1933 Act File No. 33-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-14
REGISTRATION STATEMENT, UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. ................................
Post-Effective Amendment No. ...............................
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 on May 1, 1997, or as
soon thereafter as is practicable, pursuant to Rule 488.
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, and:
X filed the Notice required by that Rule on October 15, 1996; or
intends to file the Notice required by that Rule on or about
; or
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during the most recent fiscal year did not sell any securities
pursuant to Rule 24f-2 under the Investment Company Act of 1940,
and, pursuant to Rule 24f-2(b)(2), need not file the Notice.
Copies to:
Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky, LLP
2101 L Street, N.W.
Washington, D.C. 20037
CROSS REFERENCE SHEET
Item of Part A Location in
of Form N-14 Prospectus
1..................................Cross Reference Sheet; Cover Page.
2..................................Table of Contents.
3..................................Summary; Comparison of Investment
Policies and Risk Factors.
4..................................Information About the Reorganization.
5..................................Information About the Portfolio and the
Fund.
6..................................Information About the Portfolio and the
Fund.
7..................................Voting Information.
8..................................Summary; Information About the
Reorganization.
9..................................Not Applicable.
Item of Part B Location in Statement of
Of Form N-14 Additional Information
10.................................Cover Page.
11.................................Table of Contents.
12.................................Statement of Additional Information of
Federated Ohio Intermediate Municipal
Trust dated July 31, 1996.
13.................................Not Applicable.
14.................................Prospectus of Federated Ohio
Intermediate Municipal Trust dated July
31, 1996; Financial Statements of
Federated Ohio Municipal Income Fund, a
portfolio of Municipal Securities Income
Trust.
[INTERMEDIATE MUNICIPAL TRUST LETTERHEAD]
Dear Shareholder:
The Board of Trustees and Management of Intermediate Municipal Trust,
on behalf of its portfolio, Federated Ohio Intermediate Municipal Trust
(the "Fund"), are pleased to submit for your vote a proposal to sell all of
the Fund's assets to Federated Ohio Municipal Income Fund, a portfolio of
Municipal Securities Income Trust. As described in the enclosed
Prospectus/Proxy Statement, Federated Ohio Municipal Income Fund has an
investment objective and policies similar to the Fund. Both seek to
provide current income exempt from federal regular income tax and the
personal income taxes imposed by the State of Ohio.
The Board of Trustees of Intermediate Municipal Trust, as well as
Federated Management, the Fund's investment adviser, believe that the
proposed Agreement and Plan of Reorganization is in the best interest of
Fund shareholders. The transaction should result in efficiencies of scale
by combining the Fund's assets with a larger portfolio, which could provide
benefits from lower expense ratios and greater diversification.
We believe that the sale of the Fund's assets in this transaction will
present an excellent investment opportunity for our shareholders. Your
vote on the transaction is critical to its success. The sale will be
effected only if approved by the holders of a majority of the Fund's
outstanding shares on the record date. We hope you share our enthusiasm
and will participate by casting your vote in person or by proxy if your are
unable to attend the meeting. Please read the enclosed Prospectus/Proxy
Statement carefully before you vote. If you have any questions, please
feel free to call us at 1-800-341-7400.
Thank you for your prompt attention and participation.
Sincerely,
John F. Donahue
Chairman of the Board
INTERMEDIATE MUNICIPAL TRUST
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO SHAREHOLDERS OF FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST, A
PORTFOLIO OF INTERMEDIATE MUNICIPAL TRUST: A Special Meeting of
Shareholders of Federated Ohio Intermediate Municipal Trust (the "Fund")
will be held at 2:00 p.m. on July 7, 1997, at Federated Investors Tower,
19th Floor, 1001 Liberty Avenue, Pittsburgh, Pennsylvania 15222-3779 for
the following purposes:
To approve a proposed Agreement and Plan of Reorganization between
Intermediate Municipal Trust, on behalf of the Fund, and
Municipal Securities Income Trust (the "Trust"), on behalf of its
portfolio, Federated Ohio Municipal Income Fund (the
"Portfolio"), whereby the Trust would acquire all of the assets
of the Fund in exchange for Class F Shares of the Portfolio to be
distributed pro rata by the Fund to holders of shares of the
Fund, in complete liquidation of the Fund; and
To transact such other business as may properly come before the
meeting or any adjournment thereof.
By Order of the Board of Trustees
John W. McGonigle
Secretary
Dated : May 23, 1997
Shareholders of record at the close of business on May 9, 1997 are
entitled to vote at the meeting. Whether or
not you plan to attend the meeting, please sign and return the enclosed
proxy card. Your vote is important.
To secure the largest possible representation and to save the
expense of further mailings, please mark your proxy card, sign it, and
return it in the enclosed envelope, which requires no postage if mailed in
the United States. You may revoke your proxy at any time at or before the
meeting or vote in person if you attend the meeting.
1
I:\b358\rcr\federated\intermediate\shareholder.mtg
PROSPECTUS/PROXY STATEMENT
May 23, 1997
ACQUISITION OF THE ASSETS OF
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST,
A PORTFOLIO OF INTERMEDIATE MUNICIPAL TRUST
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-341-7400
BY AND IN EXCHANGE FOR CLASS F SHARES OF
FEDERATED OHIO MUNICIPAL INCOME FUND,
A PORTFOLIO OF MUNICIPAL SECURITIES INCOME TRUST
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-341-7400
This Prospectus/Proxy Statement describes the proposed Agreement and
Plan of Reorganization (the "Plan") whereby Municipal Securities Income
Trust, a Massachusetts business trust (the "Trust"), on behalf of its
portfolio, Federated Ohio Municipal Income Fund (the "Portfolio"), would
acquire all of the assets of Federated Ohio Intermediate Municipal Trust
(the "Fund"), a portfolio of Intermediate Municipal Trust, in exchange for
Class F Shares of the Portfolio to be distributed pro rata by the Fund to
its shareholders in complete liquidation of the Fund. As a result of the
Plan, each shareholder of the Fund will become the owner of Class F Shares
of the Portfolio having a total net asset value equal to the total net
asset value of his or her holdings in the Fund.
The Trust is among over 100 funds managed by subsidiaries of Federated
Investors. Federated Investors is one of the largest institutional service
providers in the United States. It has been providing advisory services
for over 41 years.
The Trust is an open-end, non-diversified management investment
company which currently includes five portfolios: Federated California
Municipal Income Fund, Federated Michigan Intermediate Municipal Trust,
Federated New York Municipal Income Fund, Federated Pennsylvania Municipal
Income Fund, and the Portfolio. The investment objective of the Portfolio
is to provide current income exempt from federal regular income tax and the
personal income taxes imposed by the State of Ohio and Ohio municipalities.
The investment objective of the Fund is to provide current income exempt
from federal regular income tax and the personal income taxes imposed by
the State of Ohio. The Portfolio pursues its investment objective by
investing its assets so that at least 80% of its annual interest income is
exempt from federal regular income tax and the personal income taxes
imposed by the State of Ohio and Ohio municipalities. The Fund pursues its
investment objective by investing at least 80% of its net assets in a
portfolio of Ohio municipal securities. Both the Portfolio and the Fund
are non-diversified series of investment companies. Shares in the
Portfolio and the Fund are not insured or guaranteed by the U.S. government
or any agency thereof. For a comparison of the investment policies of the
Portfolio and the Fund, see "Comparison of Investment Policies and Risk
Factors."
The Portfolio is currently offered with one class of shares: Class F
Shares (formerly, Fortress Shares). Holders of shares of the Fund will
receive Class F Shares of the Portfolio if the Reorganization is approved
by shareholders. Information concerning Class F Shares of the Portfolio,
as compared to Shares of the Fund, is included in this Prospectus/Proxy
Statement in the sections entitled "SUMMARY - Comparative Fee Tables" and
"INFORMATION ABOUT THE REORGANIZATION - Description of the Plan of
Reorganization."
This Prospectus/Proxy Statement should be retained for future
reference. It sets forth concisely the information about the Trust and the
Portfolio that a prospective investor should know before investing. This
Prospectus/Proxy Statement is accompanied by the Prospectus of the
Portfolio dated October 31, 1996, which is incorporated herein by
reference. Statements of Additional Information for the Portfolio dated
October 31, 1996 (relating to the Portfolio's prospectus of the same date)
and May 23, 1997 (relating to this Prospectus/Proxy Statement) containing
additional information have been filed by the Trust with the Securities and
Exchange Commission and are incorporated herein by reference. Copies of
the Statements of Additional Information may be obtained without charge by
writing or by calling the Trust at the address and telephone number shown
above.
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/PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS/PROXY
STATEMENT AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR THE PORTFOLIO.
SHARES OF THE PORTFOLIO ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK. SHARES OF THE PORTFOLIO ARE NOT
FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED
BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN
THE PORTFOLIO INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL AMOUNT INVESTED.
TABLE OF CONTENTS
PAGE
PROPOSAL 1.........................................REORGANIZATION
SUMMARY....................................................
COMPARISON OF INVESTMENT POLICIES AND RISK FACTORS.........
INFORMATION ABOUT THE REORGANIZATION.......................
INFORMATION ABOUT THE PORTFOLIO AND THE FUND................
VOTING INFORMATION...............................................
AGREEMENT AND PLAN OF REORGANIZATION....................Exhibit A
PROPOSAL 1. REORGANIZATION
SUMMARY
ABOUT THE PROPOSED REORGANIZATION
The Board of Trustees of Intermediate Municipal Trust, including its
members who are not "interested persons" within the meaning of the
Investment Company Act of 1940, as amended (the "1940 Act"), on behalf of
one of its portfolios, Federated Ohio Intermediate Municipal Trust (the
"Fund"), has voted to recommend to shareholders of the Fund the approval of
an Agreement and Plan of Reorganization (the "Plan"), whereby Municipal
Securities Income Trust, a Massachusetts business trust (the "Trust"), on
behalf of its portfolio, Federated Ohio Municipal Income Fund (the
"Portfolio"), would acquire all of the assets of the Fund in exchange for
Class F Shares of the Portfolio to be distributed pro rata by the Fund to
its shareholders in complete liquidation and dissolution of the Fund (the
"Reorganization"). As a result of the Reorganization, each shareholder of
shares of the Fund will become the owner of Class F Shares of the Portfolio
having a total net asset value equal to the total net asset value of his or
her holdings in the Fund on the date of the Reorganization (the "Closing
Date").
As a condition to the Reorganization transactions, the Trust and the
Fund will receive an opinion of counsel that the Reorganization will be
considered a tax-free "reorganization" under applicable provisions of the
Internal Revenue Code of 1986, as amended, so that no gain or loss will be
recognized by either the Trust or the Fund or their respective
shareholders. The tax cost-basis of the Class F Shares of the Portfolio
received by Fund shareholders will be the same as the tax cost-basis of
their shares in the Fund.
After the acquisition is completed, the Fund will no longer be
available as an investment portfolio of Intermediate Municipal Trust.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Portfolio is to provide current income
exempt from federal regular income tax and the personal income taxes
imposed by the State of Ohio and Ohio municipalities, while the Fund's
investment objective is to provide current income exempt from federal
regular income tax and the personal income taxes imposed by the State of
Ohio. Both the Portfolio and the Fund pursue their respective investment
objectives by investing in a portfolio consisting primarily of obligations
issued by or on behalf of states, territories, and possessions of the
United States, and their respective political subdivisions or financing
authorities, which pay income exempt from federal regular income tax and
Ohio personal income taxes. The Portfolio pursues its investment objective
by investing its assets so that at least 80% of its annual interest income
is exempt from federal regular income tax and the personal income taxes
imposed by the State of Ohio and Ohio municipalities. The Fund pursues its
investment objective by investing at least 80% of its net assets in a
portfolio of Ohio municipal securities. Both the Portfolio and the Fund
are non-diversified series of investment companies. Since the Portfolio
and the Fund invest in similar securities, an investment in the Portfolio
presents similar investment risks as investing in the Fund.
ADVISORY FEES AND EXPENSE RATIOS
The maximum annual investment advisory fee for the Portfolio is 0.40%
of average daily net assets. The maximum annual investment advisory fee
for the Fund is 0.50% of average daily net assets.
For its fiscal year ended August 31, 1996, the Portfolio's ratio of
expenses to average daily net assets was 0.90% for Class F Shares. During
this period the Portfolio's investment adviser, Federated Advisers
("Federated Advisers"), voluntarily waived a portion of its management fees
and reimbursed the Portfolio for certain operating expenses. Absent such
waiver and reimbursement, the ratio of expenses to average daily net assets
would have been 1.48% for Class F Shares of the Portfolio. This
undertaking to waive management fees and/or reimburse operating expenses
may be terminated by Federated Advisers at any time in its discretion.
For its fiscal year ended May 31, 1996, the Fund's ratio of expenses
to average daily net assets was 0.45%. During this period the Fund's
investment adviser, Federated Management ("Federated Management"),
voluntarily waived a portion of its management fees and reimbursed the Fund
for certain operating expenses. Absent such waiver and reimbursement, the
ratio of expenses to average daily net assets would have been 4.53%. This
undertaking to waive management fees and/or reimburse operating expenses
may be terminated by Federated Management at any time in its discretion.
SERVICES PROVIDERS TO THE TRUST AND PORTFOLIO
Administrative services to the Trust and Portfolio are provided by
Federated Services Company ("Federated Services"). Federated Services is a
wholly-owned subsidiary of Federated Investors. For its services to the
Portfolio, Federated Services receives a fee at an annual rate which
relates to the average aggregate daily net assets of all funds administered
by Federated Services in the Federated Investors complex, determined as
follows: 0.15% on the first $250 million in assets; 0.125% on the next
$250 million in assets; 0.10% on the next $250 million in assets; and
0.075% on assets in excess of $750 million. The minimum annual
administrative fee for the Portfolio is $125,000 plus $30,000 per each
additional class of shares. For the fiscal year ended August 31, 1996,
Federated Services received administrative fees at the effective rate of
0.18% of the average daily net assets of the Portfolio.
Federated Services also serves as the Portfolio's transfer agent and
dividend disbursing agent. Federated Services also provides certain
accounting and recordkeeping services with respect to the portfolio
investments of the Portfolio.
Federated Securities Corp. ("FSC"), a wholly-owned subsidiary of
Federated Investors, is the principal distributor of the Trust and
Portfolio. Under a distribution agreement, FSC acts as the Trust's agent
in connection with the offering of shares of the Portfolio.
COMPARATIVE FEE TABLES
Set forth in the tables below is information regarding the fees and
expenses paid by the Fund and Class F Shares of the Portfolio as of August
31, 1996, and pro forma information for the Portfolio assuming that the
Reorganization had taken place on July 11, 1997.
Federated Ohio
Municipal Income
Fund Federated Ohio Pro Forma
Class F Shares Intermediate Municipal Combined Fund
(the "Portfolio") Trust (the "Fund") Class F Shares
SHAREHOLDER
TRANSACTION EXPENSES
Maximum Sales Charge
Imposed on Purchases
(as a percentage of
offering price) 1.00% None 1.00%
Maximum Sales Charge
Imposed on Reinvested
Dividends (as a
percentage of offering
price)......... None None None
Contingent Deferred
Sales Charge (as a
percentage of original
purchase price or
redemption proceeds,
as applicable). 1.00%(1) None 1.00%(1)
Redemption Fees
(as a percentage of
amount redeemed, if
applicable).... None None None
Exchange Fee... None None None
ANNUAL FUND
OPERATING EXPENSES
(as a percentage of
average net assets)
Management Fees/
Advisory Fees (after
fee waivers)(2) 0.07% 0.00% 0.07%
12b-1 Fees (after
waivers)....... 0.16%(3) None 0.16%(3)
Shareholder Services
Fee (after waivers) (4) 0.24% 0.10% 0.24%
Other Expenses
(after fee waivers
and/or expense
reimbursements) 0.43% 0.35%(6) 0.43%
Total Operating
Expenses (after fee
waivers and/or
expense reimbursements 0.90%(5) 0.45%(6) 0.90%(5)
(1) The contingent deferred sales charge is 1.00% of the lesser of the
original purchase price or the net asset value of shares redeemed
within four years of their purchase date. If the Reorganization is
completed, current shareholders of the Fund would not be subject to
the contingent deferred sales charge.
(2) 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 of the Portfolio and the Pro Forma combined Fund is
0.40%. The maximum fee of the Fund is 0.50%.
(3) The Portfolio and the Pro Forma Combined Fund 12b-1 fee has been
reduced to reflect the voluntary waiver of a portion of the 12b-1 fee.
The 12b-1 fee provider can terminate this voluntary waiver at any
time at its sole discretion. The maximum 12b-1 fee is 0.40%.
(4) The shareholder services fee has been reduced to reflect the voluntary
waiver of the shareholder services fee. The shareholder service
provider can terminate this voluntary waiver at any time at its sole
discretion. The maximum shareholder services fee for the Fund and
Portfolio is 0.25%.
(5) The total operating expenses would have been 1.48% absent the
voluntary waiver of a portion of the management fee, the shareholder
services fee, and the 12b-1 fee.
(6) The total operating expenses would have been 4.53% absent the
voluntary waiver of the management fee, a portion of the shareholder
services fee, and the voluntary reimbursement of certain other
operating expenses.
LONG TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE
MAXIMUM FRONT-END SALES CHARGE PERMITTED UNDER THE RULES OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC.
The purpose of this table is to assist an investor in understanding
the various costs and expenses that a shareholder will bear, either
directly or indirectly. Wire-transferred redemption of less than $5,000
may be subject to additional fees.
EXAMPLES
The Examples below are intended to assist an investor in understanding
the various costs that an investor will bear directly or indirectly. The
Examples assume payment of operating expenses at the levels set forth in
the table above.
(1) This Example does not include sales charges or contingent deferred
sales charges since such sales charges are not applicable to the
Portfolio Class F Shares received as a result of the proposed
reorganization.
An investor would pay the following expenses
on a $1,000 investment assuming (1) 5% annual
return, and (2) redemption at the end of each
time period. Expenses would be the same if there
were no redemption at the end of each time period.
1 year 3 years 5 years 10 years
Federated Ohio Municipal
Income Fund
(Class F Shares) $9 $29 $50 $111
Federated Ohio
Intermediate Municipal Trust $5 $14 $25 $57
Pro Forma Combined Fund $9 $29 $50 $111
(Class F Shares)
An investor 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.
(2) This Example includes sales charges since Portfolio Class F Shares
purchased subsequent to the reorganizaiton may be subject to sales
charges.
1 year 3 years 5 years 10 years
Federated Ohio Municipal
Income Fund
(Class F Shares) $29 $50 $59 $120
Federated Ohio Intermediate
Municipal Trust $5 $14 $25 $57
Pro Forma Combined Fund $29 $50 $59 $120
(Class F Shares)
An investor would pay the following expenses,
assuming no redemption.
1 year 3 years 5 years 10 years
Federated Ohio Municipal
Income Fund
(Class F Shares) $19 $38 $59 $120
Federated Ohio Intermediate
Municipal Trust $5 $14 $25 $57
Pro Forma Combined Fund $19 $38 $59 $120
(Class F Shares)
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
As a result of the Reorganization, the expense ratio of the Fund will
increase by 0.45%.
PURCHASE AND REDEMPTION PROCEDURES
Procedures for the purchase and redemption of Portfolio shares are
similar, but not identical, to procedures applicable to the purchase and
redemption of Fund shares. In anticipation that the Reorganization will be
consummated, shareholders of the Fund will receive information with respect
to the various services provided by the Portfolio, as well as a detailed
explanation of the options available to shareholders for effecting
purchases and redemptions of Portfolio shares. Any questions about such
procedures may be directed to, and assistance in effecting purchases or
redemptions of Portfolio shares may be obtained by calling the Portfolio at
1-800-341-7400.
Reference is made to the Prospectus of the Portfolio dated October 31,
1996, and the Prospectus of the Fund for a complete description of the
purchase and redemption procedures applicable to purchases and redemptions
of Portfolio and Fund shares, respectively, each of which is incorporated
herein by reference thereto. Set forth below is a brief listing of the
more significant differences between the purchase and redemption procedures
of the Portfolio as compared to the Fund.
Shares of the Portfolio are subject to a maximum sales charge on
purchases of 1.00% of the offering price and a contingent deferred sales
charge of up to 1.00%. Shares of the Fund are available for purchase
without the imposition of a sales charge on purchases or a contingent
deferred sales charge. Shareholders of the Fund will not pay a sales
charge on shares of the Portfolio received in the Reorganization, if
approved by shareholders. In addition, redemptions of shares received in
the Reorganization will not be subject to the contingent deferred sales
charge. Trust and Institutional customers are exempt from the sales charge
and contingent deferred sales charge. The minimum initial investment in
the Portfolio is $1,500.00. The minimum initial investment by an
institution in the Fund is $25,000.00. To meet the minimum investment
requirements, purchases of shares of the Fund may be aggregated over a
period of 90 days.
The Fund's and the Portfolio's net asset values are calculated at the
close of each day on which each computes its net asset value. Purchase
orders received by either the Portfolio or the Fund by wire before 1:00
p.m. (Eastern time) begin earning dividends that day. Purchase orders
received by check by either the Portfolio or the Fund begin earning
dividends the day after such check is converted into federal funds, which
ordinarily occurs one day after receipt by State Street Bank and Trust
Company, the Fund's and the Portfolio's custodian. Shares of the Portfolio
may also be purchased at a given day's price if an order is placed through
a financial institution, including a registered broker/dealer, and if the
purchase order is received by 4:00 p.m. and transmitted to the Portfolio by
5:00 p.m., in the case of a broker/dealer, or 4:00 p.m., in the case of a
financial institution other than a broker/dealer.
Shares of both the Portfolio and the Fund may be redeemed by mail or
by telephone. Shares of the Fund are redeemed at the net asset value per
share next determined after receiving the redemption order. Shares of the
Portfolio are subject to a contingent deferred sales charge of 1.00% of the
lesser of the original purchase price or the net asset value of shares
redeemed within four years of their purchase date.
DIVIDENDS
The Fund's dividends are declared daily and paid monthly. In
contrast, the Portfolio's dividends are declared and paid monthly to all
shareholders invested in the Portfolio on the record date. Dividends paid
by both the Fund and the Portfolio are automatically reinvested in
additional shares unless shareholders request cash payment. Dividends
reinvested in Portfolio shares are purchased at net asset value without a
sales charge.
COMPARISON OF INVESTMENT POLICIES AND RISK FACTORS
INVESTMENT OBJECTIVES AND POLICIES
The Portfolio and the Fund have similar investment objectives. The
investment objective of the Portfolio is to provide current income exempt
from federal regular income tax and the personal income taxes imposed by
the State of Ohio and Ohio municipalities. The investment objective of the
Fund is to provide current income exempt from federal regular income tax
and the personal income taxes imposed by the State of Ohio.
The Portfolio invests its assets so that at least 80% of its annual
interest income is exempt from federal regular income tax and the personal
income taxes imposed by the State of Ohio and Ohio municipalities. The
Fund pursues its investment objective by investing at least 80% of its net
assets in a non-diversified portfolio of Ohio municipal securities. In
addition, the Fund maintains a dollar-weighted average maturity of not less
than three nor more than ten years. The Portfolio has no such maturity
limitation.
Each of the Portfolio and the Fund invests in municipal securities
which pay interest that is, in the opinion of bond counsel for the issuers
or in the opinion of officers of the investment adviser of the Portfolio or
the Fund, respectively, exempt from both federal regular income tax and the
personal income taxes imposed by the State of Ohio (the "Municipal
Securities"). The Municipal Securities in which the Portfolio and the Fund
invest are: (1) obligations issued by or on behalf of the State of Ohio,
its political subdivisions, or agencies; (2) debt obligations of any state,
territory, or possession of the United States, including the District of
Columbia, or any political subdivision of any of these; and (3)
participation interests in any of the foregoing obligations.
The Municipal Securities in which the Portfolio may invest must be
"investment grade." Thus, the Portfolio's Municipal Securities must be
rated Aaa, Aa, A, or Baa, by Moody's Investors Service, Inc. ("Moody's"),
or AAA, AA, A, or BBB by Standard & Poor's Ratings Group ("S&P") or Fitch
Investors Service, Inc. ("Fitch"). The Municipal Securities in which the
Fund may invest must be rated within three highest ratings for municipal
securities by Moody's, S&P, or Fitch. In addition to the foregoing, both
the Portfolio and the Fund may invest in unrated Municipal Securities if,
at the time of purchase, the investment adviser determines that such
security is of equivalent quality to securities with the applicable
ratings. In addition, the Fund may invest in Municipal Securities which
are: (1) guaranteed at the time of purchase by the U.S. government as to
the payment of principal and interest; (2) fully collateralized by an
escrow of U.S. government securities or other securities acceptable to the
investment adviser; (3) rated at the time of purchase within Moody's
highest short-term municipal obligation rating (MIG 1/VMIG 1) or Moody's
highest municipal commercial paper rating (PRIME-1) or S&P's highest
municipal commercial paper rating (SP-1); or (4) unrated if, at the time of
purchase, other municipal securities of that issuer are rated A or better
by Moody's, S&P, or Fitch. Finally, both the Portfolio and the Fund may
retain a Municipal Security that is downgraded if the investment adviser
determines that such security continues to be an acceptable investment.
Both the Portfolio and the Fund may purchase participation interests
from financial institutions such as commercial banks, savings associations,
and insurance companies. Participation interests give the Portfolio and
the Fund undivided interests in Ohio Municipal Securities. The financial
institutions from which the Portfolio or the Fund may purchase
participation interests frequently provide or secure irrevocable letters of
credit or guarantees to assure that the participation interests are of high
quality.
Both the Portfolio and the Fund may also invest in variable rate
Municipal Securities. The variable interest rates of the Municipal
Securities are ordinarily stated as a percentage of a published interest
rate, interest rate index, or a similar standard, such as the 91-day U.S.
Treasury bill rate. Many of the variable rate Municipal Securities are
subject to payment of principal on demand by the Portfolio or the Fund in
not more than seven days.
Both the Portfolio and Fund may also invest in 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 illiquid. The Fund restricts the ability to invest in "non-
appropriation" leases to not more than ten percent of its total assets.
Lease obligations that contain "non-appropriation" clauses provide that the
municipality has no obligation to make lease or installment purchase
payments in future years unless money is appropriated for such purpose on a
yearly basis. The Portfolio does not include this limitation.
Both the Portfolio and the Fund may also purchase Municipal Securities
on a when-issued or delayed delivery basis. In these transactions, the
Portfolio or the Fund may purchase securities with payment and delivery
scheduled for a future time. A seller's failure to complete these
transactions may cause the Portfolio or the Fund to miss a price or yield
considered to be advantageous.
Finally, both the Portfolio and the Fund may invest in temporary
investments, which may include short-term non-Ohio municipal tax-exempt
obligations or taxable temporary investments. Both the Portfolio and the
Fund invest in temporary investments when the investment adviser determines
the market conditions call for a temporary defensive posture. The
temporary investments include: (1) notes issued by or on behalf of
municipal corporate issuers; (2) obligations issued or guaranteed by the
U.S. government, its agencies, or instrumentalities; (3) other debt
securities; (4) commercial paper; (5) certificates of deposit of banks; and
(6) repurchase agreements. There are no rating requirements applicable to
temporary investments, with the exception of the Fund's investment in
temporary municipal securities, which are subject to the same rating
requirements as all other Municipal Securities in which the Fund invests.
INVESTMENT RESTRICTIONS
The investment restrictions of the Portfolio and the Fund are similar.
The significant differences are as follows. Although neither the
Portfolio nor the Fund intend to invest more than 10% of its assets in
securities that may be illiquid because of legal contractual restrictions
on resale ("restricted securities") or securities for which there are no
readily available market quotations, only the Portfolio requires majority
shareholder approval in order to change the limitation relating to
restricted securities. In addition, although neither the Portfolio nor the
Fund intends to invest in puts, calls, straddles, spreads, or any
combination of these securities, only the Portfolio requires majority
shareholder approval in order to permit investments in these securities.
RISK FACTORS
The risks associated with an investment in the Portfolio and the Fund
are similar. The nature of the Municipal Securities included in each of
the Portfolio's and Fund's investments are generally subject to the same
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, adverse economic conditions or
developments affecting the State of Ohio or its municipalities could impact
the Portfolio's or the Fund's investments. Because the Portfolio may
invest in Municipal Securities that are rated in the four highest rating
categories by Moody's, S&P, or Fitch, an investment in the Portfolio may be
subject to additional investment risk as compared to the Fund, which limits
its purchase of Municipal Securities to those rated in the three highest
categories.
INFORMATION ABOUT THE REORGANIZATION
BACKGROUND AND REASONS FOR THE PROPOSED ACQUISITION
The Fund commenced operations on December 2, 1993, in order to provide
financial institutions serving in a fiduciary capacity with an investment
vehicle which provided current income exempt from federal regular income
tax and the personal income taxes imposed by the State of Ohio. Federated
Securities Corp. (`FSC''), the distributor of shares of both the Fund and
the Portfolio, has proposed that the Fund consider a sale of all of the
Fund's assets to the Trust, acting on behalf of the Portfolio.
In considering the proposed Reorganization, the Board of Trustees of
Intermediate Municipal Trust took into consideration a number of factors,
including: (1) the comparatively larger size of the Portfolio, (2) the
capabilities and resources of Federated Advisers, (3) expense ratios and
published information regarding the fees and expenses of the Portfolio in
relation to similar funds, (4) the fact that Federated Management had
advised the Board that, if the Reorganization is not completed, it will
consider discontinuing the waiver of its investment advisory fee and its
reimbursement of certain Fund operating expenses; (5) the comparative
investment performance of the Portfolio and the Fund as well as the
performance of similar funds, (6) the terms and conditions of the
Reorganization and whether the Reorganization would result in the dilution
of shareholder interests, (7) the tax consequences of the Reorganization,
and (8) the compatibility of the Portfolio's and the Fund's investment
objectives, policies, restrictions and portfolios, as well as service
features available to shareholders in the respective funds.
The Board concluded to recommend that the shareholders of the Fund
vote to approve the Reorganization. Pursuant to Rule 17a-8 under the 1940
Act, the Board of Trustees of Intermediate Municipal Trust, including a
majority of the Trustees who were not interested persons of either
Intermediate Municipal Trust or the Trust, determined that participation in
the transaction was in the best interests of the Fund's shareholders and
that the interests of existing Fund shareholders would not be diluted as a
result of effecting the transaction. This conclusion was based on a number
of factors, including the following:
1. The Reorganization would permit the shareholders of the Fund to
pursue substantially the same investment goals in a larger fund.
A larger fund should enhance the ability of portfolio managers
to effect their portfolio transactions on more favorable terms
and give portfolio managers greater investment flexibility and
the ability to select a larger number of portfolio securities,
with the attendant ability to spread investment risks over a
larger number of portfolio issues.
