations 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.
Expenses of the Fund
Holders of Shares pay their allocable portion of Trust and portfolio expenses.
The Trust expenses for which holders of Shares pay their allocable portion
include, but are not limited to: the cost of organizing the Trust and continuing
its existence; registering the Trust with federal and state securities
authorities; Trustees' fees; auditor's fees; the cost of meetings of Trustees;
legal fees of the Trust; association membership dues; and such non-recurring and
extraordinary items as may arise from time to time.
The portfolio expenses for which holders of Shares pay their allocable portion
include, but are not limited to: registering the portfolio and Shares of the
portfolio; investment advisory services; taxes and commissions; custodian fees;
insurance premiums; auditors' fees; and such non-recurring and extraordinary
items as may arise from time to time.
At present, the only expenses which are allocated specifically to Class A Shares
as a class are expenses under the Trust's Shareholder Services Plan, and the
only expenses which are allocated specifically to Class B Shares as a class are
expenses under the Trust's Shareholder Services Plan and Distribution Plan.
However, the Trustees reserve the right to allocate certain other expenses to
holders of Shares as they deem appropriate ("Class Expenses"). In any case,
Class Expenses would be limited to: distribution fees; transfer agent fees as
identified by the transfer agent as attributable to holders of Shares; fees
under the Trust's Shareholder Services Plan; printing and postage expenses
related to preparing and distributing materials such as shareholder reports,
prospectuses and proxies to current shareholders; registration fees paid to the
Securities and Exchange Commission and to state securities commissions; expenses
related to administrative personnel and services as required to support holders
of Shares; legal fees relating solely to Shares; and Trustees' fees incurred as
a result of issues relating solely to Shares.
Net Asset Value
The Fund's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of each class of Shares in the market value
of all securities and other assets of the Fund, subtracting the interest of each
class of Shares in the liabilities of the Fund and those attributable to each
class of Shares, and dividing the remainder by the total number of each class of
Shares outstanding. The net asset value for each class of Shares may differ due
to the variance in daily net income realized by each class. Such variance will
reflect only accrued net income to which the shareholders of a particular class
are entitled.
The net asset value of each class of Shares of the Fund 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; or (iii)
the following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Investing in the Fund
The Fund offers investors two classes of shares that carry either a sales charge
and/or a contingent deferred sales charge and which bear different levels of
expenses.
CLASS A SHARES. An investor who purchases Class A Shares pays a maximum sales
charge of 4.50% at the time of purchase. Certain purchases of Class A Shares are
not subject to a sales charge. See "Investing in Class A Shares." As a result,
Class A Shares are not subject to any charges when they are redeemed (except for
special programs offered under "Purchases with Proceeds From Redemptions of
Unaffiliated Investment Companies"). Certain purchases of Class A Shares qualify
for reduced sales charges. See "Reducing or Eliminating the Sales Charge." Class
A Shares have no conversion feature.
CLASS B SHARES. Class B Shares are sold without an initial sales charge, but are
subject to a contingent deferred sales charge of up to 5.50% if redeemed within
six full years following purchase. Class B Shares also bear a 12b-1 fee while
Class A Shares do not bear such a fee. Class B Shares will automatically convert
into Class A Shares, based on relative net asset value, on or around the
fifteenth of the month, eight full years after the purchase date. Class B Shares
provide an investor the benefit of putting all of the investor's dollars to work
from the time the investment is made, but (until conversion) will have a higher
expense ratio and pay lower dividends than Class A Shares due to the 12b-1 fee.
HOW TO PURCHASE SHARES
Shares of the Fund 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 (such as a bank or broker/dealer) which has a sales agreement with
the distributor, or directly from the distributor with a minimum initial
investment of $1,000 for Class A shares and $1,500 for Class B Shares.
Additional investments can be made for as little as $100. (Financial
institutions may impose different minimum investment requirements on their
customers).
In connection with any sale, Federated Securities Corp. may from time to time
offer certain items of nominal value to any shareholder or investor. The Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and returning
the new account form available from the Fund before Shares can be purchased.
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. 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 Pennsylvania Municipal Income Fund-and designate Class
A Shares or Class B Shares; and mail both to Federated Pennsylvania Municipal
Income Fund, 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
Pennsylvania Municipal Income Fund-and designate Class A Shares or Class B
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.
INVESTING IN CLASS A SHARES
Class A Shares are sold at their net asset value, less any applicable sales
charge, next determined after an order is received:
Sales Charge asSales Charge asDealer Concession
a Percentagea Percentageas a Percentage
of Publicof Net Amount of Public
Amount of TransactionOffering PriceInvestedOffering Price
Less than $100,000 4.50% 4.71% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.25%
$250,000 but less than $500,000 2.50% 2.56% 2.25%
$500,000 but less than $1 million 2.00% 2.04% 1.80%
$1 million or greater 0.00% 0.00% 0.25%*
* See sub-section entitled `Dealer Concession.''
No sales charge is imposed for Class A Shares purchased through financial
intermediaries that do not receive a reallowance of a sales charge. However,
investors who purchase Class A Shares through a trust department, investment
adviser, or other financial intermediary may be charged a service or other fee
by the financial intermediary. Additionally, no sales charge is imposed on
shareholders designated as Liberty Life Members or on Class A Shares purchased
through `wrap accounts'' or similar programs under which clients pay a fee for
services.
DEALER CONCESSION. For sales of Class A Shares, the distributor will normally
offer to pay dealers up to 90% of the applicable sales charge. Any portion of
the sales charge which is not paid to a dealer will be retained by the
distributor. However, the distributor may offer to pay dealers up to 100% of the
sales charge retained by it. Such payments may take the form of cash or
promotional incentives, such as reimbursement of certain expenses of qualified
employees and their spouses to attend informational meetings about the Fund or
other special events at recreational-type facilities, or items of material
value. In some instances, these incentives will be made available only to
dealers whose employees have sold or may sell a significant amount of Class A
Shares. On purchases of $1 million or more, the investor pays no sales charge;
however, the distributor will make twelve monthly payments to the dealer
totaling 0.25% of the public offering price over the first year following the
purchase. Such payments are based on the original purchase price of Class A
Shares outstanding at each month end.
The sales charge for Class A 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 Class A
Shares.
ELIMINATING/REDUCING THE SALES CHARGE
The sales charge can be reduced or eliminated on the purchase of Class A Shares
through:
o quantity discounts and accumulated purchases;
o signing a 13-month letter of intent;
o using the reinvestment privilege;
o concurrent purchases; or
o purchases with proceeds from redemptions of unaffiliated investment
companies.
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 Class A Shares is made, the Fund will consider the
previous purchases still invested in the Fund. For example, if a shareholder
already owns Class A Shares having a current value at the public offering price
of $90,000 and he purchases $10,000 more at the current public offering price,
the sales charge on the additional purchase according to the schedule now in
effect would be 3.75%, not 4.50%.
To receive the sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at the
time the purchase is made that Class A 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 Class A Shares are already owned.)
LETTER OF INTENT. If a shareholder intends to purchase a specific dollar amount
of Class A Shares over the next 13 months, the sales charge may be reduced if
the shareholder signs a letter of intent to that effect. For example, if a
shareholder intends to purchase at least $100,000 in Class A 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 4.50% of the total amount intended to be purchased in escrow
(in Class A Shares) until such purchase is completed.
The applicable portion of the 4.50% 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 Class A 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 Class A
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. Prior trade prices
will not be adjusted.
REINVESTMENT PRIVILEGE. If Class A 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 eliminate a sales charge.
If the shareholder redeems his Class A Shares, 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 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 $80,000 in one of the other Class A Shares of the
Federated Funds and $20,000 in Class A Shares of the Fund the sales charge
would be reduced. 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 REDEMPTIONS OF UNAFFILIATED INVESTMENT COMPANIES.
Investors may purchase Class A 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. From
time to time, the Fund may offer dealers a payment of .50 of 1% for Class A
Shares purchased under this program. If Class A 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.
INVESTING IN CLASS B SHARES
Class B Shares are sold at their net asset value next determined after an order
is received. While Class B Shares are sold without an initial sales charge,
under certain circumstances described under "Contingent Deferred Sales Charge--
Class B Shares," a contingent deferred sales charge may be applied by the
distributor at the time Class B Shares are redeemed.
CONVERSION OF CLASS B SHARES. Class B Shares will automatically convert into
Class A Shares on or around the fifteenth of the month eight full years after
the purchase date, except as noted below, and may no longer be subject to a
distribution services fee (see "Distribution of Shares"). Such conversion will
be on the basis of the relative net asset values per share, without the
imposition of any sales charge, fee, or other charge. Class B Shares acquired by
exchange from Class B Shares of another fund in the Federated Funds will convert
into Class A Shares based on the time of the initial purchase. For purposes of
conversion to Class A Shares, Shares purchased through the reinvestment of
dividends and distributions paid on Class B Shares will be considered to be held
in a separate sub-account. Each time any Class B Shares in the shareholder's
account (other than those in the sub-account) convert to Class A Shares, an
equal pro rata portion of the Class B Shares in the sub-account will also
convert to Class A Shares. The conversion of Class B Shares to Class A Shares is
subject to the continuing availability of a ruling from the Internal Revenue
Service or an opinion of counsel that such conversions will not constitute
taxable events for federal tax purposes. There can be no assurance that such
ruling or opinion will be available, and the conversion of Class B Shares to
Class A Shares will not occur if such ruling or opinion is not available. In
such event, Class B Shares would continue to be subject to higher expenses than
Class A Shares for an indefinite period.