2. The 30-day yield of the Portfolio for the period ended August 31,
1996, was 5.06%. The 30-day yield of the Fund for the period
ended May 31, 1996, was 4.91%. Over other periods the
performance of the Portfolio and the Fund in relation to each
other have varied, in part due to differing expense waivers by
the respective investment advisers.
3. The current waiver of investment advisory fees charged to the
Fund by Federated Management might be discontinued, as well as
Federated Management's reimbursement of certain Fund operating
expenses.
The Board of Trustees of Municipal Securities Income Trust likewise
considered the Reorganization and approved the Plan on behalf of the
Portfolio. Pursuant to Rule 17a-8 under the 1940 Act, the Board of
Trustees of Municipal Securities Income Trust, including a majority of the
Trustees who were not interested persons of either Intermediate Municipal
Trust or the Trust, determined that participation in the transaction was in
the best interests of the Portfolio's shareholders and that the interests
of existing Portfolio shareholders would not be diluted as a result of
effecting the transaction.
DESCRIPTION OF THE PLAN OF REORGANIZATION
The Plan provides that the Trust, on behalf of the Portfolio, will
acquire all of the assets of the Fund in exchange for Class F Shares of the
Portfolio to be distributed pro rata by the Fund to the holders of Fund
shares in complete liquidation of the Fund on or about July 11, 1997. Fund
shareholders will receive a number of shares in the Portfolio equal to the
same total net asset value as the Fund shares they held immediately prior
to the Closing. Shareholders of the Fund will become shareholders of the
Portfolio as of 5:00 p.m. (Eastern time) on the Closing Date. Shareholders
of the Fund will earn their last dividend from the Fund on the day
preceding the Closing Date, which Closing Date is expected to be July 11,
1997.
Consummation of the Reorganization is subject to the conditions set
forth in the Plan, including receipt of an opinion in form and substance
satisfactory to Intermediate Municipal Trust, on behalf of the Fund, and
the Trust, on behalf of the Portfolio, as described under the caption
`Federal Income Tax Consequences'' below. The Plan may be terminated and
the Reorganization may be abandoned at any time before or after approval by
shareholders of the Fund prior to the Closing Date by either party if it
believes that consummation of the Reorganization would not be in the best
interests of its shareholders.
Federated Advisers is responsible for the payment of all expenses of
the Reorganization, whether or not the Reorganization is consummated.
Such expenses include, but are not limited to: legal fees; registration
fees; transfer taxes (if any); the fees of banks and transfer agents; and
the costs of preparing, printing, copying, and mailing proxy solicitation
materials to the Fund's shareholders and the costs of holding the Special
Meeting of Shareholders.
The foregoing description of the Plan entered into between the Trust,
on behalf of the Portfolio, and Intermediate Municipal Trust, on behalf of
the Fund, is qualified in its entirety by the terms and provisions of the
Plan, a copy of which is attached hereto as Exhibit A and incorporated
herein by reference.
DESCRIPTION OF PORTFOLIO SHARES
Class F Shares of the Portfolio to be issued to shareholders of the
Fund under the Plan will be fully paid and nonassessable when issued,
transferable without restrictions and will have no preemptive or conversion
rights. Reference is hereby made to the Prospectus of the Portfolio
provided herewith for additional information about Class F Shares of the
Portfolio.
FEDERAL INCOME TAX CONSEQUENCES
As a condition to the Reorganization transactions, the Trust, on
behalf of the Portfolio, and Intermediate Municipal Trust, on behalf of the
Fund, will receive an opinion from Howard & Howard Attorneys, P.C., to the
effect that, on the basis of the existing provisions of the Internal
Revenue Code of 1986, as amended (the `Code''), current administrative
rules and court decisions, for federal income tax purposes: (1) the
Reorganization as set forth in the Plan will constitute a tax-free
reorganization under section 368(a)(1)(C) of the Code; (2) no gain or loss
will be recognized by the Portfolio upon its receipt of the Fund's assets
in exchange for Portfolio shares; (3) the holding period and basis for the
Fund's assets acquired by the Portfolio will be the same as the holding
period and the basis to the Fund immediately prior to the Reorganization;
(4) no gain or loss will be recognized by the Fund upon transfer of its
assets to the Portfolio in exchange for Portfolio shares or upon the
distribution of the Portfolio shares to the Fund's shareholders in exchange
of their Fund shares; (5) no gain or loss will be recognized by
shareholders of the Fund upon exchange of their Fund shares for Portfolio
shares; (6) the holding period of Portfolio shares received by shareholders
of the Fund pursuant to the Plan will be the same as the holding period of
Fund shares held immediately prior to the Reorganization, provided the Fund
shares were held as capital assets on the date of the Reorganization; and
(7) the basis of Portfolio shares received by shareholders of the Fund
pursuant to the Plan will be the same as the basis of Fund shares held
immediately prior to the Reorganization.
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS AND OBLIGATIONS
The Trust is organized as a Massachusetts business trust pursuant to a
Declaration of Trust dated August 6, 1990, under the laws of the
Commonwealth of Massachusetts. Intermediate Municipal Trust is also
organized as a Massachusetts business trust under a Declaration of Trust
dated May 31, 1985. The rights of shareholders of the Trust and of
Intermediate Municipal Trust are identical. Set forth below is a brief
summary of the more significant similarities between rights of shareholders
of the Fund and the Portfolio.
Special meetings of both the Fund's and the Portfolio's shareholders
may be called for any purpose on the written request of shareholders
entitled to cast at least ten percent (10%) of all votes entitled to be
cast at the meeting. Special meetings of the Fund's and the Portfolio's
shareholders may also be called by the Trustees or the Chief Executive
Officer of the Trust. Shareholders of the Fund and the Portfolio are
entitled to at least fifteen days' notice of any meeting.
The Declaration of Trust of both Intermediate Municipal Trust and the
Trust provide that shareholders shall have the following voting powers:
(i) to vote for the election of Trustees; (ii) to vote with respect to any
investment advisory or sub-advisory contract entered into on behalf of any
series; (iii) to vote to the same extent as shareholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding, or claim should or should not be brought derivatively or as a
class action on behalf of the trust, any series, or the shareholders; (iv)
to vote for the removal of Trustees; (v) to vote on amendments or
supplements to the Declaration of Trust; and (vi) to vote on such
additional matters as required by the Declaration of Trust, the By-laws,
the registration statement, or the Securities and Exchange Commission.
Under certain circumstances, shareholders of the Fund or the Portfolio
may be held personally liable as partners under Massachusetts law for acts
or obligations of Intermediate Municipal Trust or the Trust, respectively.
To protect shareholders of the Fund and the Portfolio, the Declarations of
Trust expressly disclaim the liability of shareholders for acts or
obligations of the Fund and the Portfolio. The Declarations of Trust
provide that a notice of the disclaimer of liability may be included in
each agreement, obligation, or instrument that either Intermediate
Municipal Trust or the Trust may enter into.
In the unlikely event that a shareholder of either the Fund or the
Portfolio is held personally liable for obligations of the Fund or the
Portfolio, the Declarations of Trust provide that property of the Fund or
the Portfolio will be used to protect or compensate the shareholder. On
request, claims are defended and judgments against shareholders are paid
that arise out of any act or obligation of Intermediate Municipal Trust or
the Trust on behalf of the Fund or the Portfolio, respectively. Therefore,
financial loss resulting from liability as a shareholder will occur only if
Intermediate Municipal Trust or the Trust cannot meet its obligations to
indemnify shareholders and pay judgments against them from the assets of
the Fund or the Portfolio, respectively.
CAPITALIZATION
The following table shows the capitalization of the Portfolio and the
Fund as of February 28, 1997, and on a pro forma basis as of that date:
Pro Forma
Portfolio Combined
(Class F Shares) Fund (Class F Shares)
Net Assets.. $67,616,569 $8,820,015 $76, 436, 584
Price Per Share $11.38 $9.95 $11.38
Shares Outstanding 5,944,265 886,561 6,719,645
INFORMATION ABOUT THE PORTFOLIO AND THE FUND
FEDERATED OHIO MUNICIPAL INCOME FUND, A PORTFOLIO OF MUNICIPAL SECURITIES
INCOME TRUST
Information about the Trust and the Portfolio is contained in the
Portfolio's current Prospectus. A copy of the prospectus is included
herewith and incorporated by reference herein. Additional information
about the Trust and the Portfolio is included in the Portfolio's Statement
of Additional Information dated October 31, 1996, which is incorporated
herein by reference. Copies of the Statement of Additional Information, as
well as the Statement of Additional Information relating to this
Prospectus/Proxy Statement dated May 23, 1997, both of which have been
filed with the Securities and Exchange Commission, may be obtained without
charge by contacting the Trust at 1-800-341-7400 or by writing to the Trust
at Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779. The
Trust, on behalf of the Portfolio, is subject to the informational
requirements of the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, and the Investment Company Act of 1940,
as amended, and in accordance therewith files reports and other information
with the Securities and Exchange Commission. Reports, proxy and
information statements, and other information filed by the Trust, on behalf
of the Portfolio, can be obtained by calling or writing the Trust and can
also be inspected and copied by the public at the public reference
facilities maintained by the Securities and Exchange Commission in
Washington, D.C. located at Room 1024, 450 Fifth Street, N.W., Washington
D.C. 20549 and at certain of its regional offices located at Room 1204,
Everett McKinley Dirksen Building, 219 South Dearborn Street, Chicago,
Illinois 60604 and 14th Floor, 75 Park Place, New York, NY 10007. Copies
of such material can be obtained at prescribed rates from the Public
Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington D.C. 20549, or obtained
electronically from the Securities and Exchange Commission's Internet Web
site (http://www.sec.gov).
This Prospectus/Proxy Statement, which constitutes part of a
Registration Statement filed by the Trust, on behalf of the Portfolio, with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended, omits certain of the information contained in the Registration
Statement. Reference is hereby made to the Registration Statement and to
the exhibits thereto for further information with respect to the Trust, the
Portfolio and the shares offered hereby. Statements contained herein
concerning the provisions of documents are necessarily summaries of such
documents, and each such statement is qualified in its entirety by
reference to the copy of the applicable documents filed with the Securities
and Exchange Commission.
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST, A PORTFOLIO OF INTERMEDIATE
MUNICIPAL TRUST
Information about the Fund may be found in the Fund's current
Prospectuses dated July 31, 1996, and its Statement of Additional
Information dated July 31, 1996, which are incorporated herein by
reference. Financial Statements for the Fund for the year ended May 31,
1996, may be found in the Fund's prospectus. Copies of the Fund's
Prospectus and Statement of Additional Information may be obtained without
charge from the Fund by calling 1-800-341-7400 or by writing to the Fund at
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779. A copy of
the Statement of Additional Information relating to this Prospectus/Proxy
Statement may be obtained without charge from Intermediate Municipal Trust
by calling 1-800-341-7400 or by writing to Intermediate Municipal Trust at
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779. The Fund
is subject to the information requirements of the Securities Act of 1933,
as amended, the Securities Exchange Act of 1934, as amended, and the
Investment Company Act of 1940, as amended, and in accordance therewith
files reports and other information with the Securities and Exchange
Commission. Reports, proxy and information statements, and other
information filed by the Fund can be obtained by calling or writing the
Fund and can also be inspected at the public reference facilities
maintained by the Securities and Exchange Commission at the addresses
listed in the previous section.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with the
solicitation by the Board of Trustees of the Fund of proxies for use at the
Special Meeting of Shareholders (the "Meeting") to be held on July 7, 1997
and at any adjournment thereof. The proxy confers discretionary authority
on the persons designated therein to vote on other business not currently
contemplated which may properly come before the Meeting. A proxy, if
properly executed, duly returned, and not revoked, will be voted in
accordance with the specifications thereon; if no instructions are given,
such proxy will be voted in favor of the Plan. A shareholder may revoke a
proxy at any time prior to use by filing with the Secretary of the Fund an
instrument revoking the proxy, or by submitting a proxy bearing a later
date, or by attending and voting at the Meeting. Proxies, instruments
revoking a proxy, or proxies bearing a later date may be communicated by
telephone, by electronic means including facsimile, or by mail.
The cost of the solicitation, including the printing and mailing of
proxy materials, will be borne by Federated Advisers. In addition to
solicitations through the mails, proxies may be solicited by officers,
employees, and agents, including third party solicitors, of the Fund at no
additional costs to the Fund. Such solicitations may be by telephone,
telegraph, or otherwise. Any telephonic solicitations will follow
procedures designed to insure accuracy and prevent fraud including
requiring identifying shareholder information, recording the shareholder's
instructions, and delivering a written confirmation of the shareholder's
instructions. Shareholders who communicate proxies by telephone or by
other electronic means have the same power and authority to issue, revoke,
or otherwise change their voting instructions as currently exists for
instructions communicated in written form. Federated Advisers will
reimburse custodians, nominees, and fiduciaries for the reasonable costs
incurred by them in connection with forwarding solicitation materials to
the beneficial owners of shares held of record by such persons.
OUTSTANDING SHARES AND VOTING REQUIREMENTS
The Board of Trustees of the Fund has fixed the close of business on
May 9, 1997, as the record date for the determination of shareholders
entitled to notice of and to vote at the Special Meeting of Shareholders
and any adjournment thereof. As of the record, date, there were
shares of the Fund outstanding. Each Fund share is
- -----------------
entitled to one vote and fractional shares have proportionate voting
rights. On the record date, [INSERT 5% SHAREHOLDERS AND PERCENTAGE
HOLDINGS] On such date, no other person owned of record, or to the
knowledge of the Fund, beneficially owned, 5% or more of the Fund's
outstanding shares. On the record date, the Trustees and officers of the
Fund as a group owned less than 1% of the outstanding shares of the Fund.
On the record date the following persons of record owned 5% or more of
the Portfolio's outstanding shares: [INSERT 5% SHAREHOLDERS AND PERCENTAGE
HOLDINGS] On the record date, the Trustees and officers of the Trust as a
group owned less than 1% of the outstanding shares of the Portfolio.
The votes of shareholders of the Portfolio are not being solicited
since their approval is not required in order to effect the Reorganization.
Approval of the Reorganization requires the affirmative vote of a
majority of the Fund's outstanding shares. As used herein, the term
"majority of the Fund's outstanding shares" means the lesser of: (a) 67%
of the shares of the Fund present at the Special Meeting if the holders of
more than 50% of the outstanding shares of the Fund, are present in person
or by proxy, or (b) more than 50% of the outstanding shares of the Fund.
In tallying shareholder votes, abstentions and broker non-votes (i.e.,
proxies sent in by brokers and other nominees that cannot be voted on a
proposal because instructions have been received from the beneficial
owners) will be counted for purposes of determining whether or not a quorum
is present for purposes of convening the meeting. On each proposal, broker
non-votes will be considered to be abstentions on the vote regarding each
proposal.
NO DISSENTER'S RIGHT OF APPRAISAL
Shareholders of the Fund objecting to the Reorganization have no
appraisal rights under the Fund's Declaration of Trust or under the laws of
the Commonwealth of Massachusetts. Shareholders have the right, however,
to redeem their Fund shares at net asset value until the Closing Date, and
thereafter shareholders may redeem Class F Shares of the Portfolio acquired
by them in the Reorganization at net asset value.
QUORUM
In the event that a quorum is not present at the Special Meeting, or
in the event that a quorum is present at the Special Meeting, but
sufficient votes to approve the Plan are not received, the persons named as
proxies may propose one or more adjournments of the Special Meeting to
permit further solicitation of proxies. Any such adjournment will require
the affirmative vote of a majority of shares that are represented at the
Meeting in person or by proxy. If a quorum is present, the persons named
as proxies will vote those proxies which they are entitled to vote FOR the
Plan in favor of such adjournments, and will vote those proxies required to
be voted AGAINST such proposal against any adjournment. A quorum is
constituted with respect to the Fund by the presence in person or by proxy
of the holders of more than 50% of the outstanding shares of the Fund
entitled to vote at the Meeting. Proxies properly executed and marked with
a negative vote or an abstention will be considered to be present at the
Meeting for purposes of determining the existence of a quorum for the
transaction of business.
OTHER MATTERS
Management of the Fund knows of no other matters that may properly be,
or which are likely to be, brought before the meeting. However, if any
other business shall properly come before the meeting the persons named in
the proxy intend to vote thereon in accordance with their best judgment.
So far as management is presently informed, there is no litigation
pending or threatened against the Trust.
Whether or not shareholders expect to attend the meeting, all
shareholders are urged to sign, fill in and return the enclosed proxy form
promptly.
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION dated February 27, 1997 (the
`Agreement''), by and between MUNICIPAL SECURITIES INCOME TRUST, a
Massachusetts business trust, on behalf of its portfolio, Federated Ohio
Municipal Income Fund (hereinafter called the `Acquiring Fund''),
FEDERATED ADVISERS, a Delaware business trust (`Federated Advisers''),
INTERMEDIATE MUNICIPAL TRUST, a Massachusetts business trust, on behalf of
its portfolio, Federated Ohio Intermediate Municipal Trust (hereinafter
called the `Acquired Fund'') and FEDERATED MANAGEMENT, a Delaware business
trust ("Federated Management").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C)
of the United States Internal Revenue Code of 1986, as amended (the
`Code''). The reorganization (the ``Reorganization'') will consist of the
transfer of all of the assets of the Acquired Fund in exchange solely for
Class F Shares of beneficial interest of the Acquiring Fund (collectively,
the `Acquiring Fund Shares'') and the distribution, after the Closing Date
as hereinafter defined, of Class F Shares of the Acquiring Fund to the
shareholders of the Acquired Fund in liquidation of the Acquired Fund as
provided herein, all upon the terms and conditions hereinafter set forth in
this Agreement.
WHEREAS, the Acquired Fund and the Acquiring Fund are registered open-
end, non-diversified, management investment companies and the Acquired Fund
owns securities which generally are assets of the character in which the
Acquiring Fund is permitted to invest;
WHEREAS, the Acquiring Fund is authorized to issue the Acquiring Fund
Shares and the Acquired Fund is authorized to issue its shares of
beneficial interest;
WHEREAS, Federated Advisers, an investment adviser registered as such
under the Investment Advisers Act of 1940, as amended, serves as investment
adviser to the Acquiring Fund;
WHEREAS, Federated Management, an investment adviser registered as
such under the Investment Advisers Act of 1940, as amended, serves as
investment adviser to the Acquired Fund;
WHEREAS, the Board of Trustees, including a majority of the Trustees
who are not `interested persons'' as defined under the Investment Company
Act of 1940, as amended (the `1940 Act'') of the Acquiring Fund has
determined that the transfer of all of the assets of the Acquired Fund for
Acquiring Fund Shares is in the best interests of the Acquiring Fund
shareholders and that the interests of the existing shareholders of the
Acquiring Fund would not be diluted as a result of this transaction; and
WHEREAS, the Board of Trustees, including a majority of the Trustees
who are not `interested persons'' (as defined under the 1940 Act) of the
Acquired Fund has determined that the exchange of all of the assets of the
Acquired Fund for Acquiring Fund Shares is in the best interests of the
Acquired Fund shareholders, that the interests of the shareholders of the
Acquired Fund would not be diluted as a result of this transaction and
determined that subsequent to the consummation of the transaction
contemplated by this Agreement, the Acquired Fund will cease operations;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements hereinafter set forth, the parties agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE
ACQUIRING FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the
Acquired Fund agrees to assign, transfer, and convey to the Acquiring
Fund all of the assets of the Acquired Fund at the time of the Closing
(defined below), including without limitation all securities and cash,
and the Acquiring Fund agrees in exchange therefor to deliver to the
Acquired Fund the number of Acquiring Fund Shares, including
fractional Acquiring Fund Shares, representing Class F Shares,
determined as set forth in paragraph 2.3 of this Agreement. Such
transactions shall take place at the closing (the `Closing'') on the
closing date (the `Closing Date''), as provided in paragraph 3.1 of
this Agreement. In lieu of delivering certificates for the Acquiring
Fund Shares, the Acquiring Fund shall credit the Acquiring Fund Shares
to the Acquired Fund's account on the stock record books of the
Acquiring Fund's transfer agent and shall deliver a confirmation
thereof to the Acquired Fund.
1.2 The Acquired Fund will discharge all of its liabilities and
obligations prior to the Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be
transferred shall be made on the Closing Date and shall be delivered
to State Street Bank and Trust Company (hereinafter referred to as
`State Street''), Boston, Massachusetts, the Acquiring Fund's
custodian (the `Custodian''), for the account of the Acquiring Fund,
together with proper instructions and all documents necessary to
transfer such assets to the account of the Acquiring Fund, free and
clear of all liens, encumbrances, rights, restrictions and claims,
except as may be indicated in a schedule delivered by the Acquired
Fund to the Acquiring Fund immediately prior to the Closing. All cash
delivered shall be in the form of currency or immediately available
funds payable to the order of Custodian for the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the
Acquiring Fund any dividends or interest received on or after the
Closing Date with respect to assets transferred to the Acquiring Fund
hereunder. The Acquired Fund will transfer to the Acquiring Fund any
distributions, rights, or other assets received by the Acquired Fund
after the Closing Date as distributions on, or with respect to, the
securities transferred. Such assets shall be deemed included in
assets transferred to the Acquiring Fund on the Closing Date and shall
not be separately valued.
1.5 As soon after the Closing Date as is practicable (the
"Liquidation Date"), the Acquired Fund will liquidate and distribute
pro rata to the Acquired Fund's shareholders of record, determined as
of the close of business on the Closing Date (the "Acquired Fund
Shareholders"), the Acquiring Fund Shares received by the Acquired
Fund pursuant to paragraph 1.1. Such liquidation and distribution
will be accomplished by the transfer (by the Acquiring Fund or its
transfer agent) of the Acquiring Fund Shares to an account for each
shareholder on the books of the Acquiring Fund's transfer agent in the
name of each Acquired Fund Shareholder and representing the pro rata
number of the Acquiring Fund Shares due each Acquired Fund
Shareholder. All issued and outstanding shares of the Acquired Fund
will simultaneously be canceled on the books of the Acquired Fund.
Share certificates representing interests in the Acquired Fund will
represent a number of Acquiring Fund Shares after the Closing Date as
determined in accordance with paragraph 2.3. The Acquiring Fund will
issue certificates representing the Acquiring Fund Shares in
connection with such exchange only for, and upon receipt of,
certificated shares of the Acquired Fund.
1.6 Any transfer taxes payable upon issuance of the Acquiring
Fund Shares in a name other than the registered holder of the Acquired
Fund shares on the books of the Acquired Fund as of the Closing Date
shall, as a condition of such issuance and transfer, be paid by the
person to whom such Acquiring Fund Shares are to be issued and
transferred.
1.7 Any reporting responsibility of the Acquired Fund is and
shall remain the responsibility of the Acquired Fund up to and
including the Closing Date and such later dates with respect to
discontinuation of the Acquired Fund as a series of Intermediate
Municipal Trust with federal and state authorities.
2. VALUATION.
2.1 The value of the Acquired Fund's assets to be acquired by
the Acquiring Fund hereunder shall be the net asset value of such
assets computed as of the close of business on the Closing Date (such
time and date being hereinafter called the "Valuation Date"), using
the valuation procedures set forth in the Acquiring Fund's then-
current prospectus or statement of additional information.
2.2 The net asset value of an Acquiring Fund Share shall be the
net asset value per share computed as of the close of business on the
Valuation Date, using the valuation procedures set forth in the
Acquiring Fund's then-current prospectus or statement of additional
information.
2.3 The number of the Acquiring Fund Shares to be issued
(including fractional shares, if any) in exchange for the Acquired
Fund's assets shall be determined by dividing the value of the assets
attributable to the Acquired Fund determined using the same valuation
procedures referred to in paragraph 2.1 by the net asset value of one
Acquiring Fund Share determined in accordance with paragraph 2.2.
Class F Shares of the Acquiring Fund shall be issued for shares of the
Acquired Fund.
2.4 All computations of value shall be made in accordance with
the regular practices of the Acquiring Fund.
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be July 11, 1997, or such later date
as the parties may mutually agree. All acts taking place at the
Closing Date shall be deemed to take place simultaneously as of the
close of business on the Closing Date unless otherwise provided. The
Closing shall be held at the close of business at the offices of the
Acquired Fund, Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779, or such other time and/or place as the parties may
mutually agree.
3.2 If on the Valuation Date: (a) the primary trading market
for portfolio securities of the Acquiring Fund or the Acquired Fund
shall be closed to trading or trading thereon shall be restricted; or
(b) trading or the reporting of trading shall be disrupted so that
accurate appraisal of the value of the net assets of the Acquiring
Fund or the Acquired Fund is impracticable, the Closing Date shall be
postponed until the first business day after the day when trading
shall have been fully resumed and reporting shall have been restored.
3.3 The Acquired Fund shall instruct Federated Services Company,
as transfer agent for the Acquired Fund, to deliver to the Acquiring
Fund at the Closing, a certificate of an authorized officer stating
that its records contain the names and addresses of the Acquired Fund
Shareholders and the number of outstanding shares owned by each such
shareholder immediately prior to the Closing. The Acquiring Fund
shall issue and deliver a confirmation evidencing the Class F Shares
of the Acquiring Fund to be credited on the Closing Date to the
Secretary of the Acquired Fund or provide evidence satisfactory to the
Acquired Fund that such Class F Shares of the Acquiring Fund have been
credited to the respective accounts of the Acquired Fund Shareholders
on the books of the Acquiring Fund. At the Closing, each party shall
deliver to the other such bills of sale, checks, assignments, share
certificates, if any, receipts or other documents as such other party
or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES.
4.1 Each of the Acquired Fund and Federated Management
represents and warrants to the Acquiring Fund as follows:
(a) Intermediate Municipal Trust is a business trust
organized, validly existing, and in good standing under the laws
of the Commonwealth of Massachusetts and has power to carry on
its business as it is now being conducted.
(b) Intermediate Municipal Trust is registered under the
1940 Act, as an open-end, non-diversified, management investment
company, and such registration has not been revoked or rescinded
and is in full force and effect.
(c) Intermediate Municipal Trust is not, and the execution,
delivery, and performance of this Agreement will not result, in a
material violation of its Declaration of Trust or By-Laws or of
any agreement, indenture, instrument, contract, lease, or other
undertaking to which the Acquired Fund is a party or by which it
is bound.
(d) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is
currently pending or to its knowledge threatened against the
Acquired Fund or any of the Acquired Fund's properties or assets
which, if adversely determined, would materially and adversely
affect its financial condition or the conduct of its business.
Neither Federated Management nor the Acquired Fund knows of any
facts which might form the basis for the institution of such
proceedings, and the Acquired Fund is not a party to or subject
to the provisions of any order, decree or judgment of any court
or governmental body which materially and adversely affects its
business or its ability to consummate the transactions herein
contemplated.
(e) The Statement of Assets and Liabilities of the Acquired
Fund at May 31, 1996, has been audited by Arthur Andersen LLP,
independent public accountants, and has been prepared in
accordance with generally accepted accounting principles,
consistently applied, and such statement (copies of which have
been furnished to the Acquiring Fund) fairly reflect the
financial condition of the Acquired Fund as of such date, and
there are no liabilities of the Acquired Fund, known to the
Acquired Fund or to Federated Management, contingent or
otherwise, as of such date not disclosed therein.
(f) The unaudited Statement of Assets and Liabilities of
the Acquired Fund at November 30, 1996, has been prepared in
accordance with generally accepted accounting principles,
consistently applied, and on a basis consistent with the
Statement of Assets and Liabilities of the Acquired Fund at May
31, 1996, which has been audited by Arthur Andersen LLP, and such
statement (copies of which have been furnished to the Acquiring
Fund) fairly reflects the financial condition of the Acquired
Fund as of such date, and there are no liabilities of the
Acquired Fund known to the Acquired Fund or to Federated
Management, contingent or otherwise, as of such date not
disclosed therein.
(g) Since May 31, 1996, there has not been any material
adverse change in the Acquired Fund's financial condition,
assets, liabilities, or business other than changes occurring in
the ordinary course of business, or any incurrence by the
Acquired Fund of any indebtedness for borrowed money.
(h) At the Closing Date, all federal and other tax returns
and reports of the Acquired Fund required by law (or permitted
extensions thereto) to have been filed shall have been filed, and
to the best of the Acquired Fund's knowledge all federal and
other taxes shall have been paid so far as due, or provision
shall have been made for the payment thereof, and to the best of
the Acquired Fund's knowledge no such return is currently under
audit and no assessment has been asserted with respect to such
returns.
(i) For each fiscal year (or part thereof) of its
operation, the Acquired Fund has met the requirements of
Subchapter M of the Code for qualification and treatment as a
regulated investment company.
(j) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. All of the issued
and outstanding shares of the Acquired Fund will, at the time of
the Closing, be held by the persons and in the amounts set forth
in the records of the transfer agent as provided in paragraph 3.3
of this Agreement. The Acquired Fund does not have outstanding
options, warrants or other rights to subscribe for or purchase
any of the Acquired Fund shares, nor is there outstanding any
security convertible into Acquired Fund shares.
(k) On the Closing Date, all issued and outstanding shares
of the Acquired Fund will have been duly registered under the
Securities Act of 1933, as amended (the "1933 Act"), and
registered, or exempt from registration, to the extent required
thereby under each state securities or "blue sky" law of every
state in which the Acquired Fund has offered or sold its shares.
(l) On the Closing Date, the Acquired Fund will have full
right, power, and authority to sell, assign, transfer, and
deliver the assets to be transferred by it hereunder.
(m) The execution, delivery, and performance of this
Agreement has been duly authorized by all necessary action on the
part of the Acquired Fund's Board of Trustees and, subject to the
approval of the Acquired Fund Shareholders, this Agreement
constitutes the valid and legally binding obligation of the
Acquired Fund enforceable in accordance with its terms, subject
to the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, and other similar laws
relating to or affecting creditors' rights generally and court
decisions with respect thereto, and to general principles of
equity and the discretion of the court before which a proceeding
is brought (regardless of whether the enforceability is
considered in a proceeding in equity or at law).
(n) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the
Acquired Fund) will, on the effective date of the Registration
Statement and on the Closing Date be true and correct in all
material respects. Further, on the effective date of the
Registration Statement and on the Closing Date, the
Prospectus/Proxy Statement (only insofar as it relates to the
Acquired Fund) will not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made,
not misleading.
(o) The Acquired Fund will provide the Acquiring Fund with
information reasonably necessary for the preparation of the
Prospectus/Proxy Statement.
4.2 Each of the Acquiring Fund and Federated Advisers represents and
warrants to the Acquired Fund as follows:
(a) Municipal Securities Income Trust is a business trust
duly organized, validly existing, and in good standing under the
laws of the Commonwealth of Massachusetts and has the power to
carry on its business as it is now being conducted and to carry
out this Agreement.
(b) Municipal Securities Income Trust is registered under
the 1940 Act as an open-end, non-diversified, management
investment company, and such registration has not been revoked or
rescinded and is in full force and effect.
(c) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material
respects to the applicable requirements of the 1933 Act and the
1940 Act and the rules and regulation of the SEC thereunder and
do not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d) At the Closing Date, the Acquiring Fund will have good
and marketable title to its assets.
(e) Municipal Securities Income Trust is not, and the
execution, delivery, and performance of this Agreement will not
result in a material violation of its Declaration of Trust or By-
Laws or of any agreement, indenture, instrument, contract, lease,
or other undertaking to which the Acquiring Fund is a party or by
which it is bound.
(f) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is
currently pending or to its knowledge threatened against the
Acquiring Fund or any of the Acquiring Fund's properties or
assets which, if adversely determined, would affect the Acquiring
Fund's financial condition or the conduct of its business.
Neither Federated Advisers nor the Acquiring Fund knows of any
facts which might form the basis for the institution of such
proceedings, and the Acquiring Fund is not a party to or subject
to the provisions of any order, decree or judgment of any court
or governmental body which materially and adversely affects its
business or its ability to consummate the transactions herein
contemplated.
(g) The Statement of Assets and Liabilities of the
Acquiring Fund at August 31, 1996, has been audited by Deloitte &
Touche LLP, independent auditors, and has been prepared in
accordance with generally accepted accounting principles,
consistently applied, and such statement (copies of which have
been furnished to the Acquired Fund) fairly reflects the
financial condition of the Acquiring Fund as of such date, and
there are no liabilities of the Acquiring Fund, known to the
Acquiring Fund or to Federated Advisers, contingent or otherwise,
as of such date not disclosed therein.
(h) Since August 31, 1996, there has not been any adverse
change in the Acquiring Fund's financial condition, assets,
liabilities, or business other than changes occurring in the
ordinary course of business, or any incurrence by the Acquiring
Fund of any indebtedness for borrowed money.
(i) At the Closing Date, all federal and other tax returns
and reports of the Acquiring Fund required by law (or permitted
extensions thereto) to have been filed shall have been filed, and
to the best of the Acquiring Fund's knowledge all federal and
other taxes shall have been paid so far as due or provision shall
have been made for the payment thereof, and to the best of the
Acquiring Fund's knowledge no such return is currently under
audit and no assessment has been asserted with respect to such
returns.
(j) For each fiscal year (or part thereof) of its
operation, the Acquiring Fund has met the requirements of
Subchapter M of the Code for qualification and treatment as a
regulated investment company.
(k) All issued and outstanding shares of the Acquiring Fund
are, and including the Acquiring Fund Shares issued to the
Acquired Fund Shareholders pursuant hereto, at the Closing Date
will be, duly and validly issued and outstanding, fully paid and
non-assessable. The Acquiring Fund does not have outstanding any
options, warrants or other rights to subscribe for or purchase
any of the Acquiring Fund Shares, nor is there outstanding any
security convertible into any Acquiring Fund Shares.
(l) All issued and outstanding shares of each class of the
Acquiring Fund are, and at the Closing Date will be, duly
registered under the 1933 Act and registered, or exempt from
registration, to the extent required thereby under each state
securities or "blue sky" law of every state in which the
Acquiring Fund has offered or sold its shares.
(m) The execution, delivery, and performance of this
Agreement will have been duly authorized prior to the Closing
Date by all necessary action on the part of the Acquiring Fund's
Board of Trustees, and this Agreement constitutes the valid and
legally binding obligation of Municipal Securities Income Trust
enforceable in accordance with its terms, subject to the effect
of bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other similar laws relating to or affecting
creditors' rights generally and court decisions with respect
thereto, and to general principles of equity and the discretion
of the court before which a proceeding is brought (regardless of
whether the enforceability is considered in a proceeding in
equity or at law).
(n) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the
Acquiring Fund) will, on the effective date of the Registration
Statement and on the Closing Date be true and correct in all
material respects. Further, on the effective date of the
Registration Statement and on the Closing Date, the
Prospectus/Proxy Statement (only insofar as it relates to the
Acquiring Fund) will not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made,
not misleading.
(o) The Acquiring Fund has entered into an agreement under
which Federated Advisers will assume the expenses of the
Reorganization, including legal fees of the Acquiring Fund,
registration fees, transfer tax (if any), the fees of banks and
transfer agents, and the costs of preparing, printing, copying,
and mailing proxy solicitation materials to the Acquired Fund's
shareholders.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate
its business in the ordinary course between the date hereof and the
Closing Date, it being understood that such ordinary course of
business will include customary dividends and distributions.
5.2 The Acquired Fund will call a meeting of the Acquired Fund
Shareholders to consider and act upon this Agreement and to take all
other action necessary and appropriate to obtain approval of the
transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring
Fund and the Acquired Fund will each take, or cause to be taken, all
action, and do or cause to be done, all things reasonably necessary,
proper, or advisable to consummate and make effective the transactions
contemplated by this Agreement.
5.4 As promptly as practicable, but in any case within sixty
days after the Closing Date, the Acquired Fund shall furnish the
Acquiring Fund, in such form as is reasonably satisfactory to the
Acquiring Fund, a statement of the earnings and profits of the
Acquired Fund for federal income tax purposes which will be carried
over to the Acquiring Fund as a result of Section 381 of the Code and
which will be certified by the Acquired Fund's President or its
Treasurer.
5.5 Municipal Securities Income Trust shall have filed with the
SEC a Registration Statement Form N-14 complying in all material
respects with the requirements of the 1933 Act, the Securities
Exchange Act of 1934, as amended, the 1940 Act, and applicable rules
and regulations thereunder, relating to a meeting of the shareholders
of the Acquired Fund to be called to consider and act upon the
transactions contemplated herein, and such Registration Statement
shall have been declared effective by the SEC. The Acquired Fund
agrees to provide the Acquiring Fund with information relating to the
Acquired Fund required under such Acts, rules and regulations for
inclusion in the Registration Statement Form N-14.
5.6 The Acquiring Fund agrees to use all best efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940
Act, and such of the state Blue Sky or securities laws as it may deem
appropriate in order to continue its operations after the Closing
Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject to the performance by the Acquired
Fund of all the obligations to be performed by it hereunder on or before
the Closing Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of Federated Management
and the Acquired Fund contained in this Agreement shall be true and
correct in all material respects as of the date hereof and, except as
they may be affected by the transactions contemplated by this
Agreement, as of the Closing Date with the same force and effect as if
made on and as of the Closing Date.
6.2 The Acquired Fund shall have delivered to the Acquiring Fund
a statement of the Acquired Fund's assets, together with a list of the
Acquired Fund's portfolio securities showing the tax costs of such
securities by lot and the holding periods of such securities, as of
the Closing Date, certified by the Treasurer or the Assistant
Treasurer of the Acquired Fund.
6.3 The Acquired Fund and Federated Management shall have
delivered to the Acquiring Fund on the Closing Date a certificate
executed in their names by their respective Presidents or Vice
Presidents and their Treasurers or Assistant Treasurers, in form and
substance reasonably satisfactory to the Acquiring Fund, to the effect
that the representations and warranties of the Acquired Fund and
Federated Management made in this Agreement are true and correct at
and as of the Closing Date, except as they may be affected by the
transactions contemplated by this Agreement, and as to such other
matters as the Acquiring Fund shall reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided for herein shall be subject to the performance by the Acquiring
Fund of all the obligations to be performed by it hereunder on or before
the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Acquiring Fund and
Federated Advisers contained in this Agreement shall be true and
correct in all material respects as of the date hereof and, except as
they may be affected by the transactions contemplated by this
Agreement, as of the Closing Date with the same force and effect as if
made on and as of the Closing Date.
7.2 The Acquiring Fund and Federated Advisers shall have
delivered to the Acquired Fund on the Closing Date a certificate
executed in their names by their respective Presidents or Vice
Presidents and their Treasurers or Assistant Treasurers, in form and
substance reasonably satisfactory to the Acquired Fund, to the effect
that the representations and warranties of the Acquiring Fund and
Federated Advisers made in this Agreement are true and correct at and
as of the Closing Date, except as they may be affected by the
transactions contemplated by this Agreement, and as to such other
matters as the Acquired Fund shall reasonably request.
8. FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING FUND
AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall
have been approved by the requisite vote of the holders of beneficial
interest of the Acquired Fund in accordance with the laws of the
Commonwealth of Massachusetts and the Acquired Fund's Declaration of
Trust and By-Laws.
8.2 On the Closing Date no action, suit or other proceeding
shall be pending before any court or governmental agency in which it
is sought to restrain or prohibit, or obtain damages or other relief
in connection with, this Agreement or the transactions contemplated
herein.
8.3 All consents of parties hereto and all other consents,
orders, permits, and exemptions of federal, state, and local
regulatory authorities (including those of the Securities and Exchange
Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit
consummation, in all material respects, of the transactions
contemplated hereby shall have been obtained, except where failure to
obtain any such consent, order, or permit would not involve a risk of
a material adverse effect on the assets or properties of the Acquiring
Fund or the Acquired Fund, provided that either party hereto may for
itself waive any of such conditions.
8.4 The Form N-14 shall have become effective under the 1933 Act
by the SEC and no stop orders suspending the effectiveness thereof
shall have been issued and, to the best knowledge of the parties
hereto, no investigation or proceeding for that purpose shall have
been instituted or be pending, threatened, or contemplated under the
1933 Act.
8.5 The Acquiring Fund and the Acquired Fund shall have received
an opinion of Howard & Howard Attorneys, P.C., substantially to the
effect that, on the basis of the existing provisions of the Code,
current administrative rules, and court decisions, for federal income
tax purposes:
(a) The transfer of all or substantially all of the
Acquired Fund assets in exchange for the Acquiring Fund Shares
and the distribution of the Acquiring Fund Shares to the
shareholders of the Acquired Fund in liquidation of the Acquired
fund will constitute a "reorganization" within the meaning of
Section 368(a)(1)(C) of the Code; (b) No gain or loss will be
recognized by the Acquiring Fund upon the receipt of the assets
of the Acquired Fund solely in exchange for the Acquiring Fund
Shares; (c) No gain or loss will be recognized by the Acquired
Fund upon the transfer of the Acquired Fund assets to the
Acquiring Fund in exchange for the Acquiring Fund Shares or upon
the distribution (whether actual or constructive) of the
Acquiring Fund Shares to Acquired Fund Shareholders in exchange
for their shares of the Acquired Fund; (d) No gain or loss will
be recognized by the Acquired Fund Shareholders upon the exchange
of their Acquired Fund shares for the Acquiring Fund Shares: (e)
The tax basis of the Acquired Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets
to the Acquired Fund immediately prior to the Reorganization; (f)
The tax basis of the Acquiring Fund Shares received by each of
the Acquired Fund Shareholders pursuant to the Reorganization
will be the same as the tax basis of the Acquired Fund shares
held by such shareholder immediately prior to the Reorganization;
(g) The holding period of the assets of the Acquired Fund in the
hands of the Acquiring Fund will include the period during which
those assets were held by the Acquired Fund; and (h) The holding
period of the Acquiring Fund Shares to be received by each
Acquired Fund Shareholder will include the period during which
the Acquired Fund Shares exchanged therefor were held by such
shareholder (provided the Acquired Fund Shares were held as
capital assets on the date of the Reorganization).
9. TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may
be terminated and abandoned by resolution of the Board of Trustees of
Intermediate Municipal Trust or the Board of Trustees of Municipal
Securities Income Trust, at any time prior to the Closing Date without
liability on the part of either party hereto, if circumstances should
develop that, in the opinion of the Board of Trustees of either party
hereto, determines that proceeding with the Agreement is not in the
best interests of that party's shareholders.
9.2 If this Agreement is terminated and the exchange
contemplated hereby is abandoned pursuant to the provisions of this
Section 9, this Agreement shall become void and have no effect,
without any liability on the part of any party hereto (other than the
agreement of Federated Advisers to assume the expenses of the
Reorganization) or the trustees, directors, officers or shareholders
of the Acquiring Fund or of the Acquired Fund, in respect of this
Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing conditions
(other than that set forth in Section 8.5) may be waived by the Board of
Trustees of Municipal Securities Income Trust or the Board of Trustees of
Intermediate Municipal Trust if, in the judgment of either, such waiver
will not have a material adverse effect on the benefits intended under this
Agreement to the shareholders of the Acquiring Fund or of the Acquired
Fund, as the case may be.
11. AMENDMENT.
This Agreement and Plan of Reorganization may be amended at any time
by the mutual agreement of the Acquired Fund and the Acquiring Fund,
authorized by their respective Boards of Trustees and notwithstanding
approval thereof by the Acquired Fund Shareholders; provided, that if so
approved by the Acquired Fund Shareholders, no amendment shall be made
which substantially changes the terms hereof.
12. NO BROKER'S OR FINDER'S FEE.
The Acquired Fund and the Acquiring Fund each represents that there is
no person with whom it has dealt who by reason of such
dealings is entitled to any broker's or finder's or
other similar fee or commission arising out of the
transactions contemplated by this Agreement and Plan of
Reorganization.
13. MISCELLANEOUS.
13.1 The representations and warranties included or provided for
herein shall not survive consummation of the transactions contemplated
hereby.
13.2 This Agreement contains the entire agreement and
understanding between the parties hereto with respect to the subject
matter hereof, and merges and supersedes all prior discussions,
agreements, and understandings of every kind and nature between them
relating to the subject matter hereof. Neither party shall be bound
by any condition, definition, warranty, or representation, other than
as set forth or provided in this Agreement or as may be set forth in a
later writing signed by the party to be bound thereby.
13.3 This Agreement shall be governed and construed in accordance
with the internal laws of the Commonwealth of Pennsylvania, without
giving effect to such jurisdiction's conflicts of laws principles.
13.4 This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered, shall be
deemed to be an original.
13.5 This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, but no
assignment or transfer hereof or of any rights or obligations
hereunder shall be made by any party without the written consent of
the other party. Nothing herein expressed or implied is intended or
shall be construed to confer upon or give any person, firm, or
corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of
this Agreement.
13.6 Intermediate Municipal Trust is hereby expressly put on
notice of the limitation of liability as set forth in the Declaration
of Trust of Municipal Securities Income Trust and agrees that the
obligations assumed by the Acquiring Fund pursuant to this Agreement
shall be limited in any case to the Acquiring Fund and its assets and
the Acquired Fund shall not seek satisfaction of any such obligation
from the shareholders of the Acquiring Fund, the Trustees, officers,
employees, or agents of Municipal Securities Income Trust or any of
them.
13.7 Municipal Securities Income Trust is hereby expressly put on
notice of the limitation of liability as set forth in the Declaration
of Trust of Intermediate Municipal Trust and agrees that the
obligations assumed by the Acquired Fund pursuant to this Agreement
shall be limited in any case to the Acquired Fund and its assets and
the Acquiring Fund shall not seek satisfaction of any such obligation
from the shareholders of the Acquired Fund, the Trustees, officers,
employees, or agents of Intermediate Municipal Trust or any of them.
IN WITNESS WHEREOF, each of the Acquired Fund, Federated Management,
the Acquiring Fund, and Federated Advisers have caused this Agreement and
Plan of Reorganization to be executed and attested on its behalf by its
duly authorized representatives as of the date first above written.
Attest: Acquired Fund:
INTERMEDIATE MUNICIPAL TRUST, ON BEHALF
OF ITS PORTFOLIO, FEDERATED OHIO
INTERMEDIATE MUNICIPAL TRUST
/s/S. Elliott Cohan By: /s/J. Christopher Donahue
Assistant Secretary
Name: J. Christopher Donahue
Title: Executive Vice President
FEDERATED MANAGEMENT
Attest:
By: /s/ J. Christopher Donahue
/s/ Christine Ita McGonigle
Assistant Secretary Name: J. Christopher Donahue
Title: President
Acquiring Fund:
Attest: MUNICIPAL SECURITIES INCOME TRUST, ON
BEHALF OF ITS PORTFOLIO, FEDERATED OHIO
MUNICIPAL INCOME FUND
By: /s/ J. Christopher Donahue
/s/S. Elliott Cohan Name: J. Christopher Donahue
Assistant Secretary Title: Executive Vice President
Attest: FEDERATED ADVISERS
By: /s/ J. Christopher Donahue
/s/ Christine Ita McGonigle
Assistant Secretary Name: J. Christopher Donahue
Title: President
STATEMENT OF ADDITIONAL INFORMATION
May 23, 1997
Acquisition of the assets of FEDERATED OHIO INTERMEDIATE
MUNICIPAL TRUST, a portfolio of Intermediate Municipal Trust
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone No: 1-800-341-7400
By and in exchange for shares of
FEDERATED OHIO MUNICIPAL INCOME FUND, a portfolio of
Municipal Securities Income Trust
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone No. 1-800-341-7400
This Statement of Additional Information dated May 23, 1997 is not a
prospectus. A Prospectus/Proxy Statement dated May 23, 1997, related to
the above-referenced matter may be obtained from Municipal Securities
Income Trust, on behalf of its portfolio, Federated Ohio Municipal Income
Fund, Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779. This
Statement of Additional Information should be read in conjunction with such
Prospectus/Proxy Statement.
TABLE OF CONTENTS
Statement of Additional Information of Federated Ohio Municipal Income
Fund, a portfolio of Municipal Securities Income Trust, dated August
31, 1996.
Statement of Additional Information of Federated Ohio Intermediate
Municipal Trust, a portfolio of Intermediate Municipal Trust, dated
May 31, 1996.
Financial Statements of Federated Ohio Municipal Income Fund, a portfolio
of Municipal Securities Income Trust, dated August 31, 1996.
Financial Statements of Federated Ohio Intermediate Municipal Trust, a
portfolio of Intermediate Municipal Trust, dated May 31, 1996.
Unaudited Financial Statements of Federated Ohio Intermediate Municipal
Trust, a portfolio of Municipal Securities Income Trust, dated
November 30, 1996.
The Statement of Additional Information of Federated Ohio Municipal Income
Fund (the "Portfolio"), a portfolio of Municipal Securities Income Trust
(the "Trust"), is incorporated by reference to the Trust's Post-Effective
Amendment No. 21 to its Registration Statement on Form N-1A (File No. 33-
36729) which was filed with the Securities and Exchange Commission on or
about October 24, 1996.
The Statement of Additional Information of Federated Ohio Municipal Income
Fund (the "Fund"), a portfolio of Intermediate Municipal Trust, is
incorporated by reference to Intermediate Municipal Trust's Post-Effective
Amendment No. 26 to its Registration Statement on Form N-1A (File No. 2-
98237) which was filed with the Securities and Exchange Commission on or
about July 25, 1996. A copy may be obtained from the Trust at Federated
Investors Tower, Pittsburgh, Pennsylvania 15222-3779. Telephone Number:
1-800-341-7400.
The audited financial statements of the Portfolio dated August 31, 1996,
are incorporated by reference to the Portfolio's Prospectus filed with
Post-Effective Amendment No. 21 to the Trust's Registration Statement on
Form N-1A (File No. 33-36729) which was filed with the Securities and
Exchange Commission on or about October 24, 1996.
The audited financial statements of the Fund dated May 31, 1996, are
incorporated by reference to the Fund's prospectus filed with Post-
Effective Amendment No. 26 to Intermediate Municipal Trust's Registration
Statement on Form N-1A (File No. 2-98237) which was filed with the
Securities and Exchange Commission on or about July 25, 1996.
The unaudited financial statements of the Fund dated November 30, 1996, are
incorporated by reference to the Semi-Annual Report to Shareholders of the
Fund which was filed with the Securities and Exchange Commission pursuant
to Section 30(b) of the Investment Company Act of 1940, as amended, on or
about February 3, 1997.
Pro forma financial statements as of August 31, 1996, which give effect to
the Reorganization of the Fund into the Portfolio, are attached.
FEDERATED OHIO MUNICIPAL INCOME FUND
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
INTRODUCTION TO PROPOSED MERGER
The accompanying unaudited Pro Forma Combining Portfolio of Investments and
Statement of Assets and Liabilities reflect the accounts of Federated Ohio
Municipal Income Fund and Federated Ohio Intermediate Municipal Trust,
collectively (`the Funds''), as of August 31, 1996. These statements have
been derived from the books and records utilized in calculating daily net
asset values at August 31, 1996. The accompanying unaudited Pro Forma
Combining Statement of Operations reflects the accounts of Federated Ohio
Municipal Income Fund's most recent fiscal year ended August 31, 1996, and
the twelve month period ended August 31, 1996, for Federated Ohio
Intermediate Municipal Trust.
The Pro Forma statements give effect to the proposed transfer of assets
from Federated Ohio Intermediate Municipal Trust in exchange for shares of
Federated Ohio Municipal Income Fund.
<TABLE>
<CAPTION>
FEDERATED OHIO MUNICIPAL INCOME FUND
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
PRO FORMA COMBINING PORTFOLIO OF INVESTMENTS
AUGUST 31, 1996 (UNAUDITED)
<C> <C> <C> <S> <C> <C> <C> <C>
FEDERATED
FEDERATED OHIO
OHIO INTERMEDIATE FEDERATED OHIO FEDERATED
MUNICIPAL MUNICIPAL PRO FORMA MUNICIPAL INCOME OHIO PRO FORMA
INCOME FUND TRUST COMBINED FUND INTERMEDIATE COMBINED
MUNICIPAL
TRUST
PRINCIPAL PRINCIPAL PRINCIPAL CREDIT
AMOUNT AMOUNT AMOUNT RATING* VALUE VALUE VALUE
LONG-TERM MUNICIPALS 99.6%
OHIO--93.9%
$200,000 --- $200,000 Akron, Bath & Copley, OH
Joint Township, Revenue
Bonds, 7.45% (Children's
Hospital Medical Center,
Akron)/(United States AAA $224,580 --- $224,580
Treasury PRF)/(Original
Issue Yield: 7.698%),
11/15/2000 (@102)
400,000 --- 400,000 Akron, Bath & Copley, OH
Joint Township, Revenue
Bonds, 7.45% (Children's
Hospital Medical Center,
Akron)/(United States A+ 449,160 --- 449,160
Treasury PRF)/(Original
Issue Yield: 7.698%),
11/15/2000 (@102)
- --- 200,000 200,000 Akron, OH, Various Purpose
LT GO, 5.50% (MBIA INS), AAA --- 206,346 206,346
12/1/2005
750,000 --- 750,000 Ashland County, OH, LT GO
Bonds, 7.00%, 12/1/2011 A 809,415 --- 809,415
300,000 --- 300,000 Bellefontaine, OH, Storm
Water Utility LT GO Bonds, A 322,215 --- 322,215
7.05%, 6/1/2011
500,000 --- 500,000 Brunswick, OH, UT GO
Bonds, 7.35% (Original A 553,480 --- 553,480
Issue Yield: 7.446%),
12/1/2010
- --- 200,000 200,000 Cleveland, OH Airport
System, Revenue Bonds
(Series A), 5.40% (FGIC AAA --- 204,540 204,540
INS)/(Original Issue
Yield: 5.55%), 1/1/2004
2,500,000 --- 2,500,000 Cleveland, OH Airport
System, Revenue Bonds
(Series A), 6.00% (FGIC AAA 2,481,500 --- 2,481,500
INS)/(Original Issue
Yield: 6.378%), 1/1/2024
- --- 250,000 250,000 Cleveland, OH, LT GO
Bonds, 6.00% (MBIA AAA --- 267,598 267,598
INS)/(Original Issue
Yield: 6.10%), 11/15/2004
2,000,000 --- 2,000,000 Cleveland, OH Public Power
System, Revenue Bonds,
First Mortgage (Series A
), 7.00% (MBIA Insurance AAA 2,246,200 --- 2,246,200
Corporation INS)/(Original
Issue Yield: 7.15%),
11/15/2024
- --- 500,000 500,000 Columbus, OH Municipal
Airport Authority, Revenue
Bonds, 5.55% (Port
Columbus Intl Airport AAA --- 514,515 514,515
)/(MBIA INS)/(Original
Issue Yield: 5.65%),
1/1/2004
2,600,000 --- 2,600,000 Columbus, OH Municipal
Airport Authority,
Improvement Revenue Bonds,
6.25% (Port Columbus Intl AAA 2,663,414 --- 2,663,414
Airport )/(MBIA
INS)/(Original Issue
Yield: 6.35%), 1/1/2024
- ---- 100,000 100,000 Columbus, OH Water System,
Revenue Refunding Bonds, AA- --- 104,365 104,365
6.375%, 11/1/2010
- ---- 150,000 150,000 Columbus, OH, LT GO Bonds,
5.50% (Original Issue AA+ --- 156,344 156,344
Yield: 5.55%), 5/15/2004
$2,000,000 --- $2,000,000 Cuyahoga County, OH
Hospital Authority,
Improvement & Refunding
Revenue Bonds (Series A),
5.625% (University AAA $1,908,780 --- $1,908,780
Hospitals Health System,
Inc.)/(MBIA INS)/(Original
Issue Yield: 5.90%),
1/15/2026
1,000,000 --- 1,000,000 Cuyahoga County, OH
Hospital Authority,
Revenue Bonds, 6.25%
(Fairview General A 1,010,090 --- 1,010,090
Hospital)/(Original Issue
Yield: 6.321%), 8/15/2010
1,500,000 --- 1,500,000 Cuyahoga County, OH
Hospital Authority,
Revenue Bonds, 6.25% A 1,495,035 --- 1,495,035
(Meridia Health
System)/(Original Issue
Yield: 6.80%), 8/15/2024
800,000 --- 800,000 Cuyahoga County, OH
Hospital Authority,
Revenue Bonds, 6.50%
(University Hospitals AA 818,944 --- 818,944
Health System,
Inc.)/(Original Issue
Yield: 6.68%), 1/15/2019
780,000 --- 780,000 Cuyahoga County, OH
Hospital Authority,
Revenue Refunding Bonds,
6.875% (University AAA 837,556 --- 837,556
Hospitals Health System,
Inc.)/(AMBAC
INS)/(Original Issue
Yield: 6.954%), 1/15/2019
500,000 --- 500,000 Cuyahoga County, OH
Hospital Authority,
Revenue Refunding Bonds, A+ 522,400 --- 522,400
8.00% (Cleveland
Clinic)/(Original Issue
Yield: 8.068%), 12/1/2015
800,000 --- 800,000 Cuyahoga County, OH, UT GO
Jail Facilities Bonds,
7.00% (Original Issue Aa 893,624 --- 893,624
Yield: 7.065%), 10/1/2013
500,000 --- 500,000 Franklin County, OH
Hospital Facility
Authority, Hospital
Revenue Refunding &
Improvement Bonds, 7.25% AAA 543,705 --- 543,705
(Riverside United
Methodist Hospital)/(MBIA
INS)/(Original Issue
Yield: 7.29%), 5/15/2020
260,000 --- 260,000 Franklin County, OH
Hospital Facility
Authority, Revenue
Refunding & Improvement
Bonds (Series B), 7.50%
(Riverside United Aa 289,474 --- 289,474
Methodist
Hospital)/(United States
Treasury PRF)/(Original
Issue Yield: 7.60%),
5/15/2000 (@102)
2,000,000 --- 2,000,000 Franklin County, OH
Hospital Facility
Authority, Revenue
Refunding Bonds (Series Aa 1,938,200 --- 1,938,200
A), 5.75% (Riverside
United Methodist
Hospital)/(Original Issue
Yield: 6.10%), 5/15/2020
- --- 300,000 300,000 Franklin County, OH,
Hospital Refunding &
Improvement Revenue Bonds
(1996 Series A), 5.20% Aa --- 300,570 300,570
(Children's
Hospital)/(Original Issue
Yield: 5.30%), 11/1/2004
- --- 400,000 400,000 (B) Franklin County, OH,
Hospital Revenue Bonds
(Series 1996), 5.50% (Holy AA --- 410,880 410,880
Cross Health System
Corp.), 6/1/2004
- --- 250,000 250,000 Franklin County, OH
Mortgage Revenue, Mortgage
Revenue Bonds, 5.875%
(Seton Square North, Aa --- 257,190 257,190
OH)/(FHA GTD)/(Original
Issue Yield: 6.00%),
10/1/2004
1,300,000 --- 1,300,000 Hamilton County, OH Health
System, Revenue Refunding
Bonds, Providence
Hospital, 6.875%
(Franciscan Sisters of BBB- 1,312,194 --- 1,312,194
Christian Charity
HealthCare Ministry,
Inc.)/(Original Issue
Yield: 7.05%), 7/1/2015
700,000 --- 700,000 Hamilton County, OH
Hospital Facilities
Authority, Revenue
Refunding & Improvement A- 736,267 --- 736,267
Bonds, 7.00% (Deaconess
Hospital)/(Original Issue
Yield: 7.046%), 1/1/2012
- --- 490,000 490,000 Hamilton County, OH
Hospital Facilities
Authority, Revenue
Refunding Bonds (Series A --- 500,270 500,270
A), 5.50% (Bethesda
Hospital, OH)/(Original
Issue Yield: 5.65%),
1/1/2000
2,000,000 --- 2,000,000 Hamilton County, OH
Hospital Facilities
Authority, Revenue
Refunding Bonds (Series A 2,019,820 --- 2,019,820
A), 6.25% (Bethesda
Hospital, OH)/(Original
Issue Yield: 6.55%),
1/1/2012
- --- 500,000 500,000 Hamilton County, OH
Hospital Facilities
Authority, Refunding
Revenue Bonds (Series
1992), 6.80% (Episcopal Aa2 --- $527,090 $527,090
Retirement Homes,
Inc.)/(Fifth Third Bank,
Cincinnati LOC), 1/1/2008
- --- $200,000 $200,000 Hamilton County, OH Sewer
System, Improvement &
Revenue Refunding Bonds AAA --- 200,102 200,102
(Series A), 4.55% (FGIC
INS), 12/1/2000
- --- 100,000 100,000 Kings Local School
District, OH, UT GO Bonds, NR --- 106,701 106,701
6.25%, 12/1/2001
- --- 100,000 100,000 Kings Local School
District, OH, UT GO Bonds, NR --- 109,085 109,085
6.50%, 12/1/2003
440,000 --- 440,000 Lakewood, OH Hospital
Improvement Authority,
Revenue Refunding Bonds
(Series One), 6.00% AAA 444,730 --- 444,730
(Lakewood Hospital,
OH)/(MBIA INS)/(Original
Issue Yield: 6.90%),
2/15/2010
500,000 --- 500,000 Lebanon, OH Waterworks
System, Revenue
Improvement and Refunding A 544,925 --- 544,925
Bonds, 7.10%, 3/1/2008
- ---- 300,000 300,000 Lucas County, OH, Hospital
Revenue Refunding Bonds
(Series 1996), 5.00% AAA --- 304,236 304,236
(ProMedica Healthcare
Obligated Group)/(MBIA
INS), 11/15/2000
1,000,000 --- 1,000,000 Marion County, OH Hospital
Authority, Hospital
Refunding & Improvement
Revenue Bonds (Series
1996), 6.375% (Community BBB+ 991,880 --- 991,880
Hospital of
Springfield)/(Original
Issue Yield: 6.52%),
5/15/2011
420,000 --- 420,000 Marysville, OH, LT Sewer
System GO Bonds, 7.15%, A 453,319 --- 453,319
12/1/2011
- --- 300,000 300,000 Miami County, OH, Hospital
Facilities Revenue
Refunding & Improvement
Bonds (Series 1996B),
5.20% (Upper Valley AAA --- 303,297 303,297
Medical Center, OH)/(MBIA
INS)/(Original Issue
Yield: 5.30%), 5/15/2004
1,000,000 --- 1,000,000 Miami County, OH, Hospital
Facilities Revenue
Refunding & Improvement
Bonds (Series 1996A), BBB 971,120 --- 971,120
6.375% (Upper Valley
Medical Center,
OH)/(Original Issue Yield:
6.62%), 5/15/2026
- --- 150,000 150,000 Miami Valley Regional
Transit Authority, OH, LT A --- 153,750 153,750
GO Bonds, 5.40%, 12/1/2004
650,000 --- 650,000 Middleburg Heights, OH, LT
GO Bonds, 7.20%, 12/1/2011 Aa 716,580 --- 716,580
1,000,000 --- 1,000,000 Montgomery County, OH
Health Facilities
Authority, Revenue Bonds
(Series A), 6.625% AAA 1,063,420 --- 1,063,420
(Sisters of Charity Health
Care System)/(MBIA
INS)/(Original Issue
Yield: 6.80%), 5/15/2021
3,000,000 --- 3,000,000 Moraine, OH Solid Waste
Disposal Authority,
Revenue Bonds, 6.75% A- 3,260,250 --- 3,260,250
(General Motors
Corp.)/(Original Issue
Yield: 6.80%), 7/1/2014
- --- 300,000 300,000 Muskingum County, OH,
(Series 1995) Hospital
Facilities Refunding
Revenue Bonds, 5.10%
(Franciscan Sisters of AAA --- 295,836 295,836
Christian Charity
HealthCare Ministry,
Inc.)/(Connie Lee
INS)/(Original Issue
Yield: 5.30%), 2/15/2006
- --- 150,000 150,000 North Canton OH City
School District, LT GO A --- 154,227 154,227
Energy Conservation Bonds,
5.50%, 12/1/2003
- --- 300,000 300,000 Ohio Enterprise Bond Fund,
(Series 1995-3) State
Economic Development A- --- 298,209 298,209
Revenue Bonds, 5.60%
(Smith Steelite),
12/1/2003
- --- 150,000 150,000 Ohio HFA, Residential
Mortgage Revenue Bonds AAA --- 151,269 151,269
(Series A-1), 5.40% (GNMA
COL), 3/1/2004
- --- 600,000 600,000 Ohio HFA, Residential
MortgageRevenue Bonds AAA --- 607,884 607,884
(Series B-1), 5.80% (GNMA
COL), 9/1/2005
10,515,000 --- 10,515,000 Ohio HFA, Residential
Mortgage Revenue Bonds AAA 10,800,062 --- 10,800,062
(Series B-2), 6.70% (GNMA
COL), 3/1/2025
2,400,000 --- 2,400,000 Ohio HFA, SFM Revenue
Bonds (Series A), 7.65%
(GNMA COL)/(Original Issue AAA 2,516,496 --- 2,516,496
Yield: 7.669%), 3/1/2029
275,000 --- 275,000 Ohio HFA, SFM Revenue
Bonds (Series A), 7.80% AAA 288,761 --- 288,761
(GNMA COL), 3/1/2030
$2,500,000 --- $2,500,000 Ohio State Air Quality
Development Authority, PCR
Refunding Bonds (Series BBB- $2,296,950 --- $2,296,950
A), 5.95% (Ohio Edison
Co.), 5/15/2029
500,000 --- 500,000 Ohio State Air Quality
Development Authority, PCR
Refunding Bonds (Series AAA 547,920 --- 547,920
A), 7.45% (Ohio Edison
Co.)/(FGIC INS), 3/1/2016
4,800,000 --- 4,800,000 Ohio State Air Quality
Development Authority,
Revenue Refunding Bonds,
6.375% (JMG Funding AAA 4,980,384 --- 4,980,384
Limited
Partnership)/(AMBAC
INS)/(Original Issue
Yield: 6.493%), 1/1/2029
- --- 400,000 400,000 Ohio State Building
Authority, State
Correctional Facilities A+ --- 418,792 418,792
Revenue Refunding Bonds,
Series A, 5.80% (Original
Issue Yield: 5.95%),
10/1/2006
2,000,000 --- 2,000,000 Ohio State Department of
Transportation,
Certificates of A+ 1,915,540 --- 1,915,540
Participation, 6.125%
(Rickenbacker, OH Port
Authority), 4/15/2015
2,000,000 --- 2,000,000 Ohio State Turnpike
Commission, Revenue Bonds, AA- 1,947,460 --- 1,947,460
Series A, 5.75%, 2/15/2024
- --- 350,000 350,000 Ohio State Turnpike
Commission, Revenue Bonds AAA --- 372,775 372,775
(Series A), 6.00% (FSA
INS), 2/15/2005
- --- 250,000 250,000 Ohio State, UT GO Bonds,
5.60% (Original Issue AA --- 262,223 262,223
Yield: 5.65%), 8/1/2002
1,700,000 --- 1,700,000 Ohio State Water
Development Authority, PCR
Refunding Bonds, 5.95% BBB- 1,545,045 --- 1,545,045
(Ohio Edison Co.),
5/15/2029
650,000 --- 650,000 Ohio State Water
Development Authority,
Pure Water Revenue Bonds,
7.00% (United States A 680,290 --- 680,290
Treasury PRF)/(Original
Issue Yield: 7.65%),
6/1/1998 (@100)
- --- 250,000 250,000 Olentangy, OH Local School
District, UT GO Bonds
(Series A), 5.60% AA- --- 260,105 260,105
(Original Issue Yield:
5.70%), 12/1/2004
350,000 --- 350,000 Rocky River, OH City
School District, UT GO
Bonds (Series A), 6.90% Aa 378,102 --- 378,102
(Original Issue Yield:
6.98%), 12/1/2011
- --- 195,000 195,000 Stow, OH, LT GO Safety
Center Construction Bonds, A1 --- 228,105 228,105
7.75%, 12/1/2003
500,000 --- 500,000 South Euclid, OH, UT GO
Refunding Bonds, 7.00%, A1 542,350 --- 542,350
12/1/2011
- --- 260,000 260,000 Summit County, OH, LT
Various Purpose GO Bonds, AAA --- 273,593 273,593
5.75% (AMBAC INS),
12/1/2005
500,000 --- 500,000 Tiffin, OH, LT GO Bonds, A 539,865 --- 539,865
7.10%, 12/1/2011
3,500,000 --- 3,500,000 Toledo-Lucas County, OH
Port Authority, Port
Facilities Revenue
Refunding Bonds, 5.90% Aa3 3,536,540 --- 3,536,540
(Cargill, Inc.)/(Original
Issue Yield: 5.981%),
12/1/2015
- --- 200,000 200,000 Toledo, OH Sewer System,
Revenue Bonds, 5.75%
(AMBAC INS)/(Original AAA --- 211,474 211,474
Issue Yield: 5.85%),
11/15/2005
500,000 --- 500,000 University of Cincinnati,
OH, General Receipts
Revenue Bonds (Series B), AA- 545,360 --- 545,360
7.00% (Original Issue
Yield: 7.05%), 6/1/2011
500,000 --- 500,000 University of Cincinnati,
OH, Revenue Bonds (Series
12), 6.50% (Original Issue AA- 529,130 --- 529,130
Yield: 6.613%), 6/1/2011
Total 66,112,532 8,161,371 74,273,903
PUERTO RICO--3.2% ---
2,400,000 --- 2,400,000 Puerto Rico Electric Power
Authority, Revenue Bonds
(Series T), 6.375% A- 2,501,182 --- 2,501,182
(Original Issue Yield:
6.58%), 7/1/2024
Virgin Islands--2.5%
- --- $200,000 $200,000 Virgin Islands HFA,
SFM Revenue Refunding AAA --- $201,624 $201,624
Bonds (Series A),
5.70% (GNMA COL),
3/1/2004
1,750,000 --- 1,750,000 Virgin Islands HFA,
SFM Revenue Refunding
Bonds (Series A), AAA 1,767,220 --- 1,767,220
6.50% (GNMA
COL)/(Original Issue
Yield: 6.522%),
3/1/2025
Total 1,767,220 201,624 1,968,844
TOTAL INVESTMENTS
(IDENTIFIED COST $70,380,934 $8,362,995 $78,743,929
$75,967,522)(A)
</TABLE>
Securities that are subject to alternative minimum tax represents
43.6% of the portfolio as calculated based upon total portfolio
market value.