Orders for $250,000 or more of Class B Shares will automatically be invested in
Class A Shares.
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 any 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 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.
Exchange Privilege
CLASS A SHARES. Class A shareholders may exchange all or some of their Class A
Shares of the Fund 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 Class A Shares of the Fund.
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 Class A Shares may be exchanged free of charge.
Shareholders of Class A Shares who have been designated Liberty Life Members are
exempt from sales charges on future purchases in and exchanges between the Class
A Shares of any Federated Fund, as long as they maintain a $500 balance in one
of the Federated Funds. Instructions for exchanging Class A Shares must be given
in writing by the shareholder. Written instructions may require a signature
guarantee.
CLASS B SHARES. Class B shareholders may exchange all or some of their Class B
Shares of the Fund for Class B Shares of other funds in the Federated Funds.
(Not all funds in the Federated Funds currently offer Class B Shares. Contact
your financial institution regarding the availability of other Class B Shares in
the Federated Funds.) Exchanges are made at net asset value without being
assessed a contingent deferred sales charge on the exchanged Class B Shares. In
determining the applicability of the contingent deferred sales charge, the
required holding period for your new Class B Shares received through an exchange
will include the period for which your original Class B Shares were held. For
more information, see "Contingent Deferred Sales Charge."
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. 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 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 your
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.
How to Redeem Shares
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. 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 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 the Fund by telephoning Federated
Shareholder Services Company. 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 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
Shareholders may be subject to a contingent deferred sales charge upon
redemption of their Shares under the following circumstances:
CLASS A SHARES. Class A 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 of .50% 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 Class A Shares at the time of purchase or the net asset value of
the redeemed Class A Shares at the time of the redemption.
CLASS B SHARES. Shareholders redeeming Class B Shares from their Fund accounts
within six full years of the purchase date of those Class B Shares will be
charged a contingent deferred sales charge by the Fund's distributor. Any
applicable contingent deferred sales charge will be imposed on the lesser of the
net asset value of the redeemed Class B Shares at the time of purchase or the
net asset value of the redeemed Class B Shares at the time of redemption in
accordance with the following schedule:
Contingent
Year of Redemption Deferred
After Purchase Sales Charge
First 5.50%
Second 4.75%
Third 4.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh and thereafter 0.00%
CLASS A SHARES AND CLASS B SHARES. The contingent deferred sales charge will be
deducted from the redemption proceeds otherwise payable to the shareholders 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 six full years from the date of purchase with respect to Class B
Shares and one full year from the date of purchase with respect to applicable
Class A 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 six full years from the date of purchase with
respect to Class B Shares and more than one full year from the date of purchase
with respect to applicable Class A Shares; and (3) Shares held for fewer than
six years with respect to Class B Shares and less than one full year from the
date of purchase with respect to applicable Class A 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. Moreover, the contingent deferred sales charge will be
eliminated with respect to certain redemptions (see `Elimination of Contingent
Deferred Sales Charge').
ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
A contingent deferred sales charge will not be charged in connection with
exchanges of Class A Shares of the Fund for Class A Shares in other Federated
Funds.
With respect to Class B Shares, the contingent deferred sales charge will be
eliminated with respect to the following redemptions: (1) redemptions following
the death or disability, as defined in Section 72(m)(7) of the Internal Revenue
Code of 1986, of the last surviving shareholder; (2) redemptions representing
minimum required distributions from an Individual Retirement Account or other
retirement plan to a shareholder who has attained the age of 70 1/2; (3)
involuntary redemptions by the Fund of Class B Shares in shareholder accounts
that do not comply with the minimum balance requirements; and (4) qualifying
redemptions of Class B Shares under a Systematic Withdrawal Program. To qualify
for elimination of the contingent deferred sales charge through a Systematic
Withdrawal Program, the redemptions of Class B Shares must be from an account:
that is at least 12 months old, has all Fund distributions reinvested in Fund
Shares, and has a value of at least $10,000 when the Systematic Withdrawal
Program is established. Qualifying redemptions may not exceed 1.00% monthly of
the account value as periodically determined by the Fund. For more information
regarding the elimination of the contingent deferred sales charge through a
Systematic Withdrawal Program contact your financial institution or the Fund. No
contingent deferred sales charge will be imposed on redemptions of Class B
Shares held by Trustees, employees and sales representatives of the Fund, the
distributor, or affiliates of the Fund or distributor, and their immediate
family members; employees of any financial institution that sells Class B Shares
of the Fund pursuant to a sales agreement with the distributor; and spouses and
children under the age of 21 of the aforementioned persons. Finally, no
contingent deferred sales charge will be imposed on the redemption of Class B
Shares originally purchased through a bank trust department, an investment
adviser registered under the Investment Advisers Act of 1940 or retirement plans
where the third party administrator has entered into certain arrangements with
Federated Securities Corp. or its affiliates, or any other financial
institution, to the extent that no payments were advanced for purchases made
through such entities. The Fund reserves the right to discontinue or modify the
elimination of the contingent deferred sales charge. Shareholders will be
notified of a discontinuation. Any Class B Shares purchased prior to the
termination of such waiver would have the contingent deferred sales charge
eliminated as provided in the Fund's prospectus at the time of the purchase of
the Class B Shares. If a shareholder making a redemption qualifies for an
elimination of the contingent deferred sales charge, the shareholder must notify
Federated Securities Corp. or the transfer agent in writing that the shareholder
is entitled to such elimination.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive 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. Shareholders may redeem by periodic withdrawal payments in a
minimum amount of $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. A shareholder may apply for participation in this
program through his financial institution. Due to the fact that Class A Shares
are sold with a sales charge, it is not advisable for shareholders to be
purchasing Class A 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.
Trust Information
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 Trustee's
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 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. 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 terminate this voluntary waiver
or reimbursement of expenses at any time in its sole discretion.
ADVISER'S BACKGROUND. Federated Advisers, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940, 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 $76 billion invested across more
than 338 funds under management and/or administration by its subsidiaries,
as of December 31, 1996, Federated Investors is one of the largest mutual
fund investment managers in the United States. With more than 2,000
employees, Federated continues to be led by the management who founded the
company in 1955. Federated funds are presently at work in and through 4,500
financial institutions nationwide.
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 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.
The distributor will pay dealers an amount equal to 5.5% of the net asset value
of Class B Shares purchased by their clients or customers. These payments will
be made directly by the distributor from its assets, and will not be made from
the assets of the Fund. Dealers may voluntarily waive receipt of all or any
portion of these payments. The distributor may pay a portion of the distribution
fee discussed below to financial institutions that waive all or any portion of
the advance payments.
DISTRIBUTION PLAN 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 Class A Shares and 0.75% of the
average daily net asset value of Class B 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. With respect to Class B
Shares, because distribution fees to be paid by the Fund to the distributor may
not exceed an annual rate of .75% of Class B Shares' average daily net assets,
it will take the distributor a number of years to recoup the expenses it has
incurred for its sales services and distribution-related support services
pursuant to the Plan.
The Distribution Plan is a compensation-type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such 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
both Class A Shares and Class B 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. may
pay financial institutions, at the time of purchase of Class A Shares, an amount
equal to .50% of the net asset value of Class A Shares purchased by their
clients or customers under certain qualified retirement plans as approved by
Federated Securities Corp. (Such payments are subject to a reclaim from the
financial institution should the assets leave the program within 12 months after
purchase.)
Furthermore, with respect to both Class A Shares and Class B Shares, in addition
to payments made pursuant to the Distribution Plan and Shareholder Services
Agreement, Federated Securities Corp and Federated Shareholder Services, from
their own assets, may pay financial institutions supplemental fees for the
performance of substantial sales services, distribution-related support
services, or shareholder services. The support may include sponsoring sales,
educational and training seminars for their employees, providing sales
literature, and engineering computer software programs that emphasize the
attributes of the Fund. Such assistance may 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.
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 Trust.
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 FeeDaily Net Assets
0.150% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075%on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Services Company may choose voluntarily to waive a portion of its fee.
Shareholder Information
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 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.
Tax Information
FEDERAL INCOME TAX
The Fund will pay no 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.
Shareholders are not required to pay the federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain `private activity'' bonds issued
after August 7, 1986, may be included in calculating the federal individual
alternative minimum tax for corporations.
The alternative minimum tax 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.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares. Information on the tax status of dividends and distributions
is provided annually.
STATE AND LOCAL TAXES
In the opinion of Houston, Donnelly & Meck, counsel to the Fund, Fund Shares may
be subject to personal property taxes imposed by counties, municipalities, and
school districts in Pennsylvania to the extent that the portfolio securities in
the Fund would be subject to such taxes if owned directly by residents of those
jurisdictions.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PENNSYLVANIA TAXES. Under existing Pennsylvania laws, distributions made by the
Fund derived from interest on obligations free from state taxation in
Pennsylvania are not subject to Pennsylvania personal income taxes.