(a) The cost of investments for federal tax purposes
amounts to $75,967,522. The net unrealized appreciation of
investments on a federal tax basis amounts to $2,776,407
which is comprised of $23,777,967 appreciation and
$21,001,560 depreciation at August 31, 1996.
(b) Denotes a when-issued security.
* Please refer to the Appendix of the Statement of Additional Information
for an explanation of the credit ratings.
Note: The categories of investments are shown as a percentage
of net assets ($79,060,787) at August 31, 1996.
The following acronyms are used throughout this portfolio:
AMBAC --American Municipal Bond Assurance Corporation
COL --Collateralized
FGIC --Financial Guaranty Insurance Company
FHA --Federal Housing Administration
FSA --Financial Security Assurance
GNMA --Government National Mortgage Association
GO --General Obligation
GTD --Guaranty
HFA --Housing Finance Authority
INS --Insured
LOC --Letter of Credit
LT --Limited Tax
MBIA --Municipal Bond Investors Assurance
PCR --Pollution Control Revenue
PRF --Prerefunded
SFM --Single Family Mortgage
UT --Unlimited Tax
(See Notes to Pro Forma Financial
<TABLE>
<CAPTION>
FEDERATED OHIO MUNICIPAL INCOME FUND
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1996 (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
FEDERATED
FEDERATED OHIO
OHIO INTERMEDIATE
MUNICIPAL MUNICIPAL PRO FORMA PRO FORMA
INCOME TRUST ADJUSTMENT COMBINED
FUND
ASSETS:
Investments in $ 70,380,934 $ 8,362,995 $---- $ 78,743,929
securities, at value
Cash 51,488 34,889 ---- 86,377
Deferred ---- 7,223 (7,223) (a) ----
Expenses
Receivables
for/from:
Investment Adviser ---- ---- 7,223 (a) 7,223
Shares of beneficial 22,095 ---- ---- 22,095
interest sold
Income 1,268,739 122,916 ---- 1,391,655
Total 71,723,256 8,528,023 ---- 80,251,279
assets
LIABILITIES:
Payables for/to:
Shares of beneficial
interest
redeemed 101 ---- ---- 101
Income distributions 119,082 34,193 ---- 153,275
Investments 990,737 ---- ---- 990,737
purchased
Accrued expenses and other
liabilities 45,621 758 ---- 46,379
Total 1,155,541 34,951 ---- 1,190,492
liabilities
TOTAL NET ASSETS $ 70,567,715 $ 8,493,072 $ 79,060,787
NET ASSETS CONSIST OF:
Paid in capital $ 68,463,362 $ 8,559,104 ---- $ 77,022,466
Net unrealized
appreciation of
investments 2,611,079 165,328 ---- 2,776,407
Accumulated net realized gain (loss)
on (562,495) (231,360) ---- (793,855)
investments
Undistributed
net investment income 55,769 ---- ---- 55,769
TOTAL NET ASSETS $ 70,567,715 $ 8,493,072 $---- $ 79,060,787
SHARES OUTSTANDING 6,295,420 868,161 (110,485) (b) 7,053,096
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER
SHARE:
Net asset value per $ 11.21 $9.78 $ 11.21
share
Offering price per $ 11.32 *N/A $ 11.32 *
share
Redemption proceeds $ 11.10 *N/A $ 11.10
per share *
TOTAL INVESTMENTS, AT
IDENTIFIED COST $ 67,769,855 $8,197,667 $ 75,967,522
</TABLE>
(a) Adjustment to reflect the elimination of deferred expenses.
(b) Adjustment to reflect share balance as a result of the combination, based on
the exchange ratio of 0.8727367389.
* See "What Shares Cost" in the Federated Ohio Municipal Income Fund Prospectus,
as of October 31, 1996.
** See `Contingent Deferred Sales Charge'' in the Federated Ohio Municipal
Income Fund Prospectus, as of October 31, 1996.
<TABLE>
<CAPTION>
Federated Ohio Municipal Income Fund
Federated Ohio Intermediate Municipal Trust
Pro Forma Combining Statement of Operations
For The Twelve Months Ended August 31, 1996 (unaudited)
<S> <C> <C> <C> <C>
Federated Federated
Ohio Ohio
Municipal Intermediate
Income Municipal Pro Forma Pro Forma
Fund Trust Adjustments Combined
Investment Income:
Interest $4,411,115 $398,891 $----- $4,810,006
Expenses:
Investment advisory fee 285,381 38,235 (7,651) (a) 315,965
Administrative personnel and 125,000 (125,087) (b) 125,000
services fee 125,087
Custodian fees 18,266 18,511 (17,911) (c) 18,866
Transfer and dividend disbursing
agent fees and expenses 51,504 16,452 (10,432) (d) 57,524
Directors'/Trustees' 3,565 3,130 (3,130) (e) 3,565
fees
Auditing fees 13,711 16,687 (16,687) (f) 13,711
Legal fees 3,276 2,312 (1,812) (f) 3,776
Portfolio accounting 49,252 50,047 (45,084) (g) 54,215
fees
Distribution services fee 285,377 ---- ---- 285,377
Shareholder services fee 178,361 19,117 ---- 197,478
Share registration 16,062 20,541 (12,129) (h) 24,474
costs
Printing and postage 20,895 9,637 (7,500) (i) 23,032
Insurance premiums 4,236 3,376 (2,876) (j) 4,736
Taxes 215 171 ---- 386
Miscellaneous 2,160 11,165 (10,665) (k) 2,660
Total 1,057,261 334,468 (260,964) 1,130,765
expenses
Deduct-
Waiver of investment advisory (233,662) (38,235) 47,893 (a) (224,004)
fee
Waiver of distribution (171,226) ---- ---- (171,226)
services fee
Waiver of shareholder (7,134) (13,959) ---- (21,093)
services fee
Reimbursement of other
operating ---- (247,525) 247,525 (l) ----
expenses
Net 645,239 34,749 34,454 714,442
expenses
Net 3,765,876 364,142 (34,454) 4,095,564
investment income
Realized and Unrealized Gain (Loss) on
Investments:
Net realized gain (loss) on 415,434 (4,386) ---- 411,048
investments
Net change in unrealized
appreciation (depreciation) of (528,504) (73,666) ---- (602,170)
investments
Net realized and
unrealized gain (loss) on (113,070) (78,052) ---- (191,122)
investments
Change in net assets
resulting from $3,652,806 $286,090 $(34,454) $3,904,442
operations
(See Notes to Pro Forma Combining Statement of Operations)
(See Notes to Pro Forma Financial Statements)
</TABLE>
Federated Ohio Municipal Income Fund
Federated Ohio Intermediate Municipal Trust
Notes to Pro Forma Combining Statement of Operations
For the Twelve Months Ended August 31, 1996 (unaudited)
(a) Federated Advisers receives for its services an annual investment
advisory fee equal to 0.40% of the Federated Ohio Municipal Income Fund's
(the `Municipal Income Fund'') average daily net assets. Federated
Management receives for its services an annual investment advisory fee
equal to 0.50% of the Federated Ohio Intermediate Municipal Trust's (the
`Intermediate Municipal Trust'') average daily net assets. Either adviser
may voluntarily choose to waive any portion of its fee.
(b) Federated Services Company (`FServ'') provides the funds with certain
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.
(c) State Street Bank and Trust Company is custodian for the securities
and cash of the funds. The custodian fee is based upon the level of each
funds average daily net assets for the period plus out-of-pocket expenses.
(d) Fserv, through its subsidiary, Federated Shareholder Services Company
(`FSSC'') serves as transfer and dividend disbursing agent for the funds.
The fee paid to FSSC is based on the size, type and number of accounts and
transactions made by shareholders.
(e) Adjustment to reflect the elimination of the Trustees' fees paid for
Intermediate Municipal Trust .
(f) Adjustment to reflect the audit and legal fee reductions due to the
combining of two portfolios into a single portfolio.
(g) FServ maintains the funds accounting records. The fee paid to FServ is
based on the level of the fund's average daily net assets for the period,
plus out-of-pocket expenses.
(h) Adjustment to reflect the registration costs for the Municipal Income
Fund only and the write-off of the deferred expense balance for the
Intermediate Municipal Trust.
(i) Printing and postage expenses are adjusted to reflect estimated
savings to be realized by combining two portfolios into a single portfolio.
(j) Adjustment to reflect the decrease in insurance fees due to the
reduction in the coverage requirement of a single portfolio.
(k) Adjustment to reflect the miscellaneous expense for the Municipal
Income Fund only.
(l) Adjustment to reflect the elimination of the expense reimbursement due
to the expense reduction realized by combining two portfolios into a single
portfolio.
(See Notes to Pro Forma Financial Statements)
FEDERATED OHIO MUNICIPAL INCOME FUND
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
NOTES TO PRO FORMA FINANCIAL STATEMENTS
AUGUST 31, 1996 (UNAUDITED)
1. BASIS OF COMBINATION
The accompanying unaudited Pro Forma Combining Portfolio of
Investments and Statement of Assets and Liabilities reflect the
accounts of Federated Ohio Municipal Income Fund and Federated Ohio
Intermediate Municipal Trust, collectively (the `Funds''), as of
August 31, 1996. These statements have been derived from the books and
records utilized in calculating daily net asset values at August 31,
1996. The accompanying unaudited Pro Forma Combining Statement of
Operations reflects the accounts of Federated Ohio Municipal Income
Fund's most recent fiscal year ended August 31, 1996, and the twelve
month period ended August 31, 1996, for Federated Ohio Intermediate
Municipal Trust.
The Pro Forma Financial Statements should be read in conjunction with
historical financial statements of the Funds which are incorporated by
reference in the Statement of Additional Information. The Funds follow
generally accepted accounting principles applicable to management
investment companies which are disclosed in the historical financial
statements of each fund.
The Pro Forma Financial Statements give effect to the proposed
transfer of assets of Federated Ohio Intermediate Municipal Trust in
exchange for shares of Federated Ohio Municipal Income Fund. Under
generally accepted accounting principles, Federated Ohio Municipal
Income Fund will be the surviving entity for accounting purposes with
its historical cost of investment securities and results of operations
being carried forward.
The Pro Forma Financial Statements have been adjusted to reflect the
anticipated advisory and administrative fee arrangements for the
surviving entity. Certain other operating costs have also been
adjusted to reflect anticipated expenses of the combined entity. Other
costs which may change as a result of the reorganization are currently
undeterminable.
For the twelve months ended August 31, 1996, Federated Ohio Municipal
Income Fund and Federated Ohio Intermediate Municipal Trust, paid
investment advisory fees computed at the annual rate of each Fund's
average net assets as follows:
FUND PERCENT OF EACH FUND'S
AVERAGE NET ASSETS
Federated Ohio Municipal Income Fund 0.40%
Federated Ohio Intermediate Municipal Trust 0.50%
Each adviser may voluntarily choose to waive a portion of their fees
and reimburse certain operating expenses.
2. SHARES OF BENEFICIAL INTEREST
The Pro Forma net asset value per share assumes the issuance of
757,676 shares of Federated Ohio Municipal Income Fund shares in
exchange for 868,161 shares of Federated Ohio Intermediate Municipal
Trust at August 31, 1996, in conjunction with the proposed
reorganization.
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
(A PORTFOLIO OF INTERMEDIATE MUNICIPAL TRUST)
PROSPECTUS
The shares of Federated Ohio Intermediate Municipal Trust (the "Fund")
offered by this prospectus represent interests in a non-diversified
portfolio of securities of Intermediate Municipal Trust (the "Trust"), an
open-end management investment company (a mutual fund).
The investment objective of the Fund is to provide current income which is
exempt from federal regular income tax and the personal income taxes imposed
by the State of Ohio. The Fund invests primarily in a portfolio of Ohio
municipal securities, including securities of states, territories, and
possessions of the United States which are not issued by or on behalf of the
State of Ohio or its political subdivisions, but which are exempt from
federal regular income tax and Ohio state personal income taxes.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information, dated July
31, 1996, with the Securities and Exchange Commission. 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 the Fund at the address listed in the back of this prospectus.
The Statement of Additional Information, material incorporated by reference
into this document, and other information regarding the Fund is maintained
electronically with the SEC at Internet Web site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated July 31, 1996
Table of Contents
SUMMARY OF FUND EXPENSES 1
FINANCIAL HIGHLIGHTS 2
GENERAL INFORMATION 3
INVESTMENT INFORMATION 3
Investment Objective 3
Investment Policies 3
Ohio Municipal Securities 6
Investment Risks 6
Non-Diversification 6
Investment Limitations 7
INTERMEDIATE MUNICIPAL TRUST INFORMATION 7
Management of the Trust 7
Distribution of Fund Shares 8
Administration of the Fund 9
NET ASSET VALUE 10
INVESTING IN THE FUND 10
Share Purchases 10
Minimum Investment Required 10
What Shares Cost 10
Exchanging Securities for Fund
Shares 11
Certificates and Confirmations 11
Dividends 11
Capital Gains 11
REDEEMING SHARES 11
Accounts with Low Balances 12
SHAREHOLDER INFORMATION 12
Voting Rights 12
TAX INFORMATION 13
Federal Income Tax 13
State and Local Taxes 14
PERFORMANCE INFORMATION 14
FINANCIAL STATEMENTS 15
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 26
ADDRESSES 27
SUMMARY OF FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C> <C>
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) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
<CAPTION>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1) 0.00%
12b-1 Fee None
Total Other Expenses (after expense reimbursement) 0.45%
Shareholder Services Fee (after waiver)(2) 0.10%
Total Operating Expenses(3) 0.45%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of
the management fee. The adviser can terminate this voluntary waiver at any
time at its sole discretion. The maximum management fee is 0.50%.
(2) The maximum shareholder services fee is 0.25%.
(3) The total operating expenses in the table above are based on expenses
expected during the fiscal year ending May 31, 1997. The total operating
expenses were 0.45% for the fiscal year ended May 31, 1996 and would have
been 4.53% absent the voluntary waiver of the management fee, a portion of
the shareholder services fee and the voluntary reimbursement of certain
other operating expenses.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Fund will bear, either
directly or indirectly. For more complete descriptions of the various costs
and expenses, see "Investing in the Fund" and "Intermediate Municipal Trust
Information." Wire-transferred redemptions of less than $5,000 may be
subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period. $5 $14 $25 $57
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 26.
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1996 1995 1994(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.79 $ 9.53 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.47 0.47 0.22
Net realized and unrealized gain (loss) on investments (0.04) 0.26 (0.47)
Total from investment operations 0.43 0.73 (0.25)
LESS DISTRIBUTIONS
Distributions from net investment income (0.47) (0.47) (0.22)
NET ASSET VALUE, END OF PERIOD $ 9.75 $ 9.79 $ 9.53
TOTAL RETURN(B) 4.41% 7.98% (2.52%)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.45% 0.45% 0.24%*
Net investment income 4.78% 5.05% 4.69%*
Expense waiver/reimbursement(c) 4.08%(d) 4.80%(d) 3.07%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $8,375 $6,607 $3,379
Portfolio turnover 46% 56% 48%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from December 2, 1993 (date of
initial public investment) to May 31, 1994.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) For the years ended May 31, 1996, and May 31, 1995, the adviser waived
$35,966 and $26,346, respectively, of the investment advisory fee, which
represents 0.50% and 0.50% of average net assets, and the adviser reimbursed
other operating expenses of $128,177 and $115,674, respectively, which
represents 1.78% and 2.20% of average net assets, to comply with certain
state expense limitations. The remainder of the waiver reimbursement is
voluntary. The expense decrease is reflected in both the expense and net
investment income ratios shown above.
(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 May 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 May 31, 1985. 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.
Shares of the Fund are designed for the investment of monies generally held
by financial institutions in a fiduciary capacity. A minimum initial
investment of $25,000 over a 90-day period is required. The Fund may not be
a suitable investment for non-Ohio taxpayers or retirement plans since it
intends to invest primarily in Ohio municipal securities which are not
likely to produce competitive after-tax yields for such persons and entities
compared to other investments.
Shares are sold and redeemed at net asset value without a sales charge
imposed by the Fund.
INVESTMENT INFORMATION
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income exempt
from federal regular income tax and the personal income taxes imposed by the
State of Ohio. Interest income of the Fund that is exempt from federal
regular income tax and Ohio state personal income tax retains its tax-free
status when distributed to the Fund's shareholders. The Fund pursues its
investment objective by investing at least 80% of its net assets in a
non-diversified portfolio of Ohio municipal securities. The portfolio has a
dollar-weighted average maturity of not less than three or more than ten
years. 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 investment objective and the policy stated
above cannot be changed without approval of shareholders.
INVESTMENT POLICIES
The investment policies described below may be changed by the Board of
Trustees (the "Trustees") without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Ohio municipal securities in which the Fund
invests are:
* obligations issued by or on behalf of the state of Ohio, its political
subdivisions, or agencies;
* debt obligations of any state, territory, or possession of the United
States, including the District of Columbia, or any political subdivision of
any of these; and
* participation interests, 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 State of Ohio.
The prices of fixed income securities fluctuate inversely to the direction
of interest rates.
AVERAGE MATURITY. The dollar-weighted average maturity of the Fund's
portfolio of Ohio municipal securities will not be less than three years or
more than ten years. For purposes of determining the dollar-weighted average
portfolio maturity of the Fund's portfolio, the maturity of a municipal
security will be its ultimate maturity, unless it is probable that the
issuer of the security will take advantage of maturity-shortening devices
such as a call, refunding, or redemption provision, in which case the
maturity date will be the date on which it is probable that the security
will be called, refunded, or redeemed. If the municipal security includes
the right to demand payment, the maturity of the security for purposes of
determining the Fund's dollar-weighted average portfolio maturity will be
the period remaining until the principal amount of the security can be
recovered by exercising the right to demand payment.
CHARACTERISTICS. The municipal securities in which the Fund invests are:
* rated within the three highest ratings for municipal securities by Moody's
Investors Service, Inc. ("Moody's") (Aaa, Aa, or A), Standard & Poor's
Rating Group ("S&P") (AAA, AA, or A), or Fitch Investors Service, Inc.
("Fitch") (AAA, AA, or A);
* guaranteed at the time of purchase by the U.S. government as to the
payment of principal and interest;
* fully collateralized by an escrow of U.S. government securities or other
securities acceptable to the Fund's adviser;
* rated at the time of purchase within Moody's highest short-term municipal
obligation rating (MIG1/VMIG1) or Moody's highest municipal commercial paper
rating (PRIME-1) or S&P's highest municipal commercial paper rating (SP-1);
* unrated if, at the time of purchase, other municipal securities of that
issuer are rated A or better by Moody's, S&P or Fitch; or
* unrated if determined to be of equivalent quality to one of the foregoing
rating categories by the Fund's investment adviser.
If a security is subsequently downgraded, the adviser will determine whether
it continues to be an acceptable investment; if not, the security will be
sold. 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 Ohio municipal securities. The financial institutions
from which the Fund purchases participation interests frequently provide or
secure irrevocable letters of credit or guarantees to assure that the
participation interests are of high quality. The Trustees will determine
whether participation interests meet the prescribed quality standards for
the Fund.
VARIABLE RATE MUNICIPAL SECURITIES. Some of the Ohio municipal securities
which the Fund purchases may have variable interest rates. Variable interest
rates are ordinarily stated as a percentage of 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. Also included within the general category of municipal
securities are certain lease obligations or installment purchase contract
obligations and participations therein (hereinafter collectively referred to
as "lease obligations") of municipal authorities or entities. Although lease
obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation is
ordinarily backed by the municipality's covenant to budget for, appropriate,
and make the payments due under the lease obligation. Interest on lease
obligations is tax-exempt to the same extent as if the municipality had
issued debt obligations to finance the underlying project or purchase.
However, certain lease obligations contain "non-appropriation" clauses which
provide that the municipality has no obligation to make lease or installment
purchase payments in future years unless money is appropriated for such
purpose on a yearly basis. In addition to the "non-appropriation" risk,
these securities represent a relatively new type of financing that has not
yet developed the depth of marketability associated with more conventional
bonds and some lease obligations may be illiquid. Although
"non-appropriation" lease obligations are generally secured by the leased
property, disposition of the property in the event of foreclosure might
prove difficult. In addition, the tax treatment of such obligations in the
event of "non-appropriation" is unclear. The Fund does not invest more than
10% of its total assets in lease obligations that contain
"non-appropriation" clauses.
If the Fund purchases unrated municipal leases, the Trustees will be
responsible for determining, on an ongoing basis, the credit quality of such
leases and the likelihood that such leases will not be cancelled.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase Ohio
municipal 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 these transactions may cause the Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. Accordingly, the Fund may pay
more or less than the market value of the securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase
similar securities at later dates. The Fund may realize short-term profits
or losses upon the sale of such commitments.
TEMPORARY INVESTMENTS. The Fund normally invests in Ohio municipal
securities, as described above. However, from time to time, when the
investment adviser determines that market conditions call for a temporary
defensive posture, the Fund may invest in short-term non-Ohio municipal
tax-exempt obligations or taxable temporary investments. 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 with
the exception of temporary municipal securities, which are subject to the
same rating requirements as all other municipal securities in which the Fund
invests. However, the investment adviser will limit temporary investments to
those it considers to be of comparable quality to the acceptable investments
of the Fund.
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 Ohio state personal income tax.
OHIO MUNICIPAL SECURITIES
Ohio municipal securities are generally issued to finance public works, such
as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. 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.
Ohio municipal securities include industrial development bonds issued by or
on behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations.
The availability of this financing encourages these corporations to locate
within the sponsoring communities and thereby increases local employment.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the
payment of principal and interest. However, interest on and principal of
revenue bonds are payable only from the revenue generated by the facility
financed by the bond or other specified sources of revenue. Revenue bonds do
not represent a pledge of credit or create any debt of or charge against the
general revenues of a municipality or public authority. Industrial
development bonds are typically classified as revenue bonds.