Distributions made by the Fund will be subject to Pennsylvania personal income
taxes to the extent that they are derived from gain realize by the Fund from the
sale or exchange of otherwise tax-exempt obligations.
Performance Information
From time to time, the Fund advertises the total return, yield, and tax-
equivalent yield for each class of shares.
Total return represents the change, over a specific period of time, in the value
of an investment in Shares after reinvesting all income and capital gains
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of Shares is calculated by dividing the net investment income per
Share (as defined by the SEC) earned by each class of shares over a thirty-day
period by the maximum offering price per share of each class of shares on the
last day of the period. This number is then annualized using semi-annual
compounding. The tax-equivalent yield of each class of shares is calculated
similarly to the yield, but is adjusted to reflect the taxable yield that each
class of 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 each class of shares and, therefore, may not
correlate to the dividends or other distributions paid to shareholders.
The performance information reflects the effect of 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.
Total return and yield will be calculated separately for Class A Shares and
Class B Shares.
From time to time, advertisements for Class A Shares and Class B Shares of the
Fund may refer to ratings, rankings and other information in certain financial
publications and/or compare the performance of Class A Shares and Class B Shares
to certain indices.
Federated Pennsylvania Municipal Income Fund
(formerly, Pennsylvania Municipal Income Fund)
Financial Highlights-Income Shares
(For a share outstanding throughout each period)
Reference is made to the Independent Auditors' Report on page 34.
Year Ended August 31,
1995(a) 1994 1993(b)
Net asset value, beginning of period $10.85 $11.68 $11.43
Income from investment operations
Net investment income 0.19 0.51 0.09
Net realized and unrealized gain (loss) on investments (1.00) (0.75) 0.21
Total from investment operations (0.81) (0.24) 0.30
Less distributions
Distributions from net investment income (0.15) (0.51) (0.05)
Distributions in excess of net investment income - (0.08)(e) -
Total distributions (0.15) (0.59) (0.05)
Net asset value, end of period $ 9.89 $10.85 $11.68
Total return(c) (8.00%) (2.13%) 1.20%
Ratios to average net assets
Expenses 1.18%(f)1.50% 1.48%(f)
Net investment income 5.38%(f)4.62% 6.13%(f)
Expense waiver/reimbursement(d) 0.26%(f)0.45% 0.60%(f)
Supplemental data
Net assets, end of period (000 omitted) - $8,982 $2,419
Portfolio turnover 59% 17% 0%
(a) Reflects operations for the period from September 1, 1994 to November 18,
1994 (date Income Shares ceased operations).
(b)Reflects operations for the period from July 29, 1993 (date of initial public
investment) to August 31, 1993.
(c)Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d)This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(e)Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These distributions
do not represent a return of capital for federal income tax purposes.
(f) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report for the fiscal year ended August 31, 1996, which can be obtained
free of charge.
Federated Pennsylvania Municipal Income Fund
(formerly, Pennsylvania Municipal Income Fund)
Portfolio of Investments
August 31, 1996
Principal Credit
Amountvi v Rating*v Value
Long-Term Municipals-97.2%
Pennsylvania-97.2%
$2,000,000 Allegheny County, PA HDA, Health & Education
Revenue Bonds, 7.00% (Rehabilitation Institute of
Pittsburgh)/(Original Issue Yield: 7.132%), 6/1/2022BBB $
2,027,100
2,325,000Allegheny County, PA HDA, Revenue Refunding Bonds,
6.875% (Children's Hospital of Pittsburgh)/(MBIA INS)/
(Original Issue Yield: 7.061%), 7/1/2014AAA 2,467,337
465,000 Allegheny County, PA Residential Finance Agency, SFM
Revenue Bonds (Series K), 7.75% (GNMA COL), 12/1/2022Aaa
489,087
775,000 Allegheny County, PA Residential Finance Agency, SFM
Revenue Bonds (Series Q), 7.40% (GNMA COL), 12/1/2022Aaa
815,548
2,060,000Allentown, PA Area Hospital Authority, Revenue Bonds
(Series B), 6.75% (Sacred Heart Hospital of Allentown),
11/15/2015 BBB 2,064,326
4,250,000Bradford County, PA IDA, Solid Waste Disposal Revenue
Bonds (Series A), 6.60% (International Paper Co.), 3/1/2019 A-
4,394,713
750,000 Butler County, PA Hospital Authority, Hospital Revenue
Bonds (Series A), 7.00% (North Hills Passavant Hospital)/
(FSA INS), 6/1/2022 AAA 809,798
1,750,000Delaware County, PA Authority, Hospital Revenue Bonds,
5.30% (Crozer-Chester Medical Center)/(MBIA INS)/
(Original Issue Yield: 5.55%), 12/15/2020AAA 1,603,630
750,000 Derry Township, PA School District, GO Bonds, 7.00%
(United States Treasury PRF), 9/15/2009 A1 832,110
1,600,000Dormont Borough, PA, Allegheny County, UT GO Bonds
(Series 1995), 7.00% (United States Treasury PRF)/
(Original Issue Yield: 7.125%), 3/1/2000 (@100)BBB 1,719,872
Principal Credit
Amount vi v Rating*
v Value
Long-Term Municipals-continued
Pennsylvania-continued
$2,000,000 Fayette County, PA Hospital Authority, Hospital Revenue
Bonds (Series 1996A), 5.75% (Uniontown Hospital)/
(Connie Lee INS)/(Original Issue Yield: 6.05%), 6/15/2015 AAA $
1,898,580
1,000,000Geisinger Authority, PA Health System, Revenue Bonds,
7.625% (United States Treasury PRF)/(Original Issue Yield:
7.697%), 7/1/1999 (@102) AA 1,101,990
1,000,000Lackawanna Trail School District, PA, UT GO Refunding
Bonds, 6.90% (AMBAC INS), 3/15/2010 AAA 1,089,060
1,380,000Latrobe, PA Industrial Development Authority, College
Revenue Bonds, 6.75% (St. Vincent College, PA)/(Original
Issue Yield: 7.00%), 5/1/2024 Baa1 1,389,067
1,500,000Lebanon County, PA Good Samaritan Hospital Authority,
Hospital Revenue Bonds, 6.00% (Good Samaritan Hospital)/
(Original Issue Yield: 6.10%), 11/15/2018BBB+ 1,395,705
1,000,000Lehigh County, PA General Purpose Authority, Hospital
Refunding Revenue Bonds (Series 1996A), 5.75%
(Muhlenberg Hospital Center)/(Original Issue Yield: 5.85%),
7/15/2010 A 975,680
2,500,000Luzerne County, PA IDA, Revenue Refunding Bonds
(Series A), 7.00% (Pennsylvania Gas & Water Company)/
(AMBAC INS), 12/1/2017 AAA 2,747,100
4,000,000Lycoming County, PA Authority, Hospital Lease Revenue
Bonds (Series B), 6.50% (Divine Providence Hospital, PA)/
(Original Issue Yield: 6.70%), 7/1/2022 A- 4,275,440
1,000,000Monroeville, PA Hospital Authority, Hospital Refunding
Revenue Bonds (Series 1995), 6.25% (Forbes Health System,
PA)/(Original Issue Yield: 6.60%), 10/1/2015 BBB 983,530
4,000,000Pennsylvania EDFA, Revenue Bonds, 7.60% (Macmillan
Bloedel LTD Partnership)/(Original Issue Yield: 7.65%),
12/1/2020 BBB- 4,398,080
Principal Credit
Amount vi v Rating*
v Value
Long-Term Municipals-continued
Pennsylvania-continued
$8,000,000 Pennsylvania EDFA, Wastewater Treatment Revenue Bonds
(Series A), 7.60% (Sun Co., Inc.)/(Original Issue Yield:
7.653%), 12/1/2024 BBB- $8,807,840
2,290,000Pennsylvania Housing Finance Authority, SFM Revenue
Bonds (Series 39B), 6.875%, 10/1/2024 AA 2,380,157
750,000 Pennsylvania Housing Finance Authority, SFM Revenue
Bonds (Series 33), 6.90%, 4/1/2017 AA 785,490
1,000,000Pennsylvania Housing Finance Authority, SFM Revenue
Bonds (Series 34-B), 7.00% (FHA GTDs), 4/1/2024AA 1,040,410
4,540,000Pennsylvania Housing Finance Authority, SFM Revenue
Bonds (Series 28), 7.65% (FHA GTD), 10/1/2023 AA 4,774,673
2,500,000Pennsylvania Intergovernmental Coop Authority, Special
Tax Revenue Bond, Philadelphia Funding Program, 6.75%
(FGIC INS)/(United States Treasury PRF)/(Original Issue
Yield: 7.13%), 6/15/2021 AAA 2,803,200
2,000,000Pennsylvania State Higher Education Facilities Authority,
Health Services Revenue Bonds (Series A of 1996), 5.75%
(University of Pennsylvania)/(Original Issue Yield: 6.035%),
1/1/2022 AA 1,949,080
1,000,000Pennsylvania State Higher Education Facilities Authority,
Hospital Revenue Bonds (Series A), 7.25% (Allegheny
General Hospital)/(Original Issue Yield: 7.40%), 9/1/2017 AA-
1,065,760
2,000,000Pennsylvania State Higher Education Facilities Authority,
Revenue Bonds (Series 1996), 7.20% (Thiel College),
5/15/2026 NR 2,000,480
4,000,000Pennsylvania State Higher Education Facilities Authority,
Revenue Bonds (Series A), 7.375% (Medical College of
Pennsylvania)/(United States Treasury PRF)/(Original Issue
Yield: 7.45%), 3/1/2021 AAA 4,475,720
2,000,000Pennsylvania State Higher Education Facilities Authority,
Revenue Bonds (Series N), 5.875% (MBIA INS)/(Original
Issue Yield: 5.913%), 6/15/2021 AAA 1,993,320
Principal Credit
Amountvi v Rating*v Value
Long-Term Municipals-continued
Pennsylvania-continued
$2,000,000 Pennsylvania State Higher Education Facilities Authority,
Revenue Bonds, 6.375% (Drexel University)/(Original Issue
Yield: 6.415%), 5/1/2017 BBB+ $2,019,640
4,000,000Philadelphia, PA, (Series 1995A) Airport Revenue Bonds,
6.10% (Philadelphia Airport System)/(AMBAC INS)/
(Original Issue Yield: 6.40%), 6/15/2025AAA 3,991,480
2,500,000Scranton-Lackawanna, PA Health & Welfare Authority,
Revenue Bonds (Series 1994-A), 7.60% (Allied Services
Rehabilitation Hospitals, PA), 7/15/2020 NR 2,562,923
2,650,000Sharon, PA General Hospital Authority, Hospital Revenue
Bonds, 6.875% (Sharon Regional Health System), 12/1/2022 BBB+
2,659,196
1,000,000Warren County, PA Hospital Authority, Revenue Bonds
(Series A), 7.00% (Warren General Hospital, PA)/(Original
Issue Yield: 7.101%), 4/1/2019 BBB+ 1,008,450
Total 82,295,572
Short-Term Municipals-0.6%
Pennsylvania-0.6%
500,000 Geisinger Authority, PA Health System, (Series 1992B)
Daily VRDNs (at amortized cost) AA 500,000
Total Investments (identified cost $77,683,811)(a) $ 82,295,572
Securities that are subject to alternative minimum tax represent 41.1% of the
portfolio as calculated based upon total portfolio market value.