INVESTMENT RISKS
Yields on Ohio municipal securities depend on a variety of factors,
including: the general conditions of the municipal bond market; the size of
the particular offering; the maturity of the obligations; and the rating of
the issue. Further, any adverse economic conditions or developments
affecting the state of Ohio or its municipalities could impact the Fund's
portfolio. The State of Ohio and certain underlying municipalities face
potential economic problems over the longer term. The state economy has
grown more slowly than that of the nation as a whole, resulting in a gradual
erosion of its relative economic affluence. The causes of this relative
decline are varied and complex, involving in many cases national and
international demographic and economic trends beyond the influence of the
state. The ability of the Fund to achieve its investment objective also
depends on the continuing ability of the issuers of Ohio municipal
securities and participation interests, or the guarantors of either, to meet
their obligations for the payment of interest and principal when due.
Investing in Ohio municipal securities which meet the Fund's quality
standards may not be possible if the State of Ohio or its municipalities do
not maintain their current credit ratings. In addition, certain Ohio
constitutional amendments, legislative measures, executive orders,
administrative regulations, or voter initiatives could result in adverse
consequences affecting Ohio municipal securities.
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 was diversified among more
issuers.
The Fund intends to comply with Subchapter M of the Internal Revenue Code,
as amended. This undertaking requires that at the end of each quarter of the
taxable year, 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; beyond that no more than 25% of its total assets are invested in the
securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through reverse repurchase
agreements (arrangements in which the Fund sells a portfolio instrument for
a percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund may
borrow up to one-third of the value of its total assets and pledge up to 10%
of the value of those assets to secure such borrowings. The Fund does not
intend to engage in any borrowings during the coming fiscal year.
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.
The Fund will not invest more than 15% of its net assets in securities which
are illiquid, including repurchase agreements providing for settlement in
more than seven days after notice, and restricted securities determined by
the Trustees not to be liquid.
INTERMEDIATE MUNICIPAL 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. An Executive Committee of the Board of Trustees handles the
Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the
Trustees. The adviser continually conducts investment research and
supervision for the Fund and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the Fund.
ADVISORY FEES. The adviser receives an annual investment advisory fee equal
to .50% of the Fund's average daily net assets. The adviser has undertaken
to reimburse the Fund up to the amount of the advisory fee for operating
expenses in excess of limitations established by certain states. Also, the
adviser may voluntarily choose to waive a portion of its fee or reimburse
other expenses of the Fund, but reserves the right to terminate such waiver
or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, 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 Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services to
a number of investment companies. With over $80 billion invested across more
than 250 funds under management and/or administration by its subsidiaries,
as of December 31, 1995, Federated Investors is one of the largest mutual
fund investment managers in the United States. With more than 1,800
employees, Federated continues to be led by the management who founded the
company in 1955. Federated funds are presently at work in and through 4,000
financial institutions nationwide. More than 100,000 investment
professionals have selected Federated funds for their clients.
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 interests. 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. Violations of the codes are
subject to review by the Trustees and could result in severe penalties.
PORTFOLIO MANAGER'S BACKGROUND. J. Scott Albrecht has been the Fund's
portfolio manager since the Fund's inception. Mr. Albrecht joined Federated
Investors in 1989 and has been a Vice President of the Fund's investment
adviser since 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 FUND SHARES
Federated Securities Corp. is the principal distributor for shares of the
Fund. It is a Pennsylvania corporation organized on November 14, 1969, and
is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Services Company, a subsidiary of
Federated Investors, provides administrative personnel and services
(including certain legal and financial reporting services) necessary to
operate the Fund. Federated Services Company provides these at an annual
rate which relates to the average aggregate daily net assets of all funds
advised by subsidiaries of Federated Investors as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS
<C> <S>
0.15% on the first $250 million
0.125% on the next $250 million
0.10% on the next $250 million
0.075% on assets in excess of $750 million
</TABLE>
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 SERVICES. The Fund has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which the Fund may make payments up to .25% of the average
daily net asset value of the Fund shares, computed at an annual rate, to
obtain certain personal services for shareholders and to maintain
shareholder accounts. From time to time and for such periods as deemed
appropriate, the amount stated above may be reduced voluntarily. Under the
Shareholder Services Agreement, Federated Shareholder Services will either
perform shareholder services directly or will 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. In addition to payments
made pursuant to the 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 will be predicated upon the amount of shares the financial
institution sells or may sell, and/or upon the type and nature of sales or
marketing support furnished by the financial institution. Any payments made
by the distributor may be reimbursed by the Fund's investment adviser or its
affiliates.
NET ASSET VALUE
The Fund's net asset value per share fluctuates. It is determined by
dividing the sum of all securities and other assets, less liabilities, by
the total number of shares outstanding.
INVESTING IN THE FUND
SHARE PURCHASES
Shares of the Fund are sold on days on which the New York Stock Exchange is
open for business. Shares may be purchased either by wire or mail. The Fund
reserves the right to reject any purchase request.
To purchase shares of the Fund, open an account by calling Federated
Securities Corp. Information needed to establish the account will be taken
over the telephone.
BY WIRE. To purchase shares of the Fund by Federal Reserve wire, call the
Fund before 1:00 p.m. (Eastern time) to place an order. The order is
considered received immediately. Payment by federal funds must be received
before 3:00 p.m. (Eastern time) that day. 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 Ohio Intermediate Municipal Trust; Fund Number (this number can be
found on the account statement or by contacting the Fund); Group Number or
Order 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.
BY MAIL. To purchase shares of the Fund by mail, send a check made payable
to Federated Ohio Intermediate Municipal Trust to: Federated Shareholder
Services Company, P.O. Box 8600, Boston, Massachusetts 02266-8600. Orders by
mail are considered received when payment by check is converted by State
Street Bank and Trust Company ("State Street Bank") into federal funds. This
is normally the next business day after State Street Bank receives the
check.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $25,000, plus any financial
intermediary fee, if applicable. However, an account may be opened with a
smaller amount as long as the $25,000 minimum is reached within 90 days. An
institutional investor's minimum investment will be calculated by combining
all accounts it maintains with the Fund.
Individual accounts established through a financial intermediary may be
subject to a different minimum investment requirement.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund. Investors who
purchase shares through a financial intermediary may be charged a service
fee by that financial intermediary.
The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value
of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no Shares are tendered for
redemption and no orders to purchase shares are received; or (iii) the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange certain municipal securities or a combination of
securities and cash for Fund shares. The securities and cash must have a
market value of at least $25,000. The Fund reserves the right to determine
the acceptability of the securities to be exchanged. Securities accepted by
the Fund are valued in the same manner as the Fund values its assets.
Shareholders wishing to exchange securities should first contact Federated
Securities Corp.
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.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during
that month.
DIVIDENDS
Dividends are declared daily and paid monthly to all shareholders invested
in the Fund on the record date. Dividends are declared just prior to
determining net asset value. Shares purchased by wire begin earning
dividends on the business day after the order is received. Shares purchased
by check begin earning dividends on the business day after the check is
converted, upon instruction of the transfer agent, into federal funds.
Dividends are automatically reinvested on payment dates at the ex-dividend
date net asset value in additional shares of the Fund unless cash payments
are requested by contacting the Fund.
CAPITAL GAINS
Distributions of net realized long-term capital gains realized by the Fund,
if any, will be made at least once every twelve months.
REDEEMING SHARES
The Fund redeems shares at their net asset value next determined after the
Fund receives the redemption request. Redemptions will be made on days on
which the Fund computes its net asset value. Investors who redeem shares
through a financial intermediary may be charged a service fee by that
financial intermediary. Redemption requests must be received in proper form
and can be made by telephone request or by written request.
BY TELEPHONE. Shareholders may redeem their shares by telephoning the Fund
before 4:00 p.m. (Eastern time). All proceeds will normally be wire
transferred the following business day, but in no event more than seven
days, to the shareholder's account at a domestic commercial bank that is a
member of the Federal Reserve System. 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. Telephone redemption instructions may be recorded.
An authorization form permitting the Fund to accept telephone redemption
requests must first be completed. It is recommended that investors request
this privilege at the time of their initial application. If not completed at
the time of initial application, authorization forms and information on this
service can be obtained through Federated Securities Corp. If reasonable
procedures are not followed by the Fund, it may be liable for losses due to
unauthorized or fraudulent telephone instructions.
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.
BY MAIL. Shares may be redeemed in any amount by mailing a written request
to: Federated Shareholder Services Company, P.O. Box 8600, Boston,
Massachusetts 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: Federated Ohio Intermediate Municipal
Trust; 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 the 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.
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 of
record if the account balance falls below the required minimum value of
$25,000 due to shareholder redemptions. This requirement does not apply,
however, if the balance falls below $25,000 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.
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 shareholders 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 the shareholders for this purpose shall be called by
the Trustees upon the written request of shareholders owning at least 10% of
the outstanding shares of all series in the Trust entitled to vote.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements of the Internal Revenue Code of 1986, as amended (the "Code"),
applicable to regulated investment companies and to receive the special tax
treatment afforded to such companies. The Fund will be treated as a single,
separate entity for federal income tax purposes so that income (including
capital gains) and losses realized by the Trust's other portfolios will not
be combined for tax purposes with those realized by the Fund.
Shareholders are not required to pay federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, dividends representing net interest income earned
on some municipal bonds may be included in calculating the federal
individual alternative minimum tax or the federal alternative minimum tax
for corporations.
The alternative minimum tax, up to 28% of alternative minimum taxable income
for individuals and 20% for corporations, applies when it exceeds the
regular tax for the taxable year. Alternative minimum taxable income is
equal to the regular taxable income of the taxpayer increased by certain
"tax preference" items not included in regular taxable income and reduced by
only a portion of the deductions allowed in the calculation of the regular
tax.
Interest on certain "private activity" bonds issued after August 7, 1986, is
treated as a tax preference item for both individuals and corporations.
Unlike traditional governmental purpose municipal bonds, which finance
roads, schools, libraries, prisons, and other public facilities, private
activity bonds provide benefits to private parties. The Fund may purchase
all types of municipal bonds, including private activity bonds. Thus, should
it purchase any such bonds, a portion of the Fund's dividends may be treated
as a tax preference item.
In addition, in the case of a corporate shareholder, dividends of the Fund
which represent interest on municipal bonds will become subject to the 20%
corporate alternative minimum tax because the dividends are included in a
corporation's "adjusted current earnings." The corporate alternative minimum
tax treats 75% of the excess of a taxpayer's pre-tax "adjusted current
earnings" over the taxpayer's alternative minimum taxable income as a tax
preference item. "Adjusted current earnings" is based upon the concept of a
corporation's "earnings and profits." Since "earnings and profits" generally
includes the full amount of any Fund dividend, and alternative minimum
taxable income does not include the portion of the Fund's dividend
attributable to municipal bonds which are not private activity bonds, the
difference will be included in the calculation of the corporation's
alternative minimum tax.
Dividends of the Fund representing net interest income earned on some
temporary investments and any realized net short-term gains are taxed as
ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares. Information on the tax status of dividends and
distributions is provided annually.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other than
Ohio or from personal property taxes. Shareholders are urged to consult
their own tax advisers regarding the status of their accounts under state
and local tax laws.
OHIO TAXES. Under existing Ohio laws, distributions made by the Fund will
not be subject to Ohio individual income tax if such distributions qualify
as "exempt-interest dividends" under the Code, and represent (i) interest
from obligations of Ohio or its subdivisions which is exempt from federal
income tax; or (ii) interest or dividends from obligations issued by the
United States and its territories or possessions or by any authority,
commission or instrumentality of the United States which are exempt from
state income tax under federal laws. Conversely, to the extent that
distributions made by the Fund are derived from other types of obligations,
such dividends will be subject to Ohio individual income tax.
Distributions made by the Fund will not be subject to Ohio corporation
franchise tax if such distributions qualify as "exempt-interest dividends"
under the Code, and represent (i) interest from obligations of Ohio or its
subdivisions which is exempt from federal income tax; or (ii) net interest
income from obligations issued by the United States and its territories or
possessions or by any authority, commission or instrumentality of the United
States, which is included in federal taxable income and which the exempt
from state income tax under federal laws.
Exempt-interest dividends that represent interest from obligations held by
the Fund which are issued by the State of Ohio or its political subdivisions
will be exempt from any Ohio municipal income tax (even if the municipality
is permitted under Ohio law to levy a tax on intangible income).
PERFORMANCE INFORMATION
From time to time, the Fund advertises its total return, yield, and
tax-equivalent yield.
Total return represents the change, over a specific period of time, in the
value of an investment in the Fund after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment income
per share (as defined by the Securities and Exchange Commission) earned by
the shares of the Fund over a thirty-day period by the offering price per
share of the shares of the Fund on the last day of the period. This number
is then annualized using semi-annual compounding. The tax-equivalent yield
of the Fund is calculated similarly to the yield, but is adjusted to reflect
the taxable yield that the Fund would have had to earn to equal its actual
yield, assuming a specific tax rate. The yield and the tax-equivalent yield
do not necessarily reflect income actually earned by the Fund and,
therefore, may not correlate to the dividends or other distributions paid to
shareholders.
From time to time, advertisements for the Fund may refer to ratings,
rankings, and other information in certain financial publications and/or
compare the Fund's performance to certain indices.
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS
MAY 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C>
INTERMEDIATE-TERM MUNICIPAL SECURITIES--102.8%
OHIO--100.4%
$ 200,000 Akron, OH, Various Purpose LT GO, 5.50% (MBIA
INS), 12/1/2005 Aaa $ 205,434
200,000 Butler County, OH, Sewer System Revenue Bonds, 4.85%
(AMBAC INS), 12/1/2004 Aaa 198,558
350,000 Butler County, OH, Waterworks System Revenue Bonds
(Series 1996), 4.45% (AMBAC INS)/(Original Issue
Yield: 4.55%), 12/1/2004 Aaa 334,026
200,000 Cleveland, OH Airport System, Revenue Bonds
(Series A), 5.40% (FGIC INS)/(Original Issue
Yield: 5.55%), 1/1/2004 Aaa 203,536
250,000 Cleveland, OH, LT GO Bonds, 6.00% (MBIA INS)/
(Original Issue Yield: 6.10%), 11/15/2004 Aaa 266,973
500,000 Columbus, OH Municipal Airport Authority, Revenue
Bonds, 5.55% (Port Columbus Intl Airport )/(MBIA
INS)/(Original Issue Yield: 5.65%), 1/1/2004 Aaa 512,400
100,000 Columbus, OH Water System, Revenue Refunding
Bonds, 6.375%, 11/1/2010 AA- 104,184
150,000 Columbus, OH, LT GO Bonds, 5.50% (Original Issue
Yield: 5.55%), 5/15/2004 AA+ 155,616
350,000 Cuyahoga County, OH Hospital Authority, Improvement
& Refunding Revenue Bonds (Series A), 6.00%
(University Hospitals Health System, Inc.), 1/15/2004 AA 370,457
150,000 Findlay, OH Waterworks System, Refunding Revenue
Bonds (Series 1995), 4.55% (MBIA INS), 11/1/2000 Aaa 149,668
250,000 Franklin County, OH Mortgage Revenue, Mortgage
Revenue Bonds, 5.875% (Seton Square North, OH)/
(FHA GTD)/(Original Issue Yield: 6.00%), 10/1/2004 Aa 256,345
</TABLE>
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C>
INTERMEDIATE-TERM MUNICIPAL SECURITIES--CONTINUED
OHIO--CONTINUED
$ 300,000 Franklin County, OH, Hospital Refunding &
Improvement Revenue Bonds (1996 Series A), 5.20%
(Children's Hospital)/(Original Issue Yield: 5.30%),
11/1/2004 Aa $ 296,688
400,000 (b)Franklin County, OH, Hospital Revenue Bonds
(Series 1996), 5.50% (Holy Cross Health System
Corp.), 6/1/2004 AA 406,988
500,000 Hamilton County, OH Hospital Facilities Authority,
Refunding Revenue Bonds (Series 1992), 6.80%
(Episcopal Retirement Homes, Inc.)/(Fifth Third
Bank, Cincinnati LOC), 1/1/2008 Aa2 535,420
490,000 Hamilton County, OH Hospital Facilities Authority,
Revenue Refunding Bonds (Series A), 5.50%
(Bethesda Hospital, OH)/(Original Issue Yield:
5.65%), 1/1/2000 A1 498,408
200,000 Hamilton County, OH Sewer System, Improvement
& Revenue Refunding Bonds (Series A), 4.55%
(FGIC INS), 12/1/2000 Aaa 199,558
100,000 Kings Local School District, OH, UT GO Bonds,
6.25%, 12/1/2001 NR 106,738
100,000 Kings Local School District, OH, UT GO Bonds,
6.50%, 12/1/2003 NR 108,960
150,000 Miami Valley Regional Transit Authority, OH, LT
GO Bonds, 5.40%, 12/1/2004 A 152,917
300,000 Muskingum County, OH, (Series 1995) Hospital
Facilities Refunding Revenue Bonds, 5.10%
(Franciscan Sisters of Christian Charity HealthCare
Ministry, Inc.)/(Connie Lee INS)/(Original Issue
Yield: 5.30%), 2/15/2006 AAA 293,202
200,000 Muskingum County, OH, Hospital Facilities
Refunding & Improvement Bonds (Series 1996), 4.90%
(Bethesda Care System)/(Connie Lee INS), 12/1/2003 AAA 197,410
150,000 North Canton OH City School District, LT GO
Energy Conservation Bonds, 5.50%, 12/1/2003 A 153,608
</TABLE>
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C>
INTERMEDIATE-TERM MUNICIPAL SECURITIES--CONTINUED
OHIO--CONTINUED
$ 300,000 Ohio Enterprise Bond Fund, (Series 1995-3) State
Economic Development Revenue Bonds, 5.60%
(Smith Steelite), 12/1/2003 A- $ 297,255
150,000 Ohio HFA, Residential Mortgage Revenue Bonds
(Series A-1), 5.40% (GNMA COL), 3/1/2004 AAA 149,949
600,000 Ohio HFA, Residential Mortgage Revenue Bonds
(Series B-1), 5.80% (GNMA COL), 9/1/2005 AAA 607,734
400,000 Ohio State Building Authority, State Correctional
Facilities Revenue Refunding Bonds, Series A, 5.80%
(Original Issue Yield: 5.95%), 10/1/2006 A+ 416,208
250,000 Ohio State, UT GO Bonds, 5.60% (Original Issue
Yield: 5.65%), 8/1/2002 AA 261,430
250,000 Olentangy, OH Local School District, UT GO Bonds
(Series A), 5.60% (Original Issue Yield: 5.70%),
12/1/2004 AA- 258,798
195,000 Stow, OH, LT GO Safety Center Construction Bonds,
7.75%, 12/1/2003 A1 227,998
260,000 Summit County, OH, LT Various Purpose GO Bonds,
5.75% (AMBAC INS), 12/1/2005 Aaa 272,501
200,000 Toledo, OH Sewer System, Revenue Bonds, 5.75%
(AMBAC INS)/(Original Issue Yield: 5.85%),
11/15/2005 Aaa 209,116
Total 8,408,083
VIRGIN ISLANDS--2.4%
200,000 Virgin Islands HFA, SFM Revenue Refunding Bonds
(Series A), 5.70% (GNMA COL), 3/1/2004 AAA 200,874
TOTAL INTERMEDIATE-TERM MUNICIPAL SECURITIES
(IDENTIFIED COST $8,501,498) 8,608,957
</TABLE>
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C>
SHORT-TERM MUNICIPAL SECURITIES--1.2%
PUERTO RICO--1.2%
$ 100,000 Puerto Rico Government Development Bank Weekly
VRDNs (Credit Suisse, Zurich LOC) AA+ $ 100,000
TOTAL SHORT-TERM MUNICIPAL SECURITIES
(AT AMORTIZED COST) 100,000
TOTAL INVESTMENTS (IDENTIFIED COST $8,601,498)(A) $8,708,957
</TABLE>
* Please refer to the Appendix of the Statement of Additional Information
for an explanation of the credit ratings. Current credit ratings are
unaudited.
(a) The cost of investments for federal tax purposes amounts to $8,601,498.
The net unrealized appreciation of investments on a federal tax basis
amounts to $107,459 which is comprised of $142,280 appreciation and $34,821
depreciation at May 31, 1996.
(b) Denotes when-issued security.
Note: The categories of investments are shown as a percentage of net assets
($8,375,277) at May 31, 1996.
The following acronyms are used throughout this portfolio:
AMBAC -- American Municipal Bond Assurance Corporation
COL -- Collateralized
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
GNMA -- Government National Mortgage Association
GO -- General Obligation
GTD -- Guaranty
HFA -- Housing Finance Authority
INS -- Insured
LOC -- Letter of Credit
LT -- Limited Tax
MBIA -- Municipal Bond Investors Assurance
SFM -- Single Family Mortgage
UT -- Unlimited Tax
VRDNs -- Variable Rate Demand Notes
(See Notes which are an integral part of the Financial Statements)
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost
$8,601,498) $ 8,708,957
Cash 44,271
Income receivable 147,165
Deferred expenses 7,223
Total assets 8,907,616
LIABILITIES:
Payable for investments purchased $ 408,880
Payable for shares redeemed 89,748
Income distribution payable 24,015
Accrued expenses 9,696
Total liabilities 532,339
NET ASSETS for 859,178 shares outstanding $ 8,375,277
NET ASSETS CONSIST OF:
Paid in capital $ 8,473,458
Net unrealized appreciation of investments 107,459
Accumulated net realized loss on investments (205,640)
Total Net Assets $ 8,375,277
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$8,375,277 O 859,178 shares outstanding $9.75
(See Notes which are an integral part of the Financial Statements)
</TABLE>
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1996
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 376,238
EXPENSES:
Investment advisory fee $ 35,966
Administrative personnel and services fee 125,000
Custodian fees 18,033
Transfer and dividend disbursing agent fees and expenses 15,641
Directors'/Trustees' fees 3,130
Auditing fees 15,583
Legal fees 2,312
Portfolio accounting fees 48,077
Shareholder services fee 17,983
Share registration costs 20,541
Printing and postage 10,097
Insurance premiums 3,468
Taxes 171
Miscellaneous 10,153
Total expenses 326,155
Waivers and reimbursements --
Waiver of investment advisory fee $ (35,966)
Waiver of shareholder services fee (14,123)
Reimbursement of other operating expenses (243,379)
Total waivers and reimbursements (293,468)
Net expenses 32,687
Net investment income 343,551
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 47,388
Net change in unrealized appreciation of investments (101,917)
Net realized and unrealized loss on investments (54,529)
Change in net assets resulting from operations $ 289,022
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1996 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 343,551 $ 266,114
Net realized gain (loss) on investments ($14,757 and $179,063
net losses, respectively, as computed for federal tax purposes) 47,388 (196,543)
Net change in unrealized appreciation (depreciation) (101,917) 376,266
Change in net assets resulting from operations 289,022 445,837
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (343,551) (266,114)
SHARE TRANSACTIONS--
Proceeds from sale of shares 10,235,445 8,891,447
Net asset value of shares issued to shareholders in payment of
distributions declared 75,252 39,693
Cost of shares redeemed (8,487,981) (5,882,314)
Change in net assets resulting from share transactions 1,822,716 3,048,826
Change in net assets 1,768,187 3,228,549
NET ASSETS:
Beginning of period 6,607,090 3,378,541
End of period $ 8,375,277 $ 6,607,090
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996
(1) ORGANIZATION
Intermediate Municipal 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 three portfolios. The
financial statements included herein are only those of Federated Ohio
Intermediate Municipal Trust (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 exempt from federal regular income
tax and the personal income taxes imposed by the state of Ohio.
(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 May 31, 1996, the Fund, for federal tax purposes, had a capital loss
carryforward of $193,820, 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:
<TABLE>
<CAPTION>
EXPIRATION YEAR EXPIRATION AMOUNT
<C> <C>
2003 $179,063
2004 $ 14,757
Additionally, net capital losses of $11,820 attributable to security
transactions incurred after October 31, 1995 are treated as arising on the
first day of the Fund's next taxable year.
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.
DEFERRED EXPENSES -- The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
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 May 31, 1996, 53% 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 13% of total investments.
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:
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1996 1995
<S> <C> <C>
Shares sold 1,037,604 941,647
Shares issued to shareholders in payment of distributions declared 7,616 4,237
Shares redeemed (861,086) (625,521)
Net change resulting from Fund share transactions 184,134 320,363
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE -- Federated Management, the Fund's investment
adviser, (the "Adviser"), receives for its services an annual investment
advisory fee equal to 0.50% of the Fund's average daily net assets.
The Adviser may voluntarily choose to waive any portion of its fee and/or
reimburse certain operating expenses of the Fund. The Adviser can modify or
terminate this voluntary waiver and/or reimbursement 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 shares for the period.
The fee paid to FSS is used to finance certain services for shareholders and
to maintain shareholder accounts. FSS may voluntarily choose to waive any
portion of its fee. FSS can modify or terminate this voluntary waiver at any
time at its sole discretion.
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.
ORGANIZATIONAL EXPENSES -- Organizational and start-up administrative
service expenses of $23,676 and $31,506, respectively, were borne initially
by Adviser. The Fund has agreed to reimburse Adviser for the organizational
and start-up administrative expenses during the five-year period following
effective date. For the period ended May 31, 1996, the Fund paid $5,656 and
$7,526, respectively, pursuant to this agreement.
INTERFUND TRANSACTIONS -- During the period ended May 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 $9,150,000 and $8,300,000, respectively.
GENERAL -- Certain of the Officers and Trustees of the Fund 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 May 31, 1996, were as follows:
<TABLE>
<S> <C>
PURCHASES $ 5,508,085
SALES $ 3,309,627
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of
INTERMEDIATE MUNICIPAL TRUST
(Federated Ohio Intermediate Municipal Trust):
We have audited the accompanying statement of assets and liabilities of
Federated Ohio Intermediate Municipal Trust (an investment portfolio of
Intermediate Municipal Trust, a Massachusetts business trust), including the
schedule of portfolio investments, as of May 31, 1996, the related statement
of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and financial
highlights (see page 2 of the prospectus) for the periods presented. These
financial statements and financial highlights are the responsibility of the
Trust'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
securities owned as of May 31, 1996, by correspondence with the custodian
and broker. 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 referred
to above present fairly, in all material respects, the financial position of
Federated Ohio Intermediate Municipal Trust, an investment portfolio of
Intermediate Municipal Trust, as of May 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and financial highlights for the
periods presented, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
July 12, 1996
ADDRESSES
<TABLE>
<S> <S> <S>
Fund
Federated Ohio Intermediate Federated Investors Tower
Municipal Trust Pittsburgh, Pennsylvania 15222-3779
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Investment Adviser
Federated Management 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 Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
</TABLE>
[This Page Intentionally Left Blank]
Federated Ohio Intermediate
Municipal Trust
Prospectus
A Non-Diversified Portfolio of
Intermediate Municipal Trust,
An Open-End, Management
Investment Company
July 31, 1996
[Graphic]
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.
[Graphic]
Cusip 458810405
3081602A (7/96)
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
(A PORTFOLIO OF INTERMEDIATE MUNICIPAL TRUST)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of Federated Ohio Intermediate Municipal Trust (the
`Fund''), a portfolio of Intermediate Municipal Trust (the ``Trust'')
dated July 31, 1996. This Statement is not a prospectus. You may
request a copy of a prospectus or a paper copy of this Statement, if
you have received it electronically, free of charge by calling
1-800-341-7400.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated July 31, 1996
Federated Securities Corp. is the distributor of the Fund
and is a subsidiary of Federated Investors.
Cusip 458810405
3081602B (7/96)
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
Investment Risks 4
MANAGEMENT OF INTERMEDIATE MUNICIPAL TRUST 5
Officers and Trustees 5
Fund Ownership 9
Trustees' Compensation 9
Trustee Liability 10
INVESTMENT ADVISORY SERVICES 10
Adviser to the Fund 10
Advisory Fees 10
OTHER SERVICES 11
Fund Administration 11
Custodian and Portfolio Accountants 11
Transfer Agent 11
Independent Public Accountant 11
SHAREHOLDER SERVICES 11
BROKERAGE TRANSACTIONS 11
PURCHASING SHARES 12
Conversion to Federal Funds 12
DETERMINING NET ASSET VALUE 12
Valuing Municipal Bonds 12
Use of Amortized Cost 12
REDEEMING SHARES 12
Redemption in Kind 12
EXCHANGING SECURITIES FOR FUND SHARES 13
Tax Consequences 13
MASSACHUSETTS PARTNERSHIP LAW 13
TAX STATUS 13
The Fund's Tax Status 13
Shareholders' Tax Status 13
TOTAL RETURN 14
YIELD 14
TAX-EQUIVALENT YIELD 14
Tax-Equivalency Table 14
PERFORMANCE COMPARISONS 16
Economic and Market Information 16
ABOUT FEDERATED INVESTORS 17
Mutual Fund Market 17
APPENDIX 18
GENERAL INFORMATION ABOUT THE FUND
The Fund is a portfolio of Intermediate Municipal Trust (the "Trust"). The
Trust was established as a Massachusetts business trust under a Declaration
of Trust dated May 31, 1985. On September 1, 1993, the name of the Trust
was changed from `Federated Intermediate Municipal Trust'' to
`Intermediate Municipal Trust.'' On December 19, 1994, the name of the
Fund was changed from `Ohio Intermediate Municipal Trust'' to ``Federated
Ohio Intermediate Municipal Trust.''
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide current income which is
exempt from federal regular income tax and personal income taxes imposed by
the State of Ohio. 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 Ohio state personal income
taxes. These securities include those issued by or on behalf of the State
of Ohio and Ohio municipalities, and those issued by states, territories,
and possessions of the United States which are exempt from both federal
regular income tax and Ohio state personal income taxes.
CHARACTERISTICS
The Ohio municipal securities in which the Fund invests have the
characteristics set forth in the prospectus.
An Ohio municipal security will be determined by the Fund's adviser to
meet the quality standards established by the Trust's Board of
Trustees (the "Trustees") if it is of comparable quality to municipal
securities within the Fund's rating requirements. The Trustees
consider the creditworthiness of the issuer of a municipal security,
the issuer of a participation interest if the Fund has the right to
demand payment from the issuer of the interest, or the guarantor of
payment by either of those issuers. The Fund is not required to sell a
municipal security if the security's rating is reduced below the
required minimum subsequent to its purchase by the Fund. The
investment adviser considers this event, however, in its determination
of whether the Fund should continue to hold the security in its
portfolio. If Moody's Investors Service, Inc., Standard & Poor's
Ratings Group or Fitch Investor Services, Inc. ratings change because
of changes in those organizations or in their rating systems, the Fund
will try to use comparable ratings as standards in accordance with the
investment policies described in the Fund's prospectus.
TYPES OF ACCEPTABLE INVESTMENTS
Examples of Ohio municipal securities are:
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 long-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 a
default or failure of appropriation, it is unlikely that the trustee
would be able to obtain an acceptable substitute source of payment.
In determining the liquidity of municipal lease securities, the Fund's
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"); and
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 may engage in when-issued and delayed delivery transactions to an
extent that would cause the segregation of an amount up to 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 may only enter into repurchase agreements
with banks and other recognized financial institutions such as
broker/dealers which are found by the Fund's adviser to be
creditworthy pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement, the Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in
return for a percentage of the instrument's market value in cash, and
agrees that on a stipulated date in the future, the Fund will
repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous,
but the ability to enter into reverse repurchase agreements does not
ensure that the Fund will be able to avoid selling portfolio
instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the
Fund, in a dollar amount sufficient to make payment for the
obligations to be purchased, are segregated on the Fund's records at
the trade date. These assets are marked to market daily and are
maintained until the transaction is settled.
PORTFOLIO TURNOVER
The Fund may trade or dispose of portfolio securities as considered
necessary to meet its investment objective. For the year ended May 31, 1996
and 1995, the portfolio turnover rates for the Fund were 46% and 56%,
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.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate its assets except
to secure permitted borrowings. In those cases, it may mortgage,
pledge, or hypothecate assets having a market value not exceeding 10%
of the value of its total assets at the time of the pledge.
UNDERWRITING
The Fund will not underwrite any issue of securities except as it may
be deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its
investment objective, policies, and limitations.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate or invest in real
estate limited partnerships, 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.
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.
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, i.e., 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 ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND
TRUSTEES OF THE TRUST
The Fund will not purchase or retain the securities of any issuer if
the officers and Trustees of the Trust or its investment adviser,
owning individually more than 1/2 of 1% of the issuer's securities,
together own more than 5% of the issuer's securities.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in securities
which are illiquid, including repurchase agreements providing for
settlement in more than seven days after notice, and certain
restricted securities not determined by the Trustees to be liquid.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets
in industrial development bonds where the principal and interest are
the responsibility of companies (or guarantors, where applicable) with
less than three years of continuous operations, including the
operation of any predecessor.
INVESTING IN MINERALS
The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, although it may invest
in securities of issuers which invest in or sponsor such programs.
In addition, to comply with investment restrictions of a certain state, the
Fund will not invest in real estate limited partnerships.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not result
in a violation of such restriction.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings and loan having capital, surplus, and
undivided profits in excess of $100,000,000 at the time of investment to be
"cash items."
INVESTMENT RISKS
The economy of the State of Ohio is reliant in part on durable goods
manufacturing, largely concentrated in motor vehicles and equipment, steel,
rubber products and household appliances. During the past decade,
competition in various industries in the State of Ohio has changed from
being domestic to international in nature. In addition, these industries
may be characterized as having excess capacity in particular product
segments. The steel industry, in particular, and the automobile industry,
to a lesser extent, share these characteristics. Because the State of Ohio
and certain underlying municipalities have large exposure to these
industries and their respective aftermarkets, trends in these industries
may, over the long term, impact the demographic and financial position of
the State of Ohio and its municipalities. To the degree that domestic
manufacturers in industries to which Ohio municipalities have exposure fail
to make competitive adjustments, employment statistics and disposable
income of residents in Ohio may deteriorate, possibly leading to population
declines and erosion of municipality tax bases.
Both the economic trends above and the political climate in various
municipalities may have contributed to the decisions of various businesses
and individuals to relocate outside the State. A municipality's political
climate in particular may affect its own credit standing. For both the
State of Ohio and underlying Ohio municipalities, adjustment of credit
ratings by the rating agencies may affect the ability to issue securities
and thereby affect the supply of obligations meeting the quality standards
for investment by the Fund.
The State ended fiscal year 1993 with a positive budgetary fund balance of
over $100 million. The 1994-1995 biennial budget was formulated with
reasonable revenue assumptions. The State implemented a revenue enhancement
package in January of 1993 that increased the cigarette tax and the income
tax bracket for incomes over $200,000, broadened the sales tax base and
capped tax distributions to local governments. These and other minor
revenue enhancements are budgeted to add $912 million of additional revenue
to the 1994-1995 biennial budget. The State's fund balance reserve levels
continue to be minimal but the State has demonstrated its ability to manage
with limited financial flexibility.
The State has established procedures for municipal fiscal emergencies under
which joint state/local commissions are established to monitor the fiscal
affairs of a financially troubled municipality. When these procedures are
invoked, the municipality must develop a financial plan to eliminate
deficits and cure any defaults. Since their adoption in 1979, these
procedures have been applied to approximately twenty-one cities and
villages, including the City of Cleveland; in sixteen of these communities,
the fiscal situation has been resolved and the procedures terminated.
The foregoing discussion only highlights some of the significant financial
trends and problems affecting the State of Ohio and underlying
municipalities.
MANAGEMENT OF INTERMEDIATE MUNICIPAL TRUST
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, birthdates, present
positions with Intermediate Municipal 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.; Chairman, Passport Research, Ltd.; Chief Executive Officer
and Director, Trustee, or Managing General Partner of the Funds.
Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Trust.
Glen R. Johnson *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the
Funds; staff member, Federated Securities Corp.
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director or Trustee of the Funds; formerly, Senior
Partner, Ernst & Young LLP.
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; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate ventures
in Southwest Florida; Director or Trustee of the Funds; formerly,
President, Naples Property Management, Inc.
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.;
Director or Trustee of the Funds; formerly, Vice Chairman and Director, PNC
Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine and Member, Board of Trustees, 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.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director or Trustee of the Funds; formerly, Counsel, Horizon Financial,
F.A., Western Region.
Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director
or Trustee of the Funds; formerly, President, State Street Bank and Trust
Company and State Street Boston Corporation.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; 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 and Management Consultant; Trustee,
Carnegie Endowment for International Peace, RAND Corporation, Online
Computer Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho
Management Center; Director or Trustee of the Funds; President Emeritus,
University of Pittsburgh; founding Chairman, National Advisory Council for
Environmental Policy and Technology and Federal Emergency Management
Advisory Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director or Trustee of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
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 Trust.
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, Secretary
and Treasurer of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice 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.
* 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: American Leaders Fund, Inc.; Annuity Management
Series; Arrow Funds; Automated Government Money Trust; Blanchard Group of
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 ARMS Fund; Federated Equity Funds; Federated
Exchange Fund, Ltd.; Federated GNMA Trust; Federated Government Trust;
Federated High Yield Trust; Federated Income Securities Trust; Federated
Income Trust; Federated Index Trust; Federated Institutional Trust;
Federated Master Trust; Federated Municipal Trust; Federated Short-Term
Municipal Trust; Federated Short-Term U.S. Government Trust; 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: 5-
10 Years; First Priority Funds; Fixed Income Securities, Inc.; Fortress
Adjustable Rate U.S. Government Fund, Inc.; Fortress Municipal Income Fund,
Inc.; Fortress Utility Fund, Inc.; Fund for U.S. Government Securities,
Inc.; Government Income Securities, Inc,; High Yield Cash Trust; Federated
Insurance Series; International Series, Inc.; Investment Series Funds,
Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty
High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.;
Liberty U.S. Government Money Market Trust; Liberty Term Trust, Inc.-1999;
Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Money
Market Management, Inc.; Money Market Obligations Trust; Money Market
Trust; Municipal Securities Income Trust; Newpoint Funds; 111 Corcoran
Funds; Peachtree Funds; The Planters Funds; RIMCO Monument Funds; Star
Funds; The Starburst Funds; The Starburst Funds II; Stock and Bond Fund,
Inc.; Targeted Duration Trust; Tax-Free Instruments Trust; Trust for
Financial Institutions; Trust For Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligation;
The Virtus Funds; and World Investment Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of July 5, 1996, the following shareholders of record owned 5% or more
of the outstanding Shares of the Fund: Mahco, Youngstown, Ohio, owned
approximately 48,340 Shares (5.47%); Parcol & Co., Akron, Ohio, owned
approximately 60,630 Shares (6.86%); Grand Old Co., Zainesville, Ohio,
owned approximately 54,573 Shares (6.18%); Defco, Defiance, Ohio, owned
approximately 219,456 Shares (24.84%); Lorban & Company, Elyria, Ohio,
owned approximately 49,002 Shares (5.55%); National Financial Services, New
York, New York, owned approximately 99,278 Shares (11.24%); Federated
Management Co., Pittsburgh, Pennsylvania, owned approximately 54,593 Shares
(6.18%); Federated Securities Corp., Pittsburgh, Pennsylvania, owned
approximately 44,353 Shares (5.02%); and Holdon, Findlay, Ohio, owned
approximately 104,561 Shares (11.83%).
TRUSTEES' COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST *# FROM FUND COMPLEX +
John F. Donahue $0 $ 0 for the Trust and
Chairman and Trustee 54 other investment companies in
the Fund Complex
Thomas G. Bigley,++ $552.58 $86,331 for the Trust and
Trustee 54 other investment companies in
the Fund Complex
John T. Conroy, Jr., $600.35 $115,760 for the Trust and
Trustee 54 other investment companies in
the Fund Complex
William J. Copeland, $600.35 $115,760 for the Trust and
Trustee 54 other investment companies in
the Fund Complex
James E. Dowd, $600.35 $115,760 for the Trust and
Trustee 54 other investment companies in
the Fund Complex
++
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.
Lawrence D. Ellis, M.D., $552.58 $104,898 for the Trust
and
Trustee 54 other investment companies in
the Fund Complex
Edward L. Flaherty, Jr., $600.35 $115,760 for the Trust
and
Trustee 54 other investment companies in
the Fund Complex
Glen R. Johnson $ 0 $ 0 for the Trust and
President and Trustee 9 other investment companies in the
Fund Complex
Peter E. Madden, $552.58 $104,898 for the Trust and
Trustee 54 other investment companies in
the Fund Complex
Gregor F. Meyer, $552.58 $104,898 for the Trust and
Trustee 54 other investment companies in
the Fund Complex
John E. Murray, Jr., $552.58 $104,898 for the Trust and
Trustee 54 other investment companies in
the Fund Complex
Wesley W. Posvar, $552.58 $104,898 for the Trust and
Trustee 54 other investment companies in
the Fund Complex
Marjorie P. Smuts, $552.58 $104,898 for the Trust and
Trustee 54 other investment companies in
the Fund Complex
*Information is furnished for the fiscal year ended May 31, 1996.
#The aggregate compensation is provided for the Trust which is comprised of
three portfolios.
+The information is provided for the last calendar year.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be
liable for errors of judgement 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.
INVESTMENT ADVISORY SERVICES
ADVISER TO THE FUND
The Fund's investment adviser is Federated Management (the "Adviser"). It
is a subsidiary of Federated Investors. All of 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
Fund.
ADVISORY FEES
For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectus.
For the years ended May 31, 1996, 1995, and the period from December 2,
1993 (date of initial public investment) to May 31, 1994, the Adviser
earned advisory fees of $35,966, $26,346 and $6,929, respectively, all of
which was voluntarily waived. In addition, the Adviser reimbursed other
operating expenses of $243,379, $226,561 and $35,630, respectively.
STATE EXPENSE LIMITATIONS
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares
are registered for sale in those states. If the Fund's normal
operating expenses (including the investment advisory fee, but not
including brokerage commissions, interest, taxes, and extraordinary
expenses) exceed 2.5% per year of the first $30 million of average net
assets, 2% per year of the next $70 million of average net assets, and
1.5% per year of the remaining average net assets, the Adviser will
reimburse the Trust for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this expense
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser
will be limited, in any single fiscal year, by the amount of the
investment advisory fee.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
OTHER SERVICES
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 Sevices, 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 May 31, 1996, 1995, and
the period from December 2, 1993 (date of initial public investment) to May
31, 1994, the Administrators earned $125,000, $125,000, and $1,225,
respectively, none of which was waived. Dr. Henry Gailliot, an officer of
Federated Management, the Adviser to the Fund, holds approximately 20% of
the outstanding common stock and serves as a director of Commercial Data
Services, Inc., a company which provides computer processing services to
Federated Services Company.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, 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. The fee paid
for this service is based upon the level of the Fund's average net assets
for the period plus out-of-pocket expenses.
TRANSFER AGENT
Federated Services Company, through its registered transfer agent,
Federated Shareholder Services Company, maintains all necessary shareholder
records. For its services, the transfer agent receives a fee based upon the
size, type and number of accounts and transactions made by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, Pennsylvania.
SHAREHOLDER SERVICES
This arrangement permits the payment of fees to Federated Shareholder
Services and financial institutions to cause services to be provided which
are necessary for the maintenance of shareholder accounts and to encourage
personal services to shareholders by a representative who has knowledge of
the shareholder's particular circumstances and goals. These activities and
services may include, but are not limited to: providing office space,
equipment, telephone facilities, and various clerical, supervisory,
computer, and other personnel as necessary or beneficial to establish and
to maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries; and assisting clients in
changing dividend options, account designations, and addresses.
By adopting the Shareholder Services Agreement, the Trustees expect that
the Fund will benefit by: (1) providing personal services to shareholders;
(2) investing shareholder assets with a minimum of delay and administrative
detail; (3) enhancing shareholder recordkeeping systems; and (4) responding
promptly to shareholders' requests and inquiries concerning their accounts.
For the fiscal year ending May 31, 1996, the Fund paid $17,983 pursuant to
the Shareholder Services Agreement of which $14,123 was waived.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the Adviser looks for prompt execution of the order
at a favorable price. In working with dealers, the Adviser will generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established 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 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 year(s) ended May 31, 1996, 1995, and
the period from December 2, 1993 (date of initial public investment) to May
31, 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.
PURCHASING SHARES
Except under certain circumstances described in the prospectus, shares are
sold at their net asset value on days the New York Stock Exchange is open
for business. The procedure for purchasing shares is explained in the
prospectus under "Investing in the Fund."
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. Federated Services Company acts as the
shareholder's agent in depositing checks and converting them to federal
funds.
DETERMINING NET ASSET VALUE
Net asset value generally changes each day. The days on which net asset
value is calculated by the Fund are described in the prospectus.
VALUING MUNICIPAL BONDS
The Trustees use an independent pricing service to value municipal bonds.
The independent pricing service takes into consideration yield, stability,
risk, quality, coupon rate, maturity, type of issue, trading
characteristics, special circumstances of a security or trading market, and
any other factors or market data it considers relevant in determining
valuations for normal institutional size trading units of debt securities,
and does not rely exclusively on quoted prices.
USE OF AMORTIZED COST
The Trustees have decided that the fair value of debt securities authorized
to be purchased by the Fund with remaining maturities of 60 days or less at
the time of purchase, shall be their amortized cost value, unless the
particular circumstances of the security indicate otherwise. Under this
method, portfolio instruments and assets are valued at the acquisition cost
as adjusted for amortization of premium or accumulation of discount rather
than at current market value. The Executive Committee continually assesses
this method of valuation and recommends changes where necessary to assure
that the Fund's portfolio instruments are valued at their fair value as
determined in good faith by the Trustees.
REDEEMING SHARES
The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Shares." Although State Street Bank does not
charge for telephone redemptions, it reserves the right to charge a fee for
the cost of wire-transferred redemptions of less than $5,000.
REDEMPTION IN KIND
Although the Fund intends to redeem shares in cash, it reserves the right
under certain circumstances to pay the redemption price in whole or in part
by a distribution of securities from the Fund's portfolio.
Redemption in kind will be made in conformity with applicable Securities
and Exchange Commission rules, taking such securities at the same value
employed in determining net asset value and selecting the securities in a
manner the Trustees determine to be fair and equitable.
The Fund has elected to be governed by Rule 18f-1 of the Investment Company
Act of 1940, as amended, under which the Trust is obligated to redeem
shares for any one shareholder in cash only up to the lesser of $250,000 or
1% of the Fund's net asset value during any 90-day period.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange municipal securities they already own for shares or
they may exchange a combination of municipal securities and cash for
shares. An investor should forward the securities in negotiable form with a
letter of transmittal and authorization to Federated Securities Corp. The
Fund will notify the investor of its acceptance and valuation of the
securities within five business days of their receipt by State Street Bank.
The Fund values securities in the same manner as the Fund values its
assets. The basis of the exchange will depend upon the net asset value of
Fund shares on the day the securities are valued. One share of the Fund
will be issued for each equivalent amount of securities accepted.
Any interest earned on the securities prior to the exchange will be
considered in valuing the securities. All interest, dividends,
subscription, or other rights attached to the securities become the
property of the Trust, along with the securities.
TAX CONSEQUENCES
Exercise of this exchange privilege is treated as a sale for federal income
tax purposes. Depending upon the cost basis of the securities exchanged for
shares, a gain or loss may be realized by the investor.
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.
TAX STATUS
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:
oderive at least 90% of its gross income from dividends, interest,
and gains from the sale of securities;
oderive less than 30% of its gross income from the sale of securities
held less than three months;
oinvest in securities within certain statutory limits; and
odistribute 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 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.
TOTAL RETURN
The Fund's average annual total returns for the one-year ended May 31, 1996
and for the period from December 2, 1993 (date of initial public
investment) to May 31, 1996 were 4.41% and 3.86%, respectively.
The average annual total return for the Fund is the average compounded rate
of return for a given period that would equate a $1,000 initial investment
to the ending redeemable value of that investment. The ending redeemable
value is computed by multiplying the number of shares owned at the end of
the period by the net asset value per share at the end of the period. The
number of shares owned at the end of the period is based on the number of
shares purchased at the beginning of the period with $1,000, adjusted over
the period by any additional shares, assuming the monthly reinvestment of
all dividends and distributions.
YIELD
The Fund's yield for the thirty-day period ended May 31, 1996 was 4.91%.
The yield of the Fund is determined by dividing the net investment income
per share (as defined by the Securities and Exchange Commission) earned by
the Fund over a thirty-day period by the maximum offering price per share
on the last day of the period. This value is then annualized using semi-
annual compounding. This means that the amount of income generated during
the thirty-day period is assumed to be generated each month over a twelve-
month period and is reinvested every six months. The yield does not
necessarily reflect income actually earned by the Fund because of certain
adjustments required by the Securities and Exchange Commission and,
therefore, may not correlate to the dividends or other distributions paid
to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the
Fund, performance will be reduced for those shareholders paying those fees.
TAX-EQUIVALENT YIELD
The Fund's tax-equivalent yield for the thirty-day period ended May 31,
1996, was 9.28%.
The tax-equivalent yield for the Fund is calculated similarly to the yield,
but is adjusted to reflect the taxable yield that the Fund would have had
to earn to equal its actual yield, assuming a 47.10% combined Federal and
State tax rate and assuming that income is 100% tax-exempt.
TAX-EQUIVALENCY TABLE
The Fund may also use a tax-equivalency table in advertising and sales
literature. The interest earned by the municipal obligations in the Fund's
portfolio generally remains free from federal regular income tax* and is
free from the income taxes imposed by the State of Ohio (some portion of
the Fund's income may be subject to the federal alternative minimum tax and
state and local taxes). As the table below indicates, a "tax-free"
investment is an attractive choice for investors, particularly in times of
narrow spreads between "tax-free" and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1996
STATE OF OHIO
FEDERAL TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%
COMBINED FEDERAL AND STATE TAX BRACKET:
19.457% 33.201% 37.900% 43.500% 47.100%
SINGLE $1- $24,001- $58,151- $121,301- OVER
RETURN 24,000 58,150 121,300 263,750 $263,750
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
1.50% 1.86% 2.25% 2.42% 2.65% 2.84%
2.00% 2.48% 2.99% 3.22% 3.54% 3.78%
2.50% 3.10% 3.74% 4.03% 4.42% 4.73%
3.00% 3.72% 4.49% 4.83% 5.31% 5.67%
3.50% 4.35% 5.24% 5.64% 6.19% 6.62%
4.00% 4.97% 5.99% 6.44% 7.08% 7.56%
4.50% 5.59% 6.74% 7.25% 7.96% 8.51%
5.00% 6.21% 7.49% 8.05% 8.85% 9.45%
5.50% 6.83% 8.23% 8.86% 9.73% 10.40%
6.00% 7.45% 8.98% 9.66% 10.62% 11.34%
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.
TAXABLE YIELD EQUIVALENT FOR 1996
STATE OF OHIO
FEDERAL TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%
COMBINED FEDERAL AND STATE TAX BRACKET:
20.201% 34.900% 37.900% 43.500% 47.100%
JOINT $1- $40,101- $96,901- $147,701- OVER
RETURN 40,100 96,900 147,700 263,750 $263,750
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
1.50% 1.88% 2.30% 2.42% 2.65% 2.84%
2.00% 2.51% 3.07% 3.22% 3.54% 3.78%
2.50% 3.13% 3.84% 4.03% 4.42% 4.73%
3.00% 3.76% 4.61% 4.83% 5.31% 5.67%
3.50% 4.39% 5.38% 5.64% 6.19% 6.62%
4.00% 5.01% 6.14% 6.44% 7.08% 7.56%
4.50% 5.64% 6.91% 7.25% 7.96% 8.51%
5.00% 6.27% 7.68% 8.05% 8.85% 9.45%
5.50% 6.89% 8.45% 8.86% 9.73% 10.40%
6.00% 7.52% 9.22% 9.66% 10.62% 11.34%
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.
PERFORMANCE COMPARISONS
The performance of the Fund depends upon such variables as:
oportfolio quality;
oaverage portfolio maturity;
otype of instruments in which the portfolio is invested;
ochanges in interest rates and market value of portfolio securities;
ochanges in the Fund's expenses; and
ovarious 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 as described above.
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:
oLIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any change
in net asset value over a specific period of time. From time to
time, the Fund will quote its Lipper ranking in the "other states
intermediate municipal debt funds" category in advertising and sales
literature.
oMORNINGSTAR, 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.
oLEHMAN BROTHERS FIVE-YEAR STATE GENERAL OBLIGATION BONDS is an index
comprised of all state general obligation debt issues with
maturities between four and six years. These bonds are rated A or
better and represent a variety of coupon ranges. Index figures are
total returns calculated for one, three and twelve month periods as
well as year-to-date. Total returns are also calculated as of the
index inception December 31, 1979.
oLEHMAN BROTHERS TEN-YEAR STATE GENERAL OBLIGATION BONDS is an index
comprised of the same issues noted above except that the maturities
range between nine and eleven years. Index figures are total returns
calculated for the same periods as listed above.
Advertisements and other sales literature for the Fund may quote total
returns which are calculated on non-standardized base periods. The total
returns represent the historic change in the value of an investment in the
Fund based on monthly reinvestment of dividends over a specified period of
time.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Fund's 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 Fund. 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.
ABOUT FEDERATED INVESTORS
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, 1995, Federated Investors
managed 12 bond funds with approximately $2.0 billion in assets and 20
money market funds with approximately $7.8 billion in total assets. In
1976, Federated introduced one of the first municipal bond mutual funds in
the industry and is now one of the largest institutional buyers of
municipal securities. The Fund 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
Twenty-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 trillion to the more than 5,500 funds
available.*
Federated Investors, through its subsidiaries, distributes mutual funds for
a variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional
clients nationwide by managing and servicing separate accounts and mutual
funds for a variety of applications, including defined benefit and defined
contribution programs, cash management, and asset/liability management.
Institutional clients include corporations, pension funds, tax-exempt
entities, foundations/endowments, insurance companies, and investment and
financial advisors. The marketing effort to these institutional clients
is headed by John B. Fisher, President, Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than
1,500 banks and trust organizations. Virtually all of the trust divisions
of the top 100 bank holding companies use Federated funds in their clients'
portfolios. The marketing effort to trust clients is headed by Mark R.
Gensheimer, Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. Federated's service to
financial professionals and institutions has earned it high rankings in
several DALBAR Surveys. The marketing effort to these firms is headed by
James F. Getz, President, Broker/Dealer Division.
* SOURCE: Investment Company Institute
APPENDIX
STANDARD AND 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.
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. MUNICIPAL BOND RATINGS
AAA--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
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.
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. INVESTMENT GRADE BOND RATINGS
AAA--Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA--Bonds considered to be investment grade and of very high credit
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 strong,
but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
NR--NR indicates that Fitch does not rate the specific issue.
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 AND 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 sign (+) 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 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.
STANDARD AND 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
PRIME-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:
oleading market positions in well-established industries;
ohigh rates of return on funds employed;
oconservative capitalization structure with moderate reliance on debt
and ample asset protection;
obroad margins in earning coverage of fixed financial charges and
high internal cash generation; and
owell-established access to a range of financial markets and assured
sources of alternative liquidity.
PRIME-2--Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics cited above, but
to a lesser degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
FEDERATED OHIO MUNICIPAL INCOME FUND
(FORMERLY, OHIO MUNICIPAL INCOME FUND)
(A PORTFOLIO OF MUNICIPAL SECURITIES INCOME TRUST)
CLASS F SHARES
(FORMERLY, FORTRESS SHARES)
PROSPECTUS
The Class F Shares of Federated Ohio Municipal Income Fund (the "Fund")
offered by this prospectus represent interests in a non-diversified
portfolio of securities which is one of a series of investment portfolios in
Municipal Securities Income Trust (the "Trust"), an open-end management
investment company (a mutual fund). The investment objective of the Fund is
to provide current income exempt from federal regular income tax and the
personal income taxes imposed by the state of Ohio and Ohio municipalities.
The Fund invests primarily in a portfolio of Ohio municipal securities.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT
RISKS INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in Class F Shares. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information for Class F
Shares dated October 31, 1996, with the Securities and Exchange Commission
("SEC"). The information contained in the Statement of Additional
Information is incorporated by reference in this prospectus. You may request
a copy of the Statement of Additional Information or a paper copy of this
prospectus, if you have received your prospectus electronically, free of
charge by calling 1-800-341-7400. To obtain other information, or to make
inquiries about the Fund, contact your financial institution. The Statement
of Additional Information, material incorporated by reference into this
document, and other information regarding the Fund is maintained
electronically with the SEC at Internet Web site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated October 31, 1996
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY OF FUND EXPENSES 1
FINANCIAL HIGHLIGHTS 2
GENERAL INFORMATION 3
INVESTMENT INFORMATION 3
Investment Objective 3
Investment Policies 3
Ohio Municipal Securities 6
Investment Risks 6
Non-Diversification 6
Investment Limitations 7
NET ASSET VALUE 7
INVESTING IN CLASS F SHARES 7
Share Purchases 7
Minimum Investment Required 8
What Shares Cost 8
Eliminating/Reducing the Sales Charge 9
Systematic Investment Program 10
Exchange Privilege 11
Certificates and Confirmations 11
Dividends and Distributions 11
REDEEMING CLASS F SHARES 12
Through a Financial Institution 12
Directly by Mail 12
Contingent Deferred Sales Charge 13
Systematic Withdrawal Program 14
Accounts with Low Balances 14
TRUST INFORMATION 14
Management of the Trust 14
Distribution of Class F Shares 15
Administration of the Fund 17
SHAREHOLDER INFORMATION 17
Voting Rights 17
TAX INFORMATION 17
Federal Income Tax 17
State of Ohio Income Taxes 18
State and Local Taxes 19
PERFORMANCE INFORMATION 19
FINANCIAL STATEMENTS 20
INDEPENDENT AUDITORS' REPORT 33
ADDRESSES 34
</TABLE>
SUMMARY OF FUND EXPENSES
CLASS F SHARES
(FORMERLY, FORTRESS SHARES)
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 1.00%
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) 1.00%
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
</TABLE>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<TABLE>
<S> <C> <C>
Management Fee (after waiver)(2) 0.07%
12b-1 Fee (after waiver)(3) 0.16%
Total Other Expenses 0.67%
Shareholder Services Fee(4) 0.24%
Total Operating Expenses(5) 0.90%
</TABLE>
(1) The contingent deferred sales charge is 1.00% of the lesser of the
original purchase price or the net asset value of shares redeemed within
four years of their purchase date. For a more complete description see
"Contingent Deferred Sales Charge."
(2) 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%.
(3) The 12b-1 fee has been reduced to reflect the voluntary waiver of a
portion of the 12b-1 fee. The 12b-1 fee provider can terminate this
voluntary waiver at its sole discretion. The maximum 12b-1 fee is 0.40%.
(4) 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%.
(5) The total operating expenses would have been 1.48% absent a portion of
the voluntary waivers of the management fee, the
12b-1 fee and 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 the Fund will bear, either
directly or indirectly. For more complete descriptions of the various costs
and expenses, see "Investing in Class F 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 charge permitted under the rules of the National
Association of Securities Dealers, Inc.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
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 maximum sales charge $29 $50 $59 $120
You would pay the following expenses on the same
investment, assuming no redemption $19 $38 $59 $120
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FEDERATED OHIO MUNICIPAL INCOME FUND
(FORMERLY, OHIO MUNICIPAL INCOME FUND)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Independent Auditors' Report on page 33.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1996 1995 1994 1993 1992 1991(A)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.22 $11.01 $11.65 $10.89 $10.40 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.60 0.60 0.56 0.57 0.61 0.57
Net realized and unrealized gain
(loss) on investments (0.01) 0.20 (0.64) 0.77 0.49 0.41
Total from investment operations 0.59 0.80 (0.08) 1.34 1.10 0.98
LESS DISTRIBUTIONS
Distributions from net
investment income (0.60) (0.59) (0.56) (0.57) (0.61) (0.57)
Distributions in excess of net
investment income -- -- -- (0.01)(b) -- (0.01)(b)
Total distributions (0.60) (0.59) (0.56) (0.58) (0.61) (0.58)
NET ASSET VALUE, END OF PERIOD $11.21 $11.22 $11.01 $11.65 $10.89 $10.40
TOTAL RETURN(C) 5.34% 7.65% (0.72%) 12.69% 10.91% 10.01%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.90% 0.90% 0.90% 0.87% 0.73% 0.28%*
Net investment income 5.28% 5.53% 5.02% 5.13% 5.79% 6.35%*
Expense waiver/reimbursement(d) 0.58% 0.60% 0.55% 0.83% 1.35% 1.66%*
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $70,568 $70,532 $81,566 $73,973 $28,924 $19,840
Portfolio turnover 11% 33% 20% 0% 0% 11%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from October 12, 1990 (date of
initial public investment) to August 31, 1991.
(b) 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.
(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.
(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.
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 ("Trustees")
has established one class of shares, known as Class F Shares ("Shares").
The Fund is designed for customers of financial institutions such as
broker/dealers, banks, fiduciaries, and investment advisers as a convenient
means of accumulating an interest in a professionally managed,
non-diversified portfolio investing primarily in Ohio municipal securities.