(a) The cost of investments for federal tax purposes amounts to $77,683,811.
The net unrealized appreciation of investments on a federal tax basis
amounts to $4,611,761 which is comprised of $4,838,788 appreciation and
$227,027 depreciation at August 31, 1996.
*Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
Note: The categories of investments are shown as a percentage of net
assets ($84,115,530) at August 31, 1996.
The following acronym(s) are used throughout this portfolio:
AMBAC-American Municipal Bond Assurance Corporation
COL -Collateralized
EDFA -Economic Development Financing Authority
FGIC -Financial Guaranty Insurance Company
FHA -Federal Housing Administration
FSA -Financial Security Assurance
GNMA -Government National Mortgage Association
GO -General Obligation
GTD -Guaranty
HDA -Hospital Development Authority
IDA -Industrial Development Authority
INS -Insured
LTD -Limited
MBIA -Municipal Bond Investors Assurance
PRF -Prerefunded
SFM -Single Family Mortgage
UT -Unlimited Tax
VRDNs-Variable Rate Demand Notes
(See Notes which are an integral part of the Financial Statements)
Federated Pennsylvania Municipal Income Fund
(formerly, Pennsylvania Municipal Income Fund)
Statement of Assets and Liabilities
August 31, 1996
Assets:
Total investments in securities, at value (identified and tax cost $77,683,811)
$ 82,295,572
Cash 84,381
Income receivable 1,798,545
Receivable for shares sold 168,137
Total assets 84,346,635
Liabilities:
Income distribution payable $176,401
Accrued expenses 54,704
Total liabilities 231,105
Net Assets for 7,408,593 shares outstanding $84,115,530
Net Assets Consist of:
Paid in capital $ 81,237,429
Net unrealized appreciation of investments 4,611,761
Accumulated net realized loss on investments (1,930,489)
Undistributed net investment income 196,829
Total Net Assets $84,115,530
Net Asset Value and Redemption Proceeds Per Share:
($84,115,530 / 7,408,593 shares outstanding) $11.35
Offering Price Per Share (100/97.00 of $11.35)* $11.70
*See ``Investing In Class A Shares.''
(See Notes which are an integral part of the Financial Statements)
Federated Pennsylvania Municipal Income Fund
(formerly, Pennsylvania Municipal Income Fund)
Statement of Operations
Year Ended August 31, 1996
Investment Income:
Interest $5,530,462
Expenses:
Investment advisory fee $341,175
Administrative personnel and services fee 125,000
Custodian fees 20,600
Transfer and dividend disbursing agent fees and expenses 37,388
Directors'/Trustees' fees 3,302
Auditing fees 13,772
Legal fees 5,061
Portfolio accounting fees 50,654
Shareholder services fee 213,235
Share registration costs 14,447
Printing and postage 18,838
Insurance premiums 4,394
Miscellaneous 8,084
Total expenses 855,950
Waivers and reimbursements-
Waiver of investment advisory fee $(195,433)
Waiver of shareholder services fee (17,059)
Total waivers (212,492)
Net expenses 643,458
Net investment income 4,887,004
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments 556,055
Net change in unrealized appreciation of investments 353,374
Net realized and unrealized gain on investments 909,429
Change in net assets resulting from operations $5,796,433
(See Notes which are an integral part of the Financial Statements)
Federated Pennsylvania Municipal Income Fund
(formerly, Pennsylvania Municipal Income Fund)
Statement of Changes in Net Assets
Year Ended August 31,
1996 1995
Increase (Decrease) in Net Assets:
Operations-
Net investment income/operating loss $4,887,004 $ 5,043,454
Net realized gain (loss) on investments ($881,533 and $1,036,056,
net losses, respectively, as computed for federal tax purposes) 556,055
(1,957,166)
Net change in unrealized appreciation 353,374 3,480,605
Change in net assets resulting from operations 5,796,433
6,566,893
Net equalization credits (debits)- (6,300) (4,832)
Distributions to Shareholders-
Distributions from net investment income
Class A Shares (4,846,944) (4,814,395)
Income Shares 0 (83,724)
Change in net assets resulting from distributions to shareholders
(4,846,944) (4,898,119)
Share Transactions-
Proceeds from sale of shares 10,957,322 18,979,060
Net asset value of shares issued to shareholders in payment of
distributions declared 3,064,9412,687,386
Cost of shares redeemed (14,571,991) (34,449,869)
Change in net assets resulting from share transactions (549,728)
(12,783,423)
Change in net assets 393,461 (11,119,481)
Net Assets:
Beginning of period 83,722,069 94,841,550
End of period (including undistributed net investment income of
$196,829 and $163,069, respectively) $84,115,530 $ 83,722,069
(See Notes which are an integral part of the Financial Statements)
Federated Pennsylvania Municipal Income Fund
(formerly, Pennsylvania Municipal Income Fund)
Notes to Financial Statements
August 31, 1996
1. Organization
Municipal Securities Income Trust (the `Trust'') is registered under the
Investment Company Act of 1940, as amended (the `Act'') as an open-end,
management investment company. The Trust consists of five portfolios. The
financial statements included herein are only those of Federated Pennsylvania
Municipal Income Fund (the `Fund''), a non-diversified portfolio. The financial
statements of the other portfolios are presented separately. The assets of each
portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held. 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 Commonwealth of Pennsylvania. Previously,
the Fund provided two classes of shares: Class A Shares and Income Shares. As of
November 18, 1994, the Income Shares were no longer offered.
Shareholders approved a change in the name of the Fund as follows:
Effective Date New Name
March 31, 1996Federated Pennsylvania Municipal Income Fund
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
Investment Valuations-Municipal bonds are valued by an independent pricing
service, taking into consideration yield, liquidity, risk, credit quality,
coupon, maturity, type of issue, and any other factors or market data the
pricing service deems relevant. Short-term securities are valued at the
prices provided by an independent pricing service. However, short-term
securities with remaining maturities of sixty days or less at the time of
purchase may be valued at amortized cost, which approximates fair market
value.
Investment Income, Expenses and Distributions-Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the ``Code').
Distributions to shareholders are recorded on the ex-dividend date.
Federal Taxes-It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary. At August 31, 1996, the Fund, for
federal tax purposes, had a capital loss carryforward of $1,930,489, which
will reduce the Fund's taxable income arising from future net realized gain
on investments, if any, to the extent permitted by the Code, and thus will
reduce the amount of the distributions to shareholders which would otherwise
be necessary to relieve the Fund of any liability for federal tax. Pursuant
to the Code, such capital loss carryforward will expire as follows:
Expiration YearExpiration Amount
2000 $12,837
2001 $ 63
2003 $1,036,056
2004 $881,533
Equalization-The Fund follows the accounting practice known as equalization.