A minimum initial investment of $1,500 is required. Subsequent investments
must be in amounts of at least $100. The Fund is not likely to be a suitable
investment for non-Ohio taxpayers or retirement plans since Ohio municipal
securities are not likely to produce competitive after-tax yields for such
persons and entities when compared to other investments.
Except as otherwise noted in this prospectus, Shares are sold at net asset
value plus an applicable sales charge and are redeemed at net asset value.
However, a contingent deferred sales charge is imposed on certain Shares,
other than Shares purchased through reinvestment of dividends, which are
redeemed within four years of their purchase dates. Fund assets may be used
in connection with the distribution of Shares.
The Fund's current net asset value and offering price may be found in the
mutual funds section of local newspapers under "Federated" and the
appropriate class designation listing.
INVESTMENT INFORMATION
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income exempt
from federal regular income tax (federal regular income tax does not include
the federal alternative minimum tax) and the personal income taxes imposed
by the state of Ohio and Ohio municipalities. The investment objective
cannot be changed without approval of shareholders. While there is no
assurance that the Fund will achieve its investment objective, it endeavors
to do so by following the investment policies described in this prospectus.
The Fund invests its assets so that at least 80% of its annual interest
income is exempt from federal regular income tax and the personal income
taxes imposed by the state of Ohio and Ohio municipalities. Interest income
of the Fund that is exempt from the income taxes described above retains its
exempt status when distributed to the Fund's shareholders. Income
distributed by the Fund may not necessarily be exempt from state or
municipal taxes in states other than Ohio.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing primarily in Ohio
municipal securities. Unless indicated otherwise, the investment policies of
the Fund may be changed by the Trustees without approval of shareholders.
Shareholders will be notified before any material changes in these policies
become effective.
ACCEPTABLE INVESTMENTS. The securities in which the Fund invests include:
* obligations issued by or on behalf of the state of Ohio, its political
subdivisions, or agencies;
* debt obligations of any state, territory, or possession of the United
States, including the District of Columbia, or any political subdivision of
any of these; and
* participation interests, as described below, in any of the above
obligations, the interest from which is, in the opinion of bond counsel for
the issuers or in the opinion of officers of the Fund and/or the investment
adviser to the Fund, exempt from both federal regular income tax and the
personal income tax imposed by the state of Ohio and Ohio municipalities
("Ohio municipal securities"). At least 80% of the value of the Fund's total
assets will be invested in Ohio municipal securities.
The prices of fixed income securities fluctuate inversely to the direction
of interest rates.
CHARACTERISTICS. The municipal securities which the Fund buys are investment
grade bonds rated Aaa, Aa, A, or Baa by Moody's Investors Service, Inc.
("Moody's"), or AAA, AA, A, or BBB by Standard & Poor's Ratings Group
("S&P"), or Fitch Investors Service, Inc. ("Fitch"). In certain cases the
Fund's investment adviser may choose bonds which are unrated if it judges
the bonds to have the same characteristics as the investment grade bonds
described above. If a bond is rated below investment grade according to the
characteristics set forth here after the Fund has purchased it, the Fund is
not required to drop the bond from the portfolio, but will consider
appropriate action. Bonds rated "BBB" by S&P or Fitch or "Baa" by Moody's
have speculative characteristics. Changes in economic or other circumstances
are more likely to lead to weakened capacity to make principal and interest
payments than higher rated bonds. A description of the rating categories is
contained in the Appendix to the Statement of Additional Information.
PARTICIPATION INTERESTS. The Fund may purchase participation interests from
financial institutions such as commercial banks, savings associations, and
insurance companies. These participation interests give the Fund an
undivided interest in Ohio municipal securities. The financial institutions
from which the Fund purchases participation interests frequently provide or
secure irrevocable letters of credit or guarantees to assure that the
participation interests are of high quality. The Trustees of the Trust will
determine that participation interests meet the prescribed quality standards
for the Fund.
VARIABLE RATE MUNICIPAL SECURITIES. Some of the Ohio municipal securities
which the Fund purchases may have variable interest rates. Variable interest
rates are ordinarily based on a published interest rate, interest rate
index, or a similar standard, such as the 91-day U.S. Treasury bill rate.
Many variable rate municipal securities are subject to payment of principal
on demand by the Fund in not more than seven days. All variable rate
municipal securities will meet the quality standards for the Fund. The
Fund's investment adviser has been instructed by the Trustees to monitor the
pricing, quality, and liquidity of the variable rate municipal securities,
including participation interests held by the Fund on the basis of published
financial information and reports of the rating agencies and other
analytical services.
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 SECURITIES. As a matter of fundamental policy, the Fund may
invest up to 10% of its net assets in restricted securities. Restricted
securities are any securities in which the Fund may otherwise invest
pursuant to its investment objective and policies but which are subject to
restriction upon resale under federal securities laws. The Fund will limit
investments in illiquid securities, including certain restricted securities
not determined by the Trustees to be liquid, to 15% of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. 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 these
transactions may cause the Fund to miss a price or yield considered to be
advantageous. Settlement dates may be a month or more after entering into
these transactions, and the market values of the securities purchased may
vary from the purchase prices. Accordingly, the Fund may pay more/less than
the market value of the securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the investment
adviser deems it appropriate to do so. In addition, the Fund may enter in
transactions to sell its purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase
similar securities at later dates. The Fund may realize short-term profits
or losses upon the sale of such commitments.
TEMPORARY INVESTMENTS. The Fund invests its assets so that at least 80% of
its annual interest income is exempt from federal regular income tax and the
personal income taxes imposed by the state of Ohio and Ohio municipalities.
However, from time to time, when the investment adviser determines that
market conditions call for a temporary defensive posture, the Fund may
invest in short-term non-Ohio municipal tax-exempt obligations or taxable
temporary investments. 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 (if unrated) those which the
investment adviser judges to have the same characteristics as such
investment grade securities.
Although the Fund is permitted to make taxable, temporary investments, there
is no current intention of generating income subject to federal regular
income tax or personal income taxes imposed by the state of Ohio or Ohio
municipalities.
OHIO MUNICIPAL SECURITIES
Ohio municipal securities are generally issued to finance public works, such
as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. 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.
Ohio municipal securities include industrial development bonds issued by or
on behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations.
The availability of this financing encourages these corporations to locate
within the sponsoring communities and thereby increases local employment.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the
payment of principal and interest. However, interest on and principal of
revenue bonds are payable only from the revenue generated by the facility
financed by the bond or other specified sources of revenue. Revenue bonds do
not represent a pledge of credit or create any debt of or charge against the
general revenues of a municipality or public authority. Industrial
development bonds are typically classified as revenue bonds.
INVESTMENT RISKS
Yields on Ohio municipal securities depend on a variety of factors,
including: the general conditions of the municipal bond market; the size of
the particular offering; the maturity of the obligations; and the rating of
the issue. Further, any adverse economic conditions or developments
affecting the state of Ohio or its municipalities could impact the Fund's
portfolio. The state of Ohio and certain underlying municipalities face
potential economic problems over the longer term. The state economy has
grown more slowly than that of the nation as a whole, resulting in a gradual
erosion of its relative economic affluence. The causes of this relative
decline are varied and complex, involving in many cases national and
international demographic and economic trends beyond the influence of the
state. The ability of the Fund to achieve its investment objective also
depends on the continuing ability of the issuers of Ohio municipal
securities and participation interests, or the guarantors of either, to meet
their obligations for the payment of interest and principal when due.
Investing in Ohio municipal securities which meet the Fund's quality
standards may not be possible if the state of Ohio or its municipalities do
not maintain their current credit ratings. In addition, certain Ohio
constitutional amendments, legislative measures, executive orders,
administrative regulations, and voter initiatives could result in adverse
consequences affecting Ohio municipal securities.
A further discussion of the risks of a portfolio which invests largely in
Ohio municipal securities is contained in the Statement of Additional
Information.
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 those assets to secure such borrowings.
The above investment limitation cannot be changed without shareholder
approval. The following limitation, however, can be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in this limitation becomes effective.
The Fund will not invest more than 5% of its total assets in industrial
development bonds when the payment of principal and interest is the
responsibility of companies (or guarantors, where applicable) with less than
three years of continuous operations, including the operation of any
predecessor.
NET ASSET VALUE
The Fund's net asset value per share fluctuates. It is determined by
dividing the sum of the market value of all securities and all other assets,
less liabilities, by the number of shares outstanding.
INVESTING IN CLASS F SHARES
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open. Shares
may be purchased through an investment dealer who has a sales agreement with
the distributor, Federated Securities Corp., or directly from the
distributor, Federated Securities Corp. either by mail or by wire once an
account has been established. The Fund reserves the right to reject any
purchase request.
THROUGH A FINANCIAL INSTITUTION. An investor may call his financial
institution (such as a bank or an investment dealer) to place an order to
purchase Shares. Orders through a financial institution are considered
received when the Fund is notified of the purchase order. Purchase orders
through a registered broker/dealer must be received by the broker before
4:00 p.m. (Eastern time) and must be transmitted by the broker to the Fund
before 5:00 p.m. (Eastern time) in order for Shares to be purchased at that
day's price. Purchase orders through financial institutions other than
broker/dealers must be received by the financial institution and transmitted
to the Fund before 4:00 p.m. (Eastern time) in order for Shares to be
purchased at that day's price. It is the financial institution's
responsibility to transmit orders promptly.
The financial institution which maintains investor accounts with the Fund
must do so on a fully disclosed basis unless it accounts for share ownership
periods used in calculating the contingent deferred sales charge (see
"Contingent Deferred Sales Charge"). In addition, advance payments made to
financial institutions may be subject to reclaim by the distributor for
accounts transferred to financial institutions which do not maintain
investor accounts on a fully disclosed basis and do not account for share
ownership periods (see "Supplemental Payments to Financial Institutions").
DIRECTLY BY MAIL. To purchase Shares by mail directly from Federated
Securities Corp. once an account has been established:
* complete and sign the new account form available from the Fund;
* enclose a check made payable to Federated Ohio Municipal Income Fund --
Class F Shares; and
* send both to the Fund's transfer agent, Federated Shareholder Services
Company, P.O. Box 8600, Boston, MA 02266-8600.
Purchases by mail are considered received after payment by check is
converted by the transfer agent's bank, State Street Bank and Trust Company
("State Street Bank"), into federal funds. This is generally the next
business day after State Street Bank receives the check.
DIRECTLY BY WIRE. To purchase Shares directly from Federated Securities
Corp. by Federal Reserve Wire once an account has been established, call the
Fund. All information needed will be taken over the telephone, and the order
is considered received when State Street Bank receives payment by wire.
Federal funds should be wired as follows: Federated Shareholder Services
Company, c/o State Street Bank and Trust Company, Boston, MA; Attention:
EDGEWIRE; For Credit to: Federated Ohio Municipal Income Fund -- Class F
Shares; (Fund Number -- this number can be found on the account statement or
by contacting the Fund); Trade Date and Order Number; Group Number or Dealer
Number; Nominee or Institution Name; and ABA Number 011000028. Shares cannot
be purchased by wire on holidays when wire transfers are restricted.
Questions on wire purchases should be directed to your shareholder services
representative at the telephone number listed on your account statement.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Shares is $1,500. Subsequent investments
must be in amounts of at least $100.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received, plus a sales charge of 1% of the offering price (which is 1.01% of
the net amount invested). Further, there is no sales charge for purchases of
$1 million or more. In addition, no sales charge is imposed for Shares
purchased through bank trust departments or investment advisers registered
under the Investment Advisers Act of 1940 purchasing on behalf of their
clients, or by sales representatives, Trustees, and employees of the Fund,
Federated Advisers, and Federated Securities Corp., or their affiliates, or
any investment dealer who has a sales agreement with Federated Securities
Corp., their spouses and children under age 21, or any trusts or pension or
profit-sharing plans for these persons. Unaffiliated institutions through
whom Shares are purchased may charge fees for services provided which may be
related to the ownership of Fund Shares. This prospectus should, therefore,
be read together with any agreement between customer and institution with
regard to services provided, the fees charged for these services, and any
restrictions and limitations imposed.
The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value
of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no Shares are tendered for
redemption and no orders to purchase Shares are received; and (iii) the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Under certain circumstances, described under "Redeeming Class F Shares,"
shareholders may be charged a contingent deferred sales charge by the
distributor at the time Shares are redeemed.
DEALER CONCESSION. For sales of Shares, the distributor will normally offer
to pay dealers up to 100% of the sales charge retained by it. Any portion of
the sales charge which is not paid to a broker/dealer will be retained by
the distributor. However, from time to time, and at the sole discretion of
the distributor, all or part of that portion may be paid to a dealer.
The sales charge for Shares sold other than through registered
broker/dealers will be retained by Federated Securities Corp. Federated
Securities Corp. may pay fees to banks out of the sales charge in exchange
for sales and/or administrative services performed on behalf of the bank's
customers in connection with the initiation of customer accounts and
purchases of Shares.
ELIMINATING/REDUCING THE SALES CHARGE
The sales charge can be eliminated on the purchase of Shares through:
* quantity discounts and accumulated purchases;
* signing a 13-month letter of intent;
* using the reinvestment privilege; or
* concurrent purchases.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. There is no sales charge for
purchases of $1 million or more. The Fund will combine purchases made on the
same day by the investor, his spouse, and his children under age 21 when it
calculates the sales charge.
If an additional purchase of Shares is made, the Fund will consider the
previous purchases still invested in the Fund. For example, if a shareholder
already owns Shares having a current value at the public offering price of
$900,000 and he purchases $100,000 more at the current public offering
price, there will be no sales charge on the additional purchase. The Fund
will also combine purchases for the purpose of reducing the contingent
deferred sales charge imposed on some Share redemptions. For example, if a
shareholder already owns Shares having a current value at public offering
price of $1 million and purchases an additional $1 million at the current
public offering price, the applicable contingent deferred sales charge would
be reduced to .50% of those additional Shares. For more information on the
levels of contingent deferred sales charges and holding periods, see the
section entitled "Contingent Deferred Sales Charge."
To receive the sales charge elimination and/or the contingent deferred sales
charge reduction, Federated Securities Corp. must be notified by the
shareholder in writing or by their financial institution at the time the
purchase is made that Shares are already owned or that purchases are being
combined. The Fund will eliminate the sales charge and/or reduce the
contingent deferred sales charge after it confirms the purchases.
LETTER OF INTENT. If a shareholder intends to purchase at least $1 million
of Shares over the next 13 months, the sales charge may be eliminated by
signing a letter of intent to that effect. This letter of intent includes a
provision for a sales charge elimination depending on the amount actually
purchased within the 13-month period and a provision for the Fund's
custodian to hold 1.00% of the total amount intended to be purchased in
escrow (in Shares) until such purchase is completed.
The 1.00% held in escrow will be applied to the shareholder's account at the
end of the 13-month period unless the amount specified in the letter of
intent, which must be $1 million or more of Shares, is not purchased. In
this event, an appropriate number of escrowed Shares may be redeemed in
order to realize the 1.00% sales charge.
This letter of intent also includes a provision for reductions in the
contingent deferred sales charge and holding period depending on the amount
actually purchased within the 13-month period. For more information on the
various levels of contingent deferred sales charges and holding periods, see
the section entitled "Contingent Deferred Sales Charge."
This letter of intent will not obligate the shareholder to purchase Shares.
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 Shares have been redeemed, the shareholder has a
one-time right, within 120 days, to reinvest the redemption proceeds at the
next-determined net asset value without any sales charge. Federated
Securities Corp. must be notified by the shareholder in writing or by his
financial institution of the reinvestment in order to receive this
elimination of the sales charge. If the shareholder redeems his Shares,
there may be tax consequences.
CONCURRENT PURCHASES. For purposes of qualifying for a sales charge
elimination, a shareholder has the privilege of combining concurrent
purchases of Class F Shares of two or more funds for which affiliates of
Federated Investors serve as investment advisers or principal underwriter
(the "Federated Funds"), the purchase prices of which include a sales
charge. For example, if a shareholder concurrently invested $400,000 in
Class F Shares of one of the other Federated Funds and $600,000 in Shares,
the sales charge would be eliminated. (Not all Federated Funds currently
offer Class F Shares. Contact your financial institution regarding the
availability of other Federated Class F Shares.)
To receive this sales charge elimination, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at
the time the concurrent purchases are made. The Fund will eliminate the
sales charge after it confirms the purchases.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their
investment on a regular basis in a minimum of $100. Under this program,
funds may be automatically withdrawn periodically from the shareholder's
checking account and invested in Shares at the net asset value next
determined after an order is received by Federated Shareholder Services
Company, plus the 1.00% sales charge for purchases under $1 million. A
shareholder may apply for participation in this program through Federated
Securities Corp. or his financial institution.
EXCHANGE PRIVILEGE
Class F shareholders may exchange all or some of their Shares for shares of
Ohio Municipal Cash Trust or Class F Shares of other Federated Funds.
Exchanges are made at net asset value without being assessed a contingent
deferred sales charge. In determining the applicability of the contingent
deferred sales charge, the required holding period for your new Class F
Shares received through an exchange will include the period for which your
original Class F Shares were held.
Shareholders using this privilege must exchange shares having a net asset
value equal to the minimum investment requirements of the fund into which
the exchange is being made. Shareholders who desire to automatically
exchange Shares of a predetermined amount on a monthly, quarterly, or annual
basis may take advantage of a systematic exchange privilege.
Before a financial institution may request exchange by telephone on behalf
of a shareholder, an authorization form permitting the Fund to accept
exchange by telephone must first be completed. Telephone exchange
instructions may be recorded. If reasonable procedures are not followed by
the Fund, it may be liable for losses due to unauthorized or fraudulent
telephone instructions.
The exchange privilege is available to shareholders residing in any state in
which the Shares being acquired may be legally sold.
Before making an exchange, a shareholder must receive a prospectus of the
fund for which the exchange is being made.
An exercise of the exchange privilege is treated as sale for federal income
tax purposes. Depending on the circumstances, a capital gain or loss may be
realized.
Please contact your financial institution directly or Federated Securities
Corp. at 1-800-341-7400 for more information on and prospectuses for the
Federated Funds into which your Shares may be exchanged free of charge.
Instructions for exchanging Shares must be given in writing by the
shareholder. Written instructions may require a signature guarantee.
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 on the application or by contacting the Fund.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly statements are sent to report dividends paid during the
month.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared and paid monthly. Distributions of any net realized
long-term capital gains will be made at least once every twelve months.
Dividends and distributions are automatically reinvested in additional
Shares at net asset value without a sales charge, unless shareholders
request cash payments on the application or by writing to Federated
Shareholder Services Company.
Shares purchased through a financial institution, for which payment by wire
is received by State Street Bank on the business day following the order,
begin to earn dividends on the day the wire payment is received. Otherwise,
Shares purchased by wire begin to earn dividends on the business day after
wire payment is received by State Street Bank. Shares purchased by mail, or
through a financial institution, if the financial institution's payment is
by check, begin to earn dividends on the second business day after the check
is received by Federated Shareholder Services Company.
Shares earn dividends through the business day that proper written
redemption instructions are received by Federated Shareholder Services
Company.
REDEEMING CLASS F 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.
Redemption requests must be received in proper form and can be made through
a financial institution or directly from the Fund by written request.
THROUGH A FINANCIAL INSTITUTION
A shareholder may redeem Shares by calling his financial institution (such
as a bank or a broker/dealer) to request the redemption. Shares will be
redeemed at the net asset value next determined after the Fund receives the
redemption request from the financial institution. Redemption requests
through a registered broker/dealer must be received by the broker before
4:00 p.m. (Eastern time) and must be transmitted by the broker to the Fund
before 5:00 p.m. (Eastern time) in order for Shares to be redeemed at that
day's net asset value. Redemption requests through other financial
institutions must be received by the financial institution and transmitted
to the Fund before 4:00 p.m. (Eastern time) in order for Shares to be
redeemed at that day's net asset value. The financial institution is
responsible for promptly submitting redemption requests and providing proper
written redemption instructions to Federated Services Company. The financial
institution may charge customary fees and commissions for this service. If,
at any time, the Fund shall determine it necessary to terminate or modify
this method of redemption, shareholders will be promptly notified.
Before a financial institution may request redemption by telephone on behalf
of a shareholder, an authorization form permitting the Fund to accept
redemption requests by telephone must first be completed. In the event of
drastic economic or market changes, a shareholder may experience difficulty
in redeeming by telephone. If such a case should occur, another method of
redemption, such as "Directly by Mail," should be considered. Telephone
redemption instructions may be recorded. If reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
DIRECTLY BY MAIL
Shareholders may also redeem Shares by sending a written request to
Federated Shareholder Services Company, P.O. Box 8600, Boston, MA
02266-8600. Shares will be redeemed at their net asset value, less any
applicable contingent deferred sales charge, next determined after the
transfer agent receives the redemption request. If share certificates have
been issued, they should be sent unendorsed with the written request by
registered or certified mail to the address noted above.
The written request should state: Fund Name and the Class designation; the
account name as registered with the Fund; the account number; and the number
of Shares to be redeemed or the dollar amount requested. All owners of the
account must sign the request exactly as the Shares are registered.
Normally, a check for the proceeds is mailed within one business day, but in
no event more than seven days, after receipt of a proper written redemption
request. Dividends are paid up to and including the day that a redemption
request is processed.
Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund, or a redemption payable other than
to the shareholder of record must have their signatures guaranteed by a
commercial or savings bank, Trust company or savings association whose
deposits are insured by an organization which is administered by the Federal
Deposit Insurance Corporation; a member firm of a domestic stock exchange;
or any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934. The Fund does not accept signatures guaranteed by a
notary public.
The Fund and its transfer agent have adopted standards for accepting
signature guarantees from the above institutions. The Fund may elect in the
future to limit eligible signature guarantors to institutions that are
members of a signature guarantee program. The Fund and its transfer agent
reserve the right to amend these standards at any time without notice.
CONTINGENT DEFERRED SALES CHARGE
Shareholders redeeming Shares from their Fund accounts within certain time
periods of the purchase date of those Shares will be charged a contingent
deferred sales charge by the Fund's distributor of the lesser of the
original price or the net asset value of the Shares redeemed as follows:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
AMOUNT OF PURCHASE SHARES HELD SALES CHARGE
<S> <S> <C>
Up to $1,999,999 4 years or less 1.00%
$2,000,000 to $4,999,999 2 years or less 0.50%
$5,000,000 or more 1 year or less 0.25%
</TABLE>
In instances in which Shares have been acquired in exchange for Class F
Shares in other Federated Funds, (i) the purchase price is the price of the
shares when originally purchased and (ii) the time period during which the
shares are held will run from the date of the original purchase. The
contingent deferred sales charge will not be imposed on Shares acquired
through the reinvestment of dividends or distributions of long-term capital
gains. In computing the amount of contingent deferred sales charge for
accounts with Shares subject to a single holding period, if any, redemptions
are deemed to have occurred in the following order: (1) Shares acquired
through the reinvestment of dividends and long-term capital gains, (2)
purchases of Shares occurring prior to the number of years necessary to
satisfy the applicable hold period, and (3) purchases of Shares occurring
within the current hold period. For accounts with Shares subject to multiple
share holding periods, the redemption sequence will be determined first,
with reinvested dividends and long-term capital gains, and second, on a
first-in, first-out basis.
The contingent deferred sales charge will not be imposed when a redemption
results from a tax-free return under the following circumstances: (i) a
total or partial distribution from a qualified plan, other than an IRA,
Keogh Plan, or a custodial account, following retirement; (ii) a total or
partial distribution from an IRA, Keogh Plan, or a custodial account, after
the beneficial owner attains age 591U2; or (iii) from the death or permanent
and total disability of the beneficial owner. The exemption from the
contingent deferred sales charges for qualified Plans, an IRA, Keogh Plan or
a custodial account does not extend to account transfers, rollovers, and
other redemptions made for purposes of reinvestment. Contingent deferred
sales charges are not charged in connection with exchanges of Shares for
shares in Ohio Municipal Cash Trust or Shares in other Federated Funds, or
in connection with redemptions by the Fund of accounts with low balances.
Shares of the Fund originally purchased through a bank trust department or
investment adviser registered under the Investment Advisers Act of 1940, as
amended, are not subject to the contingent deferred sales charge to the
extent that no payment was advanced for purchases made by or through such
entities.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive monthly or quarterly payments of
predetermined amounts may take advantage of the Systematic Withdrawal
Program. Under this program, Shares are redeemed to provide for periodic
withdrawal payments in an amount directed by the shareholder; the minimum
withdrawal amount is $100. Depending upon the amount of the withdrawal
payments, the amount of dividends paid and capital gains distributions with
respect to Shares, and the fluctuation of the net asset value of Shares
redeemed under this program, redemptions may reduce, and eventually deplete,
the shareholder's investment in the Fund. For this reason, payments under
this program should not be considered as yield or income on the
shareholder's investment in the Fund. To be eligible to participate in this
program, a shareholder must have an account value of at least $10,000 in the
Fund (at current offering price).
A shareholder may apply for participation in this program through Federated
Securities Corp. Due to the fact that Shares are sold with a sales charge,
it is not advisable for shareholders to be purchasing Shares while
participating in this program.
Contingent deferred sales charges are charged for Shares redeemed through
this program within four years of their purchase dates.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum value of $1,500. This
requirement does not apply, however, if the balance falls below $1,500
because of changes in the Fund's net asset value. Before Shares are redeemed
to close an account, the shareholder is notified in writing and allowed 30
days to purchase additional Shares to meet the minimum requirement.
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 Municipal Securities
Income Trust and for exercising all of the powers of the Trust except those
reserved for the shareholders. An Executive Committee of the Board of
Trustees handles the Trustees' responsibilities between meetings of the
Board.
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 and sale of
portfolio instruments, for which it receives an annual fee from the Fund.
Both the Trust and the Adviser have adopted strict codes of ethics governing
the conduct of all employees who manage the Fund and its portfolio
securities. These codes recognize that such persons owe a fiduciary duty to
the Fund's shareholders and must place the interests of shareholders ahead
of the employees' own interest. Among other things, the codes: require
preclearance and periodic reporting of personal securities transactions;
prohibit personal transactions in securities being purchased or sold, or
being considered for purchase or sale, by the Fund; prohibit purchasing
securities in initial public offerings; and prohibit taking profits on
securities held for less than sixty days. Violation of the codes are subject
to review by the Trustees, and could result in severe penalties.
ADVISORY FEES. The Fund's Adviser receives an annual investment advisory fee
equal to .40% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee or reimburse the Fund for
certain operating expenses. The Adviser can terminate this voluntary waiver
or reimbursement of expenses at any time at its sole discretion. The Adviser
has also undertaken to reimburse the Fund for operating expenses in excess
of limitations established by certain states.
>
ADVISER'S BACKGROUND. Federated Advisers, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940, as amended. It is a subsidiary of Federated
Investors. All of the Class A (voting) shares of Federated Investors are
owned by a trust, the Trustees of which are John F. Donahue, Chairman and
Trustee of Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son,
J. Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services to
a number of investment companies. With over $80 billion invested across more
than 250 funds under management and/or administration by its subsidiaries,
as of December 31, 1995, Federated Investors is one of the largest mutual
fund investment managers in the United States. With more than 1,800
employees, Federated continues to be led by the management who founded the
company in 1955. Federated funds are presently at work in and through 4,000
financial institutions nationwide. More than 100,000 investment
professionals have selected Federated funds for their clients.
J. Scott Albrecht has been the Fund's portfolio manager since March, 1995.
Mr. Albrecht joined Federated Investors in 1989 and has been a Vice
President of the Fund's investment adviser since October, 1994. From 1992 to
1994, Mr. Albrecht served as an Assistant Vice President of the Fund's
investment adviser. In 1991, Mr. Albrecht acted as an investment analyst.
Mr. Albrecht is a Chartered Financial Analyst and received his M.S. in
Public Management from Carnegie Mellon University.
Jonathan C. Conley has been the Fund's portfolio manager since its
inception. Mr. Conley joined Federated Investors in 1979 and has been a
Senior Vice President of the Fund's investment adviser since 1995. Mr.
Conley was a Vice President of the Fund's investment adviser from 1982 to
1995. Mr. Conley is a Chartered Financial Analyst and received his M.B.A. in
Finance from the University of Virginia.
DISTRIBUTION OF CLASS F SHARES
Federated Securities Corp. is the principal distributor for Shares of the
Fund. Federated Securities Corp. is located at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779. It is a Pennsylvania corporation
organized on November 14, 1969, and is the principal distributor for a
number of investment companies. Federated Securities Corp. is a subsidiary
of Federated Investors.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES. Under a distribution plan
adopted in accordance with Investment Company Act Rule 12b-1 (the
"Distribution Plan"), the Fund may pay to the distributor an amount,
computed at an annual rate of 0.40% of the average daily net asset value of
the Shares to finance any activity which is principally intended to result
in the sale of Shares subject to the Distribution Plan. The distributor may
select financial institutions such as banks, fiduciaries, custodians for
public funds, investment advisers, and broker/dealers to provide sales
services or distribution related support services as agents for their
clients or customers.
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 Shares, computed at an annual rate, to obtain certain personal
services for shareholders and for the maintenance of shareholder accounts.
Under the Shareholder Services Agreement, Federated Shareholder Services
will either perform shareholder services directly or will select financial
institutions to perform shareholder services. Financial institutions will
receive fees based upon Shares owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will
be determined from time to time by the Fund and Federated Shareholder
Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. Federated Securities Corp.
will pay financial institutions, for distribution and/or administrative
services, an amount equal to 1.00% of the offering price of the Shares
acquired by their clients or customers on purchases up to $1,999,999, .50%
of the offering price on purchases of $2,000,000 to $4,999,999, and .25% of
the offering price on purchases of $5,000,000 or more. (This fee is in
addition to the 1.00% sales charge on purchases of less than $1 million.)
Furthermore, in addition to payments made pursuant to the Distribution Plan
and Shareholder Services Agreement, Federated Securities Corp. and Federated
Shareholder Services, from their own assets, may pay financial institutions
supplemental fees for the performance of substantial sales services,
distribution related support services, or shareholder services. The support
may include sponsoring sales, educational and training seminars for their
employees at recreational-type facilities, providing sales literature, and
engineering computer software programs that emphasize the attributes of the
Fund. Such assistance will be predicated upon the amount of Shares the
financial institution sells or may sell and/or upon the type and nature of
sales or marketing support furnished by the financial institution. Any
payments made by the distributor may be reimbursed by the Fund's Adviser or
its affiliates, and not the Fund.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Services Company, a subsidiary of
Federated Investors, provides administrative personnel and services
(including certain legal and financial reporting services) necessary to
operate the Fund. Federated Services Company provides these at an annual
rate which relates to the average aggregate daily net assets of all funds
advised by affiliates of Federated Investors as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE
ADMINISTRATIVE FEE DAILY NET ASSETS
<C> <S>
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
</TABLE>
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 of October 7, 1996, Merrill Lynch Pierce Fenner & Smith,
Jacksonville, Florida owned 37.33% of the voting securities of the Fund, and
therefore, may, for certain purposes, be deemed to control the Fund and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust's or the Fund's operation and for the election of
Trustees under certain circumstances. Trustees may be removed by the
Trustees or by shareholders at a special meeting. A special meeting of the
shareholders for this purpose shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the outstanding
shares of all series of the Trust entitled to vote.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund does not expect to pay federal income tax because it expects to
meet requirements of the Code, as amended, applicable to regulated
investment companies and to receive the special tax treatment afforded to
such companies. The Fund will be treated as a single, separate entity for
federal income tax purposes so that income (including capital gains) and
losses realized by the Trust's other portfolios will not be combined for tax
purposes with those realized by the Fund.