With equalization, a portion of the proceeds from sales and costs of
redemptions of fund shares (equivalent, on a per share basis, to the amount
of undistributed net investment income on the date of the transaction) is
credited or charged to undistributed net investment income. As a result,
undistributed net investment income per share is unaffected by sales or
redemptions of fund shares.
When-Issued and Delayed Delivery Transactions-The Fund may engage in when-
issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
Use of Estimates-The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
Other-Investment transactions are accounted for on the trade date.
3. Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in shares were as follows:
Year Ended August 31,
1996 1995
Class A Shares Shares Dollars Shares Dollars
Shares sold 965,079 $10,957,3224,627,974 $ 18,593,886
Shares issued to shareholders in
payment of distributions declared270,041 3,064,941242,874 2,621,531
Shares redeemed (1,284,868) (14,571,991)(5,262,476) (25,822,912)
Net change resulting from
share transactions (49,748) $(549,728)(391,628) $ (4,607,495)
Year Ended August 31,
1996 1995*
Income Shares Shares Dollars Shares Dollars
Shares sold - - 39,353 $385,174
Shares issued to shareholders in
payment of distributions declared- - 6,434 65,855
Shares redeemed - - (873,482) (8,626,957)
Net change resulting from
share transactions - - (827,695) $(8,175,928)
*Reflect operations for the period from September 1, 1994 to November 18, 1994
(date Income Shares ceased operations).
4. Investment Advisory Fee and Other Transactions with Affiliates
Investment Advisory Fee-Federated Advisers, the Fund's investment adviser,
(the ``Adviser'), receives for its services an annual investment advisory
fee equal to 0.40% of the Fund's average daily net assets.
The Adviser may voluntarily choose to waive any portion of its fee. The
Adviser can modify or terminate this voluntary waiver at any time at its
sole discretion.
Administrative Fee-Federated Services Company (``FServ'), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid to FServ is based on the level of
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received during
the period of the Administrative Services Agreement shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Shareholder Services Fee-Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services (``FSS'), the Fund will pay FSS up to
0.25% of average daily net assets of the Fund for the period. The fee paid
to FSS is used to finance certain services for the shareholders and to
maintain shareholder accounts.
Transfer and Dividend Disbursing Agent Fees and Expenses-FServ, through its
subsidiary, Federated Shareholder Services Company (``FSSC') serves as
transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is
based on the size, type, and number of accounts and transactions made by
shareholders.
Portfolio Accounting Fees-FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
Interfund Transactions-During the period ended August 31, 1996, the Fund
engaged in purchase and sale transactions with funds that have a common
investment adviser (or affiliated investment advisers), common
Directors/Trustees, and/or common Officers. These purchase and sale
transactions were made at current market value pursuant to Rule 17a-7 under
the Act amounting to $9,850,000 and $9,350,000, respectively.
General-Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
5. Investment Transactions
Purchases and sales of investments, excluding short-term securities, for the
period ended August 31, 1996, were as follows:
Purchases $19,063,621
Sales $20,266,375
6. Concentration of Credit Risk
Since the Fund invests a substantial portion of its assets in issuers located in
one state, it will be more susceptible to factors adversely affecting issuers of
that state than would be a comparable tax-exempt mutual fund that invests
nationally. In order to reduce the credit risk associated with such factors, at
August 31, 1996, 32% of the securities in the portfolio of investments are
backed by letters of credit or bond insurance of various financial institutions
and financial guaranty assurance agencies. The value of investments insured by
or supported (backed) by a letter of credit from any one institution or agency
did not exceed 5.4% of total investments.
Independent Auditors' Report
To the Board of Trustees of Municipal Securities Income Trust
and Shareholders of Federated Pennsylvania Municipal Income Fund
(formerly, Pennsylvania Municipal Income Fund):
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated Pennsylvania Municipal Income Fund as
of August 31, 1996, the related statement of operations for the years 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. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to 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 at
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, the financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated
Pennsylvania Municipal Income Fund 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
Addresses
Federated Pennsylvania Municipal Income Fund
Class A Shares Federated Investors Tower
Class B Shares 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 P.O. Box 8600
Trust Company Boston, Massachusetts 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder P.O. Box 8600
Services Company Boston, Massachusetts 02266-8600
Independent Auditors
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401
Federated Pennsylvania Municipal Income Fund
(formerly, Pennsylvania Municipal Income Fund)
(A Portfolio of Municipal Securities Income Trust)
Class A Shares
Class B Shares
Prospectus
A Non-Diversified Portfolio of
Municipal Securities Income Trust,
An Open-End, Management
Investment Company
March 4, 1997
Cusip 625922505
Cusip
---------
G00577-02
FEDERATED PENNSYLVANIA MUNICIPAL INCOME FUND
(FORMERLY, PENNSYLVANIA MUNICIPAL INCOME FUND)
(A PORTFOLIO OF MUNICIPAL SECURITIES INCOME TRUST)
CLASS A SHARES
CLASS B SHARES
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of Federated Pennsylvania Municipal Income Fund (the `Fund''),
a portfolio of Municipal Securities Income Trust (the `Trust'') dated
March 4, 1997. 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 March 4, 1997
Federated Securities Corp. is the distributor of the Fund
and is a subsidiary of Federated Investors.
Cusip 625922505
0090701B(3/97)
GENERAL INFORMATION ABOUT THE FUND 1
INVESTMENT OBJECTIVE AND POLICIES 1
Acceptable Investments 1
When-Issued and Delayed Delivery
Transactions 2
Temporary Investments 2
Portfolio Turnover 3
Investment Limitations 3
Pennsylvania Investment Risks 4
MUNICIPAL SECURITIES INCOME TRUST MANAGEMENT 5
Fund Ownership 9
Trustees Compensation 9
Trustee Liability 10
INVESTMENT ADVISORY SERVICES 10
Adviser to the Fund 10
Advisory Fees 10
OTHER SERVICES 10
Fund Administration 10
Custodian and Portfolio Accountant 11
Transfer Agent 11
Independent Auditors 11
BROKERAGE TRANSACTIONS 11
PURCHASING SHARES 11
Distribution Plan and Shareholder Services
Agreement 11
Purchases by Sales Representatives,
Trustees, and Employees 12
DETERMINING NET ASSET VALUE 12
Valuing Municipal Bonds 12
Use of Amortized Cost 12
REDEEMING SHARES 12
Redemption in Kind 13
Elimination of the Contingent Deferred
Sales Charge (Class B Shares only) 13
Massachusetts Partnership Law 13
TAX STATUS 13
The Fund's Tax Status 13
Shareholders' Tax Status 14
TOTAL RETURN 14
YIELD 14
TAX-EQUIVALENT YIELD 14
Tax-Equivalency Table 15
PERFORMANCE COMPARISONS 16
Economic and Market Information 16
ABOUT FEDERATED INVESTORS 16
Mutual Fund Market 17
Institutional Clients 17
Bank Marketing 17
Broker/Dealers and Bank Broker/Dealer
Subsidiaries 17
APPENDIX 18
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 (`Trustees'') approved changing the name of the Trust from
Federated Municipal Income Trust to Municipal Securities Income Trust. On
February 26, 1996, the Trustees approved changing the name of the Fund from
Pennsylvania Municipal Income Fund to Federated Pennsylvania Municipal Income
Fund (effective date March 31, 1996). Shares of the Fund are presently offered
in two classes known as Class A Shares and Class B Shares (individually and
collectively referred to as `Shares'' as the context may require). This
Statement of Additional Information relates to both classes of shares.
The Fund's investment objective is to provide current income which is exempt
from federal regular income tax and the personal income taxes imposed by the
Commonwealth of Pennsylvania. 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 Pennsylvania state and local tax
(`Pennsylvania Municipal Securities''). These securities include those issued
by or on behalf of the Commonwealth of Pennsylvania and Pennsylvania
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 taxes imposed by the Commonwealth of Pennsylvania and Pennsylvania
municipalities.
CHARACTERISTICS
The Pennsylvania 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 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 Pennsylvania Municipal Securities are:
omunicipal notes and municipal commercial paper;
oserial bonds sold with differing maturity dates;
otax anticipation notes sold to finance working capital needs of
municipalities;
obond anticipation notes sold prior to the issuance of longer-term bonds;
opre-refunded municipal bonds; and
ogeneral obligation bonds secured by a municipality pledge of taxation.
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 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:
owhether 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;
othe lessee's general credit strength (e.g., its debt, administrative,
economic and financial characteristics and prospects);
othe 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'');
oany 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.
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
will only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the
Fund's investment adviser to be creditworthy pursuant to guidelines
established by the Trustees.
From time to time, such as when suitable Pennsylvania 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 Pennsylvania 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 at the trade date. These securities are marked to
market daily and 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. 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
portfolio turnover rates were 23% and 59%, 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.
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.
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 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 assets in
securities subject to restrictions on resale under the Securities Act of
1933.
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.
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 ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in illiquid
obligations, including certain restricted securities determined to be liquid
under criteria established by the Trustees and repurchase agreements
providing for settlement in more than seven days after notice, and certain
restricted securities.
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. The Fund did not borrow money or pledge securities in excess of 5%
of the value of its net assets during the last fiscal year and has no present
intent to do so in the current 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.''
PENNSYLVANIA INVESTMENT RISKS
Yields on Pennsylvania 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
Commonwealth of Pennsylvania or its county and local governments could impact
the Fund's portfolio. The Fund's concentration in securities issued by the
Commonwealth of Pennsylvania and its political subdivisions provides a greater
level of risk than a fund which is diversified across numerous states and
municipal entities.
Pennsylvania's economic base is mature but substantial. In spite of efficiency
gains owed to modernization and restructuring, the Commonwealth's dependence
upon manufacturing and mining continue to leave it vulnerable to long term
national economic trends. The cyclicality of the economy results in wide swings
in employment and state social services spending. Recent data shows improvement
in economic diversification, however, employment growth still lags the nation.
Other challenges for the Commonwealth and its municipalities include slow
population growth and an aging population which will pressure health care
services expenditures. The Commonwealth plans to address these problems with
business tax cuts, controlled social services spending and increased reserves in
the event of an economic downturn. Fiscal 1996 brought a corporate net income
tax cut. The rate fell from 11.99% to 9.99%. In addition, the Governor's budget
hopes to build up Pennsylvania's `rainy day'' fund to as much as 3% of
expenditures in coming years. The ability of the Commonwealth or its
municipalities to meet their obligations will depend on the availability of tax
and other revenues; economic, political and demographic conditions within
Pennsylvania and their underlying fiscal condition.
Concerning the constitutional provisions pertaining to debt, the Commonwealth
may issue tax anticipation notes for its General Fund and/or Motor License Fund.
However, the aggregate amount of newly issued and outstanding tax anticipation
notes is limited to a maximum of 20% of the estimated revenues of the
appropriate fund for the fiscal year in which the notes are issued. The notes
must mature within the fiscal year of issuance. The Commonwealth of Pennsylvania
may also issue bond anticipation notes with a term not to exceed three years.
The bond anticipation notes are subject to applicable statutory limitations
pertaining to the issuance of bonds. The ability of the Fund to achieve its
investment objective depends on the continuing ability of the issuers of
Pennsylvania 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 Pennsylvania Municipal Securities which meet the Fund's
quality standards may not be possible if the Commonwealth of Pennsylvania and
its municipalities do not maintain their current credit rating. The Commonwealth
is currently rated A1, AA-, and AA- by Moody's, Standard & Poor's and Fitch,
respectively.
Officers and Trustees are listed with their addresses, birthdates, present
positions with Municipal Securities Income Trust, 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
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
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
Executive Vice 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; 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; Westmark Funds; and World Investment
Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of February 5, 1997, the following shareholder of record owned 5% or more of
the outstanding Class A Shares of the Fund: Merrill Lynch Pierce Fenner & Smith,
Jacksonville, Florida, acting in various capacities for numerous accounts, owned
approximately 1,110,011.00 Class A Shares (15.17%).
TRUSTEES COMPENSATION
AGGREGATE
NAME , COMPENSATION TOTAL COMPENSATION PAID
POSITION WITH FROM FROM FUND COMPLEX +
TRUST TRUST*#
JOHN F. DONAHUE $ -0- $ -0- FOR THE TRUST AND
TRUSTEE AND CHAIRMAN 56 OTHER INVESTMENT COMPANIES IN THE
FUND COMPLEX
THOMAS G. BIGLEY++ $1,243.22 $108,725 FOR THE TRUST AND
TRUSTEE 56 OTHER INVESTMENT COMPANIES IN THE
FUND COMPLEX
JOHN T. CONROY $1,363.10 $119,615 FOR THE TRUST AND
TRUSTEE 56 OTHER INVESTMENT COMPANIES IN THE
FUND COMPLEX
WILLIAM J. COPELAND $1,363.10 $119,615 FOR THE TRUST AND
TRUSTEE 56 OTHER INVESTMENT COMPANIES IN THE
FUND COMPLEX
J. CHRISTOPHER DONAHUE$ -0- $ -0- FOR THE TRUST AND
TRUSTEE AND EXEC. VICE PRES. 18 OTHER INVESTMENT COMPANIES IN
THE FUND COMPLEX
JAMES E. DOWD $1,363.10 $119,615 FOR THE TRUST AND
TRUSTEE 56 OTHER INVESTMENT COMPANIES IN THE
FUND COMPLEX
LAWRENCE D. ELLIS, M.D. $1,243.22 $108,725 FOR THE TRUST AND
TRUSTEE 56 OTHER INVESTMENT COMPANIES IN THE
FUND COMPLEX
EDWARD L. FLAHERTY, JR. $1,363.10 $119,615 FOR THE TRUST AND
TRUSTEE 56 OTHER INVESTMENT COMPANIES IN THE
FUND COMPLEX
PETER E. MADDEN $1,243.22 $108,725 FOR THE TRUST AND
TRUSTEE 56 OTHER INVESTMENT COMPANIES IN THE
FUND COMPLEX
GREGOR F. MEYER $1,243.22 $108,725 FOR THE TRUST AND
TRUSTEE 56 OTHER INVESTMENT COMPANIES IN THE
FUND COMPLEX
JOHN E. MURRAY, JR. $1,243.22 $108,725 FOR THE TRUST AND
TRUSTEE 56 OTHER INVESTMENT COMPANIES IN THE
FUND COMPLEX
WESLEY W. POSVAR $1,243.22 $108,725 FOR THE TRUST AND
TRUSTEE 56 OTHER INVESTMENT COMPANIES IN THE
FUND COMPLEX
MARJORIE P. SMUTS $1,243.22 $108,725 FOR THE TRUST AND
TRUSTEE 56 OTHER INVESTMENT COMPANIES IN THE
FUND COMPLEX
*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 Advisers 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 $341,175, $341,354, and $394,564,
respectively, of which $195,433, $222,052, and $394,564, respectively, were
voluntarily waived.
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, $134,042 and $247,255, 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 that 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.
Except under certain circumstances described in the prospectus, Shares are sold
at their net asset value (plus a sales charge on Class A Shares only) on days
the New York Stock Exchange is open for business. The procedure for purchasing
shares is explained in the prospectus under `How to Purchase Shares.''
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 $0, $8,482 and $49,274, respectively, were made by Class A Shares
pursuant to the Distribution Plan, none of which were waived. In addition, for
the fiscal year ended August 31, 1996, the Fund's Class A Shares paid
shareholder service fees in the amount of $213,235, of which $17,059 were
waived.
PURCHASES BY SALES REPRESENTATIVES, TRUSTEES, AND EMPLOYEES
Trustees, employees, and sales representatives of the Fund, Federated Advisers,
and Federated Securities Corp. or their affiliates and their immediate family
members, or any investment dealer who has a sales agreement with Federated
Securities Corp., and their spouses and children under 21, may buy Class A
Shares at net asset value without a sales charge. Class A 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 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, less any
applicable contingent deferred sales charge, after the Fund receives the
redemption request. Redemption procedures and contingent deferred sales charges
are explained in the prospectus under `How to Redeem 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.
Class B Shares redeemed within one to six years of purchase and applicable Class
A Shares redeemed within one year of purchase may be subject to a contingent
deferred sales charge. The amount of the contingent deferred sales charge is
based upon the amount of the administrative fee paid at the time of purchase by
the distributor to the financial institution for services rendered, and the
length of time the investor remains a shareholder in the Fund. Should financial
institutions elect to receive an amount less than the administrative fee that is
stated in the prospectus for servicing a particular shareholder, the contingent
deferred sales charge and/or holding period for that particular shareholder will
be reduced accordingly.
REDEMPTION IN KIND
The Trust is obligated to redeem Shares solely in cash up to $250,000 or 1% of
the net asset value of the respective class, whichever is less, for any one
shareholder within a 90-day period.
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 Fund 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.
ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE (CLASS B SHARES ONLY)
The amounts that a shareholder may withdraw under a Systematic Withdrawal
Program that qualify for elimination of the Contingent Deferred Sales Charge may
not exceed 12% annually with reference initially to the value of the Class B
Shares upon establishment of the Systematic Withdrawal Program and then as
calculated at the annual valuation date. Redemptions on a qualifying Systematic
Withdrawal Program can be made at a rate of 1.00% monthly, 3.00% quarterly, or
6.00% semi-annually with reference to the applicable account valuation amount.
Amounts that exceed the 12.00% annual limit for redemption, as described, may be
subject to the Contingent Deferred Sales Charge. To the extent that a
shareholder exchanges Class B Shares for Class B Shares of other Federated
Funds, the time for which the exchanged-for Class B Shares are to be held will
be added to the time for which exchanged-from Class B Shares were held for
purposes of satisfying the 12 month holding requirement. However, for purposes
of meeting the $10,000 minimum account value requirement, Class B Share accounts
will not be aggregated.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust on behalf
of the Fund. To protect shareholders of the Fund, the Trust has filed legal
documents with Massachusetts that expressly disclaim the liability of
shareholders of the Fund for such acts or obligations of the Trust. These
documents require notice of this disclaimer to be given in each agreement,
obligation, or instrument that the Trust or its Trustees enter into or sign on
behalf of the Fund.
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.
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.
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:
othe availability of higher relative yields;
odifferentials in market values;
onew investment opportunities;
ochanges in creditworthiness of an issuer; or
oan 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 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 return for Class A Shares for the fiscal year
ended August 31, 1996, and for the period from October 11, 1990 (date of initial
public investment) to August 31, 1996, were 3.75% and 7.64%, respectively.
The Fund's average annual total return for each class of shares 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, 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.
The Fund's yield for Class A Shares for the thirty-day period ended August 31,
1996 was 5.11%.
The yield for each class of shares of the Fund is determined by dividing the net
investment income per share (as defined by the Securities and Exchange
Commission) earned by any class of shares over a thirty-day period by the
maximum offering price per Share of the respective class on the last day of the
period. This value is then annualized using semi-annual compounding. This means
that the amount of income generated during the thirty-day period is assumed to
be generated each month over a twelve-month period and is reinvested every six
months. The yield does not necessarily reflect income actually earned by any
class of shares because of certain adjustments required by the Securities and
Exchange Commission and, therefore, may not correlate to the dividends or other
distributions paid to shareholders. To the extent that financial institutions
and broker/dealers charge fees in connection with services provided in
conjunction with an investment in any class of shares of the Fund, performance
will be reduced for those shareholders paying those fees.
The Fund's tax-equivalent yield for Class A Shares for the thirty-day period
ended August 31, 1996 was 7.38%.
The tax-equivalent yield for each class of shares of the Fund is calculated
similarly to the yield, but is adjusted to reflect the taxable yield that any
class would have had to earn to equal its actual yield, assuming a state and
federal tax rate of 30.80% 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 is free
from the income taxes imposed by the State of Pennsylvania. 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 1997
STATE OF PENNSYLVANIA
COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
17.80% 30.80% 33.80% 38.80% 42.40%
JOINT $1- $41,201- $99,601- $151,751- OVER
RETURN 41,200 99,600 151,750 271,050 $271,050
SINGLE $1- $24,651- $59,751- $124,651- OVER
RETURN 24,650 59,750 124,650 271,050 $271,050
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
1.50% 1.82% 2.17% 2.27% 2.45% 2.60%
2.00% 2.43% 2.89% 3.02% 3.27% 3.47%
2.50% 3.04% 3.61% 3.78% 4.08% 4.34%
3.00% 3.65% 4.34% 4.53% 4.90% 5.21%
3.50% 4.26% 5.06% 5.29% 5.72% 6.08%
4.00% 4.87% 5.78% 6.04% 6.54% 6.94%
4.50% 5.47% 6.50% 6.80% 7.35% 7.81%
5.00% 6.08% 7.23% 7.55% 8.17% 8.68%
5.50% 6.69% 7.95% 8.31% 8.99% 9.55%
6.00% 7.30% 8.67% 9.06% 9.80% 10.42%
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 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 each class of shares depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in the Fund's class expenses; and
o various other factors.
The Fund's performance fluctuates on a daily basis largely because net earnings
and offering price per share fluctuate daily. Both net earnings and offering
price per share are factors in the computation of yield and total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
o 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 offering price 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 specific 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 fundamental and technical research. Investment decisions
are made and executed by teams of portfolio managers, analysts, and traders
dedicated to specific market sectors. These traders handle trillions of dollars
in annual trading volume.
In the municipal sector, as of December 31, 1996, Federated Investors managed 12
bond funds with approximately $2.0 billion in assets and 21 money market funds
with approximately $9.5 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.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $3.5 trillion to the more than 6,000 funds available.*
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.
BANK MARKETING
Other institutional clients include close relationships with more than 1,600
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios. The
marketing effort to trust clients is headed by Mark R. Gensheimer, Executive
Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated mutual funds are available to consumers through major brokerage firms
nationwide -- we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country -- supported by more wholesalers than any other
mutual fund distributor. Federated's service to financial professionals and
institutions has earned it high rankings in several surveys performed by DALBAR,
Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Broker/Dealer Division.
*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.
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 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 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.
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. 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.
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.
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements: Filed in Part A.
(b) Exhibits:
(1) (i) Paper Copy of Declaration of Trust of the Registrant
(1);
(ii) Paper Copy of Amendment No. 1 (dated August 26, 1991)
to Declaration of Trust (5);
(iii) Conformed Copy of Amendment No. 2 (dated August 6,
1990) to the Declaration of Trust (6);
(iv) Conformed Copy of Amendment No. 3 (dated August 31,
1992) to the Declaration of Trust (8);
(v) Conformed Copy of Amendment No. 4 (dated September 17,
1992) to the Declaration of Trust (8);
(vi) Conformed Copy of Amendment No. 5 (dated February 4,
1993) to the Declaration of Trust (10);
(vii) Conformed Copy of Amendment No. 6 (dated May 24, 1993)
to the Declaration of Trust; (13)
(2) Copy of By-Laws of the Registrant (1);
(3) Not applicable;
(4) Copy of Specimen Certificate for Shares of Beneficial
Interest for:
(i) Federated Pennsylvania Municipal Income Fund-Class A
Shares; (19)
(ii) Federated Ohio Municipal Income Fund-Class F Shares;
(19)
(iii) Federated California Municipal Income Fund-Class F
Shares; (19)
(iv) Federated New York Municipal Income Fund-Class F
Shares; (19)
(v) Federated Michigan Intermediate Municipal Trust; (19)
+ All exhibits are filed electronically.
1. Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed August 31, 1990. (File Nos.
33-36729 and 811-6165)
5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 4 on Form N-1A filed on October 28, 1991. (File Nos.
33-36729 and 811-6165)
6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed on January 24, 1992. (File Nos.
33-36729 and 811-6165)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 on Form N-1A filed on September 25, 1992. (File Nos.
33-36729 and 811-6165)
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed on March 24, 1993. (File Nos. 33-
36729 and 811-6165)
13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 on Form N-1A filed on July 2, 1993, (File Nos. 33-
36729 and 811-6165)
19. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 21 on Form N-1A filed on October 23, 1996, (File Nos.
33-36729 and 811-6165)
(5) Copy of new Investment Advisory Contract of the
Registrant (8);
(i) Copy of Amendment to Investment Advisory Contract (12)
(ii) Conformed Copies of Amendments to Investment Advisory
Contract (14);
(iii) Conformed Copies of Amendments to Investment Advisory
Contract (14);
(6) Copy of Distributor's Contract of the Registrant (8);
(i) Copy of Amendment to Distributor's Contract (12);
(ii) Conformed copy of Amendment to Distributor's Contract
(14);
(iii) The Registrant incorporates the conformed copy of the
specimen Mutual Fund Sales and Service Agreement;
Mutual Funds Service Agreement; and Plan Trustee/Mutual
Funds Service Agreement from Item 24(b)(6) of the Cash
Trust Series II Registration Statement filed with the
Commission on July 24, 1995. (File Number 33-38550 and
811-6269).
(7) Not applicable;
(8) Conformed Copy of Custodian Contract of the
Registrant (18);
(9) (i) Conformed Copy of Agreement for Fund Accounting
Services, Administrative Services, Transfer Agency
Services and Custody Services Procurement; (19)
(ii) Conformed Copy of Shareholder
Services Agreement(17);
(iii) With regard to Federated California Municipal Income
Fund and Federated New York Municipal Income Fund,
the Registrant hereby incorporates the conformed
copy of the Shareholder Services Sub-Contract between
Fidelity and Federated Shareholder Services from Item
24(b)(9)(iii) of the Federated GNMA Trust
Registration Statement on Form N-1A, filed with the
Commission on March 25, 1996. (File Nos. 2-75670 and
811-3375).
(iv) The response and exhibits described in Item
24(b)(6)(iii) are hereby incorporated by reference;
+ All exhibits are filed electronically.
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 on Form N-1A filed on September 25, 1992. (File Nos.
33-36729 and 811-6165)
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 on Form N-1A filed on May 17, 1993. (File Nos. 33-
36729 and 811-6165)
14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 on Form N-1A filed on October 28, 1993. (File Nos.
33-36729 and 811-6165)
17. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 17 on Form N-1A filed on December 30, 1994. (File Nos.
33-36729 and 811-6165)
18. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed on October 30, 1995. (File Nos.
33-36729 and 811-6165)
19. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 21 on Form N-1A filed on October 23, 1996, (File Nos.
33-36729 and 811-6165)
(10) Conformed Copy of Opinion and Consent of Counsel as to the
legality of shares being registered (1);
(11) Conformed Copy of Consent of Independent Auditors;+
(12) Not applicable;
(13) Conformed Copy of Initial Capital Understanding (1);
(14) Not applicable;
(15) (i) Copy of Distribution Plan (12);
(ii) Copy of 12b-1 Agreement (8);
(iii) The response and exhibits described in Item
24(b)(6)(iii) are hereby incorporated by reference;
(16) Copy of Schedule for Computation of Fund Performance Data
for:
(i) Ohio Municipal Income Fund (18);
(ii) Pennsylvania Municipal Income Fund (18);
(iii) California Municipal Income Fund (11);
(iv) New York Municipal Income Fund (11);
(v) Michigan Municipal Income Fund (11);
(17) Copy of Financial Data Schedules;+
(18) Not applicable.
(19) Conformed Copy of Power of Attorney; (19)
Item 25. Persons Controlled by or Under Common Control with Registrant
None
+ All exhibits are filed electronically.
1. Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed August 31, 1990. (File Nos.
33-36729 and 811-6165)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 on Form N-1A filed on September 25, 1992. (File Nos.
33-36729 and 811-6165)
11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 11 on Form N-1A filed on April 28, 1993. (File Nos. 33-
36729 and 811-6165)
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 on Form N-1A filed on May 17, 1993. (File Nos. 33-
36729 and 811-6165)
18. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed on October 30, 1995. (File Nos.
33-36729 and 811-6165)
19. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 21 on Form N-1A filed on October 23, 1996, (File Nos.
33-36729 and 811-6165)
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of February 5, 1997
Shares of
beneficial interest
Federated California Municipal Income Fund 326
Federated Michigan Municipal Income Trust312
Federated New York Municipal Income Fund395
Federated Ohio Municipal Income Fund 1,659
Federated Pennsylvania Municipal Income
Fund (Class A Shares) 2,024
Item 27. Indemnification: (1)
Item 28. Business and Other Connections of Investment Adviser:
For a description of the other business of the investment
adviser, see the section entitled `Municipal Securities Income
Trust Information - Management of Municipal Securities Income
Trust''in Part A. The affiliations with the Registrant of four
of the Trustees and one of the Officers of the investment adviser
are included in Part B of this Registration Statement under
`Municipal Securities Income Trust Management." The remaining
Trustee of the investment adviser, his position with the
investment adviser, and, in parentheses, his principal occupation
is: Mark D. Olson, (Partner, Wilson, Halbrook & Bayard), 107 W.
Market Street, Georgetown, Delaware, 19947.
The remaining Officers of the investment adviser are: William P.
Dawson, III, Henry A Franzen, J. Thomas Madden and Mark L.
Mallon, Executive Vice Presidents; Peter R. Anderson, Drew J.
Collins, Jonathan C Conley, Deborah A. Cunningham, Mark Durbiano,
J. Alan Minteer and Mary Jo Ochson, Christopher H. Wiles, Senior
Vice Presidents; J. Scott Albrecht, Joseph M. Balestrino, Randall
S. Bauer, David F. Belton, Christine A. Bosio, David A. Briggs
Kenneth J. Cody, Alexandre de Bethmann, Michael J. Donnelly,
Michael P. Donnelly, Linda A. Duessel, Kathleen Foody-Malus,
Thomas M. Franks, Edward C. Gonzales, James E. Grefenstette,
Susan R. Hill, Stephen A. Keen, Robert M. Kowit, Mark S.
Kopinski, Jeff A. Kozemchak, Marian R. Marinack, Sandra L.
McInerney, Susan M. Nason, Robert J. Ostrowski, Charles A.
Ritter, Scott B. Schermerhorn, Frank Semack, Aash M. Shah,
William F. Stotz, Tracy P. Stouffer, Edward J. Tiedge, Paige M.
Wilhelm, Jolanta M. Wysocka, Vice Presidents; Thomas R. Donahue,
Treasurer; and Stephen A. Keen, Secretary. The business address
of each of the Officers of the investment adviser is Federated
Investors Tower, Pittsburgh, PA 15222-3779. These individuals are
also officers of a majority of the investment advisers to the
Funds listed in Part B of this Registration Statement.
1. Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed August 31, 1990. (File Nos.
33-36729 and 811-6165)
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the Distributor for shares of the
Registrant, also acts as principal underwriter for the
following open-end investment companies:
111 Corcoran Funds; Arrow Funds; Automated Government Money
Trust; BayFunds; 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; Independence One Mutual Funds;
Intermediate Municipal Trust; International Series, Inc.;
Investment Series Funds, Inc.; Investment Series Trust;
Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Marshall Funds, Inc.; Money
Market Management, Inc.; Money Market Obligations Trust;
Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; Peachtree Funds; RIMCO Monument Funds;
SouthTrust Vulcan Funds; Star Funds; Targeted Duration Trust;
Tax-Free Instruments Trust; The Biltmore Funds; The Biltmore
Municipal Funds; The Monitor Funds; The Planters Funds; The
Starburst Funds; The Starburst Funds II; The Virtus Funds;
Tower Mutual Funds; Trust for Financial Institutions; Trust
for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations;
Vision Group of Funds, Inc.; andWorld Investment Series, Inc.
Federated Securities Corp. also acts as principal underwriter
for the following closed-end investment company: Liberty Term
Trust, Inc.- 1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary, and Asst.
Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive ViceExecutive Vice
Federated Investors Tower President, Federated, President
Pittsburgh, PA 15222-3779 Securities Corp.
Thomas R. Donahue Director, Assistant Secretary,
Federated Investors Tower Assistant Treasurer
Pittsburgh, PA 15222-3779 Federated Securities Corp
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust, Federated
Pittsburgh, PA 15222-3779 Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Byron F. Bowman Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Dale R. Browne Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securites Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Steven A. La Versa Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert D. Oehlschlager Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard Suder Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jamie M. Teschner Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charlene H. Jennings Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
J. Timothy Radcliff Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Leslie K. Platt Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(c) Not applicable.
Item 30. Location of Accounts and Records:
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Registrant Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Shareholder Services Company P.O. Box 8600
(`Transfer Agent and Dividend Boston, MA 02266-8600
Disbursing Agent')
Federated Services Company Federated Investors Tower
(`Administrator'') Pittsburgh, PA 15222-3779
Federated Advisers Federated Investors Tower
(`Adviser'') Pittsburgh, PA 15222-3779
State Street Bank and Trust Company P.O. Box 8600
(`Custodian'') Boston, MA 02266-8600
Item 31. Management Services:
Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, MUNICIPAL SECURITIES INCOME
TRUST, certifies that it meets all of the requirements for effectiveness of
this Amendment to its Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Pittsburgh and Commonwealth of
Pennsylvania, on the 12th day of February, 1997.
MUNICIPAL SECURITIES INCOME TRUST
BY: /s/ S. Elliott Cohan
S. Elliott Cohan, Assistant Secretary
Attorney in Fact for John F. Donahue
February 12, 1997
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE DATE
By:/s/ S. Elliott Cohan
S. Elliott Cohan Attorney In Fact February 12, 1997
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
Richard B. Fisher* President
J. Christopher Donahue* Executive Vice President
and Trustee
John W. McGonigle * Treasurer and Executive
Vice President
(Principal Financial and
Accounting Officer)
Thomas G. Bigley* Trustee
John T. Conroy, Jr.* Trustee
William J. Copeland* Trustee
James E. Dowd* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr.* Trustee
Peter E. Madden* Trustee
Gregor F. Meyer* Trustee
John E. Murray, Jr.* Trustee
Wesley W. Posvar* Trustee
Majorie P. Smuts* Trustee
Exhibit (11) under N-1A
Exhibit 23 under 601/Reg SK
INDEPENDENT AUDITORS' CONSENT
To the Board of Trustees of Municipal Securities Income Trust
and Shareholders of Federated Pennsylvania Municipal Income Fund:
We consent to the use in Post-Effective Amendment No. 22 to Registration
Statement (No. 33-36729) of Federated Pennsylvania Municipal Income Fund, a
portfolio of Municipal Securities Income Trust, of our report dated
October 11, 1996, appearing in the Prospectus, which is a part of such
Registration Statement, and to the reference to us under the heading `Financial
Highlights''in such Prospectus.
By:/s/ DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
February 10, 1997
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> Municipal Securities Income Trust
Federated Pennsylvania Municipal Income Fund
Class A Shares
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Aug-31-1996
<PERIOD-END> Aug-31-1996
<INVESTMENTS-AT-COST> 77,683,811
<INVESTMENTS-AT-VALUE> 82,295,572
<RECEIVABLES> 1,832,084
<ASSETS-OTHER> 84,381
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 84,212,037
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 96,507
<TOTAL-LIABILITIES> 96,507
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 81,237,429
<SHARES-COMMON-STOCK> 7,408,593
<SHARES-COMMON-PRIOR> 7,458,342
<ACCUMULATED-NII-CURRENT> 196,829
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,930,489)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,611,761
<NET-ASSETS> 84,115,530
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,530,462
<OTHER-INCOME> 0
<EXPENSES-NET> 643,458
<NET-INVESTMENT-INCOME> 4,887,004
<REALIZED-GAINS-CURRENT> 556,055
<APPREC-INCREASE-CURRENT> 353,374
<NET-CHANGE-FROM-OPS> 5,796,433
<EQUALIZATION> (6,300)
<DISTRIBUTIONS-OF-INCOME> 4,846,944
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 965,079
<NUMBER-OF-SHARES-REDEEMED> 1,284,868
<SHARES-REINVESTED> 270,041
<NET-CHANGE-IN-ASSETS> 393,461
<ACCUMULATED-NII-PRIOR> 163,069
<ACCUMULATED-GAINS-PRIOR> (2,486,544)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 341,175
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 855,950
<AVERAGE-NET-ASSETS> 85,142,844
<PER-SHARE-NAV-BEGIN> 11.230
<PER-SHARE-NII> 0.650
<PER-SHARE-GAIN-APPREC> 0.120
<PER-SHARE-DIVIDEND> 0.650
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.350
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