In general, shareholders are not required to pay federal regular income tax
on any dividends received from the Fund that represent net interest on
tax-exempt municipal bonds, although tax exempt interest will increase the
taxable income of certain recipients of social security benefits. However,
under the Tax Reform Act of 1986, dividends representing net interest income
earned on some municipal bonds may be included in calculating the federal
individual alternative minimum tax or the federal alternative minimum tax
for corporations.
The alternative minimum tax, up to 28% of alternative minimum taxable income
for individuals and 20% for corporations, applies when it exceeds the
regular tax for the taxable year. Alternative minimum taxable income is
equal to the regular taxable income of the taxpayer increased by certain
"tax preference" items not included in regular taxable income and reduced by
only a portion of the deductions allowed in the calculation of the regular
tax.
The Tax Reform Act of 1986 treats interest on certain "private activity"
bonds issued after August 7, 1986, as a tax preference item for both
individuals and corporations. Unlike traditional governmental purpose
municipal bonds, which finance roads, schools, libraries, prisons, and other
public facilities, private activity bonds provide benefits to private
parties. The Fund may purchase all types of municipal bonds, including
private activity bonds. Thus, should it purchase any such bonds, a portion
of the Fund's dividends may be treated as a tax preference item.
In addition, in the case of a corporate shareholder, dividends of the Fund
which represent interest on municipal bonds will become subject to the 20%
corporate alternative minimum tax because the dividends are included in a
corporation's "adjusted current earnings." The corporate alternative minimum
tax treats 75% of the excess of a taxpayer's pre-tax "adjusted current
earnings" over the taxpayer's alternative minimum taxable income as a tax
preference item. "Adjusted current earnings" is based upon the concept of a
corporation's "earnings and profits." Since "earnings and profits" generally
includes the full amount of any Fund dividend, and alternative minimum
taxable income does not include the portion of the Fund's dividend
attributable to municipal bonds which are not private activity bonds, the
difference will be included in the calculation of the corporation's
alternative minimum tax.
Dividends of the Fund representing net interest income earned on some
temporary investments and any realized net short-term gains are taxed as
ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares. Information on the tax status of dividends and
distributions is provided annually.
STATE OF OHIO INCOME TAXES
Under existing Ohio laws, distributions made by the Fund will not be subject
to Ohio individual income taxes to the extent that such distributions
qualify as "exempt-interest dividends" under the Code and represent (i)
interest from obligations of Ohio or its subdivisions which is exempt from
federal income tax; or (ii) interest of dividends from obligations issued by
the United States and its territories or possessions or by any authority,
commission or instrumentality of the United States which are exempt from
state income tax under federal laws. Conversely, to the extent that
distributions made by the Fund are derived from other types of obligations,
such distributions will be subject to Ohio individual income taxes.
Distributions made by the Fund will not be subject to Ohio corporate
franchise tax to the extent that such distributions qualify as
"exempt-interest dividends" under the Code and represent (i) interest from
obligations of Ohio or its subdivisions which is exempt from federal income
tax; or (ii) net interest income from obligations issued by the United
States and its territories or possessions or by any authority, commission or
instrumentality of the United States, which is included in federal taxable
income and which is exempt from state income tax under federal laws.
Exempt-interest dividends that represent interest from obligations held by
the Fund which are issued by Ohio or its political subdivisions will be
exempt from any Ohio municipal income tax (even if the municipality is
permitted under Ohio law to levy a tax on intangible income).
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other than
Ohio. Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.
PERFORMANCE INFORMATION
From time to time, the Fund advertises the total return, yield, and
tax-equivalent yield for Shares.
Total return represents the change, over a specific period of time, in the
value of an investment in Shares after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of Shares is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by
Shares over a thirty-day period by the maximum offering price per share of
Shares on the last day of the period. This number is then annualized using
semi-annual compounding. The tax-equivalent yield of Shares is calculated
similarly to the yield, but is adjusted to reflect the taxable yield that
Shares would have had to earn to equal its actual yield, assuming a specific
tax rate. The yield and the tax-equivalent yield do not necessarily reflect
income actually earned by Shares and, therefore, may not correlate to the
dividends or other distributions paid to shareholders.
The performance information reflects the effect of the maximum sales charge
and other similar non- recurring charges, such as the contingent deferred
sales charge, which, if excluded, would increase the total return, yield,
and tax-equivalent yield.
From time to time, advertisements for the Fund may refer to ratings,
rankings and other information in certain financial publications and/or
compare the Fund's performance to certain indices.
FEDERATED OHIO MUNICIPAL INCOME FUND
(FORMERLY, OHIO MUNICIPAL INCOME FUND)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPALS -- 99.7%
OHIO -- 93.7%
$ 200,000 Akron, Bath & Copley, OH Joint Township, Revenue
Bonds, 7.45% (Children's Hospital Medical Center,
Akron)/(United States Treasury PRF)/(Original Issue
Yield: 7.698%), 11/15/2000 (@102) AAA $ 224,580
400,000 Akron, Bath & Copley, OH Joint Township, Revenue
Bonds, 7.45% (Children's Hospital Medical Center,
Akron)/(United States Treasury PRF)/(Original Issue
Yield: 7.698%), 11/15/2000 (@102) A+ 449,160
750,000 Ashland County, OH, LT GO Bonds, 7.00%, 12/1/2011 A 809,415
300,000 Bellefontaine, OH, Storm Water Utility LT GO Bonds,
7.05%, 6/1/2011 A 322,215
500,000 Brunswick, OH, UT GO Bonds, 7.35% (Original Issue
Yield: 7.446%), 12/1/2010 A 553,480
2,500,000 Cleveland, OH Airport System, Revenue Bonds (Series A),
6.00% (FGIC INS)/(Original Issue Yield: 6.378%),
1/1/2024 AAA 2,481,500
2,000,000 Cleveland, OH Public Power System, Revenue Bonds,
First Mortgage (Series A ), 7.00% (MBIA INS)/(Original
Issue Yield: 7.15%), 11/15/2024 AAA 2,246,200
2,600,000 Columbus, OH Municipal Airport Authority,
Improvement Revenue Bonds, 6.25% (Port Columbus
International Airport)/(MBIA INS)/(Original Issue
Yield: 6.35%), 1/1/2024 AAA 2,663,414
2,000,000 Cuyahoga County, OH Hospital Authority,
Improvement & Refunding Revenue Bonds (Series A),
5.625% (University Hospitals Health System, Inc.)/
(MBIA INS)/(Original Issue Yield: 5.90%), 1/15/2026 AAA 1,908,780
1,000,000 Cuyahoga County, OH Hospital Authority, Revenue
Bonds, 6.25% (Fairview General Hospital)/(Original
Issue Yield: 6.321%), 8/15/2010 A 1,010,090
</TABLE>
FEDERATED OHIO MUNICIPAL INCOME FUND
(FORMERLY, OHIO MUNICIPAL INCOME FUND)
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPALS -- CONTINUED
OHIO -- CONTINUED
$ 1,500,000 Cuyahoga County, OH Hospital Authority, Revenue
Bonds, 6.25% (Meridia Health System)/(Original Issue
Yield: 6.80%), 8/15/2024 A $ 1,495,035
800,000 Cuyahoga County, OH Hospital Authority, Revenue
Bonds, 6.50% (University Hospitals Health System, Inc.)/
(Original Issue Yield: 6.68%), 1/15/2019 AA 818,944
780,000 Cuyahoga County, OH Hospital Authority, Revenue
Refunding Bonds, 6.875% (University Hospitals Health
System, Inc.)/(AMBAC INS)/(Original Issue
Yield: 6.954%), 1/15/2019 AAA 837,556
500,000 Cuyahoga County, OH Hospital Authority, Revenue
Refunding Bonds, 8.00% (Cleveland Clinic)/(Original
Issue Yield: 8.068%), 12/1/2015 A+ 522,400
800,000 Cuyahoga County, OH, UT GO Jail Facilities Bonds,
7.00% (Original Issue Yield: 7.065%), 10/1/2013 Aa 893,624
500,000 Franklin County, OH Hospital Facility Authority,
Hospital Revenue Refunding & Improvement Bonds,
7.25% (Riverside United Methodist Hospital)/(MBIA
INS)/(Original Issue Yield: 7.29%), 5/15/2020 AAA 543,705
260,000 Franklin County, OH Hospital Facility Authority,
Revenue Refunding & Improvement Bonds (Series B),
7.50% (Riverside United Methodist Hospital)/(United
States Treasury PRF)/(Original Issue Yield: 7.60%),
5/15/2000 (@102) Aa 289,474
2,000,000 Franklin County, OH Hospital Facility Authority,
Revenue Refunding Bonds (Series A), 5.75% (Riverside
United Methodist Hospital)/(Original Issue Yield: 6.10%),
5/15/2020 Aa 1,938,200
1,300,000 Hamilton County, OH Health System, Revenue
Refunding Bonds, Providence Hospital, 6.875%
(Franciscan Sisters of Christian Charity HealthCare
Ministry, Inc.)/(Original Issue Yield: 7.05%), 7/1/2015 BBB- 1,312,194
</TABLE>
FEDERATED OHIO MUNICIPAL INCOME FUND
(FORMERLY, OHIO MUNICIPAL INCOME FUND)
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPALS -- CONTINUED
OHIO -- CONTINUED
$ 700,000 Hamilton County, OH Hospital Facilities Authority,
Revenue Refunding & Improvement Bonds, 7.00%
(Deaconess Hospital)/(Original Issue Yield: 7.046%),
1/1/2012 A- $ 736,267
2,000,000 Hamilton County, OH Hospital Facilities Authority,
Revenue Refunding Bonds (Series A), 6.25%
(Bethesda Hospital, OH)/(Original Issue
Yield: 6.55%), 1/1/2012 A 2,019,820
440,000 Lakewood, OH Hospital Improvement Authority,
Revenue Refunding Bonds (Series One), 6.00%
(Lakewood Hospital, OH)/(MBIA INS)/(Original
Issue Yield: 6.90%), 2/15/2010 AAA 444,730
500,000 Lebanon, OH Waterworks System, Revenue
Improvement and Refunding Bonds, 7.10%,
3/1/2008 A 544,925
1,000,000 Marion County, OH Hospital Authority, Hospital
Refunding & Improvement Revenue Bonds (Series
1996), 6.375% (Community Hospital of Springfield)/
(Original Issue Yield: 6.52%), 5/15/2011 BBB+ 991,880
420,000 Marysville, OH, LT Sewer System GO Bonds,
7.15%, 12/1/2011 A 453,319
1,000,000 Miami County, OH, Hospital Facilities Revenue
Refunding & Improvement Bonds (Series 1996A),
6.375% (Upper Valley Medical Center, OH)/
(Original Issue Yield: 6.62%), 5/15/2026 BBB 971,120
650,000 Middleburg Heights, OH, LT GO Bonds, 7.20%,
12/1/2011 Aa 716,580
1,000,000 Montgomery County, OH Health Facilities
Authority, Revenue Bonds (Series A), 6.625%
(Sisters of Charity Health Care System)/(MBIA
INS)/(Original Issue Yield: 6.80%), 5/15/2021 AAA 1,063,420
</TABLE>
FEDERATED OHIO MUNICIPAL INCOME FUND
(FORMERLY, OHIO MUNICIPAL INCOME FUND)
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPALS -- CONTINUED
OHIO -- CONTINUED
$ 3,000,000 Moraine, OH Solid Waste Disposal Authority,
Revenue Bonds, 6.75% (General Motors Corp.)/
(Original Issue Yield: 6.80%), 7/1/2014 A- $ 3,260,250
10,515,000 Ohio HFA, Residential Mortgage Revenue Bonds
(Series B-2), 6.70% (GNMA COL), 3/1/2025 AAA 10,800,062
2,400,000 Ohio HFA, SFM Revenue Bonds (Series A), 7.65%
(GNMA COL)/(Original Issue Yield: 7.669%),
3/1/2029 AAA 2,516,496
275,000 Ohio HFA, SFM Revenue Bonds (Series A), 7.80%
(GNMA COL), 3/1/2030 AAA 288,761
2,500,000 Ohio State Air Quality Development Authority,
PCR Refunding Bonds (Series A), 5.95% (Ohio
Edison Co.), 5/15/2029 BBB- 2,296,950
500,000 Ohio State Air Quality Development Authority,
PCR Refunding Bonds (Series A), 7.45% (Ohio
Edison Co.)/(FGIC INS), 3/1/2016 AAA 547,920
4,800,000 Ohio State Air Quality Development Authority,
Revenue Refunding Bonds, 6.375% (JMG Funding
Limited Partnership)/(AMBAC INS)/(Original
Issue Yield: 6.493%), 1/1/2029 AAA 4,980,384
2,000,000 Ohio State Department of Transportation,
Certificates of Participation, 6.125% (Rickenbacker,
OH Port Authority), 4/15/2015 A+ 1,915,540
2,000,000 Ohio State Turnpike Commission, Revenue
Bonds, Series A, 5.75%, 2/15/2024 AA- 1,947,460
1,700,000 Ohio State Water Development Authority, PCR
Refunding Bonds, 5.95% (Ohio Edison Co.),
5/15/2029 BBB- 1,545,045
650,000 Ohio State Water Development Authority, Pure
Water Revenue Bonds, 7.00% (United States
Treasury PRF)/(Original Issue Yield: 7.65%),
6/1/1998 (@100) A 680,290
</TABLE>
FEDERATED OHIO MUNICIPAL INCOME FUND
(FORMERLY, OHIO MUNICIPAL INCOME FUND)
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPALS -- CONTINUED
OHIO -- CONTINUED
$ 350,000 Rocky River, OH City School District, UT GO
Bonds (Series A), 6.90% (Original Issue Yield: 6.98%),
12/1/2011 Aa $ 378,102
500,000 South Euclid, OH, UT GO Refunding Bonds, 7.00%,
12/1/2011 A1 542,350
500,000 Tiffin, OH, LT GO Bonds, 7.10%, 12/1/2011 A 539,865
3,500,000 Toledo-Lucas County, OH Port Authority, Port
Facilities Revenue Refunding Bonds, 5.90% (Cargill,
Inc.)/(Original Issue Yield: 5.981%), 12/1/2015 Aa3 3,536,540
500,000 University of Cincinnati, OH, General Receipts
Revenue Bonds (Series B), 7.00% (Original Issue
Yield: 7.05%), 6/1/2011 AA- 545,360
500,000 University of Cincinnati, OH, Revenue Bonds (Series 12),
6.50% (Original Issue Yield: 6.613%), 6/1/2011 AA- 529,130
Total 66,112,532
PUERTO RICO -- 3.5%
2,400,000 Puerto Rico Electric Power Authority, Revenue Bonds
(Series T), 6.375% (Original Issue Yield: 6.58%), 7/1/2024 A- 2,501,182
VIRGIN ISLANDS -- 2.5%
1,750,000 Virgin Islands HFA, SFM Revenue Refunding Bonds
(Series A), 6.50% (GNMA COL)/(Original Issue
Yield: 6.522%), 3/1/2025 AAA 1,767,220
TOTAL LONG-TERM MUNICIPALS
(IDENTIFIED COST $67,769,855)(A) $ 70,380,934
</TABLE>
Securities that are subject to alternative minimum tax represents 43.6% of
the portfolio as calculated based upon total portfolio market value.
(a) The cost of investments for federal tax purposes amounts to $67,769,855.
The net unrealized appreciation of investments on a federal tax basis
amounts to $2,611,079 which is comprised of $3,040,769 appreciation and
$429,690 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
($70,567,715) at August 31, 1996.
FEDERATED OHIO MUNICIPAL INCOME FUND
(FORMERLY, OHIO MUNICIPAL INCOME FUND)
The following acronyms are used throughout this portfolio:
AMBAC -- American Municipal Bond Assurance Corporation
COL -- Collateralized
FGIC -- Financial Guaranty Insurance Company
GNMA -- Government National Mortgage Association
GO -- General Obligation
HFA -- Housing Finance Authority
INS -- Insured
LT -- Limited Tax
MBIA -- Municipal Bond Investors Assurance
PCR -- Pollution Control Revenue
PRF -- Prerefunded
SFM -- Single Family Mortgage
UT -- Unlimited Tax
(See Notes which are an integral part of the Financial Statements)
FEDERATED OHIO MUNICIPAL INCOME FUND
(FORMERLY, OHIO MUNICIPAL INCOME FUND)
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1996
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost $67,769,855) $70,380,934
Cash 51,488
Income receivable 1,268,739
Receivable for shares sold 22,095
Total assets 71,723,256
LIABILITIES:
Payable for investments purchased $ 990,737
Payable for shares redeemed 101
Income distribution payable 119,082
Accrued expenses 45,621
Total liabilities 1,155,541
NET ASSETS for 6,295,420 shares outstanding $70,567,715
NET ASSETS CONSIST OF:
Paid in capital $68,463,362
Net unrealized appreciation of investments 2,611,079
Accumulated net realized loss on investments (562,495)
Undistributed net investment income 55,769
Total Net Assets $70,567,715
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
Net Asset Value Per Share ($70,567,715 / 6,295,420 shares outstanding) $11.21
Offering Price Per Share (100/99.00 of $11.21)* $11.32
Redemption Proceeds Per Share (99.00/100 of $11.21)** $11.10
</TABLE>
* See "What Shares Cost."
** See "Contingent Deferred Sales Charge."
(See Notes which are an integral part of the Financial Statements)
FEDERATED OHIO MUNICIPAL INCOME FUND
(FORMERLY, OHIO MUNICIPAL INCOME FUND)
STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 1996
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $4,411,115
EXPENSES:
Investment advisory fee $ 285,381
Administrative personnel and services fee 125,000
Custodian fees 18,266
Transfer and dividend disbursing agent fees and expenses 51,504
Directors'/Trustees' fees 3,565
Auditing fees 13,711
Legal fees 3,276
Portfolio accounting fees 49,252
Distribution services fee 285,377
Shareholder services fee 178,361
Share registration costs 16,062
Printing and postage 20,895
Insurance premiums 4,236
Taxes 215
Miscellaneous 2,160
Total expenses 1,057,261
Waivers --
Waiver of investment advisory fee $ (233,662)
Waiver of distribution services fee (171,226)
Waiver of shareholder services fee (7,134)
Total waivers (412,022)
Net expenses 645,239
Net investment income 3,765,876
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 415,434
Net change in unrealized appreciation of investments (528,504)
Net realized and unrealized loss on investments (113,070)
Change in net assets resulting from operations $3,652,806
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED OHIO MUNICIPAL INCOME FUND
(FORMERLY, OHIO MUNICIPAL INCOME FUND)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED
AUGUST 31,
1996 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 3,765,876 $ 4,028,250
Net realized gain (loss) on investments ($230,283 net gain and $782,520
net loss, respectively, as computed for federal tax purposes) 415,434 (712,819)
Net change in unrealized (depreciation) appreciation (528,504) 1,576,901
Change in net assets resulting from operations 3,652,806 4,892,332
NET EQUALIZATION CREDITS (DEBITS)-- (4,115) (39,884)
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (3,771,215) (3,954,127)
Change in net assets resulting from distributions to shareholders (3,771,215) (3,954,127)
SHARE TRANSACTIONS--
Proceeds from sale of shares 7,290,549 6,748,209
Net asset value of shares issued to shareholders in payment of
distributions declared 2,308,433 1,562,674
Cost of shares redeemed (9,440,266) (20,243,640)
Change in net assets resulting from share transactions 158,716 (11,932,757)
Change in net assets 36,192 (11,034,436)
NET ASSETS:
Beginning of period 70,531,523 81,565,959
End of period (including undistributed net investment income
of $55,769 and $65,223, respectively) $ 70,567,715 $ 70,531,523
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED OHIO MUNICIPAL INCOME FUND
(FORMERLY, OHIO 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 Ohio
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 exempt from federal regular income
tax and the personal income taxes imposed by the state of Ohio and Ohio
municipalities.
The Board of Trustees approved a change in the name of the Fund as follows:
<TABLE>
<CAPTION>
EFFECTIVE DATE NEW NAME
<S> <S>
March 31, 1996 Federated Ohio Municipal Income Fund
</TABLE>
The Board of Trustees approved a change in the name of the Fortress Shares
as follows:
<TABLE>
<CAPTION>
EFFECTIVE DATE NEW NAME
<S> <S>
March 31, 1996 Class F Shares
</TABLE>
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.
FEDERATED OHIO MUNICIPAL INCOME FUND
(FORMERLY, OHIO MUNICIPAL INCOME FUND)
At August 31, 1996, the Fund, for federal tax purposes, had a capital loss
carryforward of $562,497 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:
<TABLE>
<CAPTION>
EXPIRATION YEAR EXPIRATION AMOUNT
<C> <C>
2003 $ 562,497
</TABLE>
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 Class F Shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1996 1995
SHARES SHARES
<S> <C> <C>
Shares sold 641,518 626,737
Shares issued to shareholders in payment of distributions declared 204,123 144,421
Shares redeemed (835,151) (1,896,511)
Net change resulting from share transactions 10,490 (1,125,353)
</TABLE>
FEDERATED OHIO MUNICIPAL INCOME FUND
(FORMERLY, OHIO MUNICIPAL INCOME FUND)
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.
DISTRIBUTION SERVICES FEE -- The Fund has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan,
the Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended
to result in the sale of the Fund's shares. The Plan provides that the Fund
may incur distribution expenses up to 0.40% of the average daily net assets
of the Fund, annually, to compensate FSC. The distributor may voluntarily
choose to waive any portion of its fee. The distributor can modify or
terminate this voluntary waiver at any time at its sole discretion.
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 shareholders and to
maintain shareholder accounts. FSS may voluntarily choose to waive any
portion of its fee. FSS can modify or terminate this voluntary waiver at any
time at its sole discretion.
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.
ORGANIZATIONAL EXPENSES -- Organizational expenses of $29,070 and start-up
administrative services expenses of $97,677 were borne initially by the
Adviser. The Fund has agreed to reimburse the Adviser for the organizational
and start-up administrative expenses during the five-year period following
October 10, 1990 (date the Fund first became effective). For the year ended
August 31, 1996, the Fund paid $878 pursuant to this agreement.
FEDERATED OHIO MUNICIPAL INCOME FUND
(FORMERLY, OHIO MUNICIPAL INCOME FUND)
INTERFUND TRANSACTIONS -- During the year 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 $9,950,000 and $10,150,000, 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:
<TABLE>
<S> <C>
PURCHASES $8,863,690
SALES $7,510,421
</TABLE>
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, 49.4% 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 15.3% of total
investments.
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of MUNICIPAL SECURITIES INCOME TRUST
and Shareholders of FEDERATED OHIO MUNICIPAL INCOME FUND
(formerly, OHIO MUNICIPAL INCOME FUND):
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Federated Ohio Municipal Income
Fund as of August 31, 1996, the related statement of operations for the year
then ended, the statement 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 as of August 31, 1996, by correspondence with the custodian
and brokers; where replies were not received, we performed other auditing
procedures. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated Ohio
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 Ohio Municipal Income Fund
Class F Shares Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Investment Adviser
Federated Advisers Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Custodian
State Street Bank and 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 OHIO MUNICIPAL INCOME FUND
(FORMERLY, OHIO MUNICIPAL INCOME FUND)
(A PORTFOLIO OF MUNICIPAL SECURITIES INCOME TRUST)
CLASS F SHARES
(FORMERLY, FORTRESS SHARES)
PROSPECTUS
A Non-Diversified Portfolio of
Municipal Securities Income Trust,
An Open-End, Management
Investment Company
October 31, 1996
[Graphic]
Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.
[Graphic]
Cusip 625922307
0090702A-F (10/96)
FEDERATED OHIO MUNICIPAL INCOME FUND
(FORMERLY, OHIO MUNICIPAL INCOME FUND)
(A PORTFOLIO OF MUNICIPAL SECURITIES INCOME TRUST)
CLASS F SHARES
(FORMERLY, FORTRESS SHARES)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of Federated Ohio Municipal Income Fund (the `Fund''), a
portfolio of Municipal Securities Income Trust (the `Trust'') dated
October 31, 1996. This Statement is not a prospectus. You may request
a copy of a prospectus or a paper copy of this Statement, if you have
received it electronically, free of charge by calling 1-800-341-7400.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated October 31, 1996
Federated Securities Corp. is the distributor of the Fund
and is a subsidiary of Federated Investors.
Cusip 625922307
0090702B (10/96)
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
Ohio Investment Risks 5
MUNICIPAL SECURITIES INCOME TRUST MANAGEMENT 6
Fund Ownership 10
Trustees Compensation 10
Trustee Liability 11
INVESTMENT ADVISORY SERVICES 11
Adviser to the Fund 11
Advisory Fees 11
OTHER SERVICES 11
Fund Administration 11
Custodian and Portfolio Accountant 11
Transfer Agent 12
Independent Auditors 12
BROKERAGE TRANSACTIONS 12
PURCHASING CLASS F SHARES 12
Distribution Plan and Shareholder Services
Agreement 12
Conversion to Federal Funds 13
Purchases by Sales Representatives, Fund
Trustees, and Employees 13
DETERMINING NET ASSET VALUE 13
Valuing Municipal Bonds 13
Use of Amortized Cost 13
REDEEMING CLASS F SHARES 13
Redemption in Kind 13
Massachusetts Partnership Law 14
TAX STATUS 14
The Fund's Tax Status 14
Shareholders' Tax Status 14
TOTAL RETURN 14
YIELD 15
TAX-EQUIVALENT YIELD 15
Tax-Equivalency Table 16
PERFORMANCE COMPARISONS 17
Economic and Market Information 17
ABOUT FEDERATED INVESTORS 17
Mutual Fund Market 18
Institutional Clients 18
Trust Organizations 18
Broker/Dealers and Bank Broker/Dealer
Subsidiaries 18
APPENDIX 19
GENERAL INFORMATION ABOUT THE FUND
The Fund is a portfolio of Municipal Securities Income Trust. The Trust was
established as a Massachusetts business trust under a Declaration of Trust
dated August 6, 1990. On September 16, 1992, (effective October 31, 1992),
the Trustees approved changing the name of the Trust from Federated
Municipal Income Trust to Municipal Securities Income Trust. On February
26,1996 (effective date March 31, 1996), the Trustees approved changing the
name of the Fund from Ohio Municipal Income Fund to Federated Ohio
Municipal Income Fund and also approved changing the name of the Fund's
presently offered shares from Fortress Shares to Class F Shares
(`Shares'').
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide current income exempt from
federal regular income and the personal income taxes imposed by the state
of Ohio and Ohio municipalities. The investment objective cannot be changed
without approval of shareholders.
ACCEPTABLE INVESTMENTS
The Fund invests primarily in Ohio municipal securities.
CHARACTERISTICS
The Ohio municipal securities in which the Fund invests have the
characteristics set forth in the prospectus. If a rated bond loses its
rating or has its rating reduced after the Fund has purchased it, the
Fund is not required to drop the bond from the portfolio, but will
consider doing so. If ratings made by Moody's Investors Service, Inc.,
Standard & Poor's Ratings Group or Fitch's Investors Service, Inc.
change because of changes in those organizations or in their rating
systems, the Fund will try to use comparable ratings as standards in
accordance with the investment policies described in the Fund's
prospectus.
TYPES OF ACCEPTABLE INVESTMENTS
Examples of Ohio municipal securities are:
ogovernmental lease certificates of participation issued by state or
municipal authorities where payment is secured by installment
payments for equipment, buildings, or other facilities being leased
by the state or municipality. Government lease certificates
purchased by the Fund will not contain non-appropriation clauses;
omunicipal notes and tax-exempt commercial paper;
oserial bonds;
otax anticipation notes sold to finance working capital needs of
municipalities;
obond anticipation notes sold in anticipation of the issuance of
long-term bonds;
opre-refunded municipal bonds whose timely payment of interest and
principal is ensured by an escrow of U.S. government obligations;
and
ogeneral obligation bonds.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial
institution irrevocable letters of credit or guarantees and give the
Fund the right to demand payment of the principal amounts of the
participation interests plus accrued interest on short notice (usually
within seven days).
VARIABLE RATE MUNICIPAL SECURITIES
Variable interest rates generally reduce changes in the market value
of municipal securities from their original purchase prices.
Accordingly, as interest rates decrease or increase, the potential for
capital appreciation or depreciation is less for variable rate
municipal securities than for fixed income obligations. Many municipal
securities with variable interest rates purchased by the Fund are
subject to repayment of principal (usually within seven days) on the
Fund's demand. The terms of these variable rate demand instruments
require payment of principal and accrued interest from the issuer of
the municipal obligations, the issuer of the participation interests,
or a guarantor of either issuer.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of
participation interests which represent undivided proportional
interests in lease payments by a governmental or non-profit entity.
The lease payments and other rights under the lease provide for and
secure the payments on the certificates. Lease obligations may be
limited by municipal charter or the nature of the appropriation for
the lease. In particular, lease obligations may be subject to periodic
appropriation. If the entity does not appropriate funds for future
lease payments, the entity cannot be compelled to make such payments.
Furthermore, a lease may provide that the certificate trustee cannot
accelerate lease obligations upon default. The trustee would only be
able to enforce lease payments as they became due. In the event of a
default or failure of appropriation, it is unlikely that the trustee
would be able to obtain an acceptable substitute source of payment.
In determining the liquidity of municipal lease securities, the
investment adviser, under the authority delegated by the Trustees,
will base its determination on the following factors:
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''); and
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 may only enter into repurchase agreements
with banks and other recognized financial institutions such as
broker/dealers which are found by the Fund's investment adviser to be
creditworthy pursuant to guidelines established by the Trustees.
From time to time, such as when suitable Ohio 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
Ohio municipal bonds and thereby reduce the Fund's yield.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. This
transaction is similar to borrowing cash. In a reverse repurchase
agreement the Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in
return for a percentage of the instrument's market value in cash, and
agrees that on a stipulated date in the future the Fund will
repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous,
but the ability to enter into reverse repurchase agreements does not
ensure that the Fund will be able to avoid selling portfolio
instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the
Fund, in a dollar amount sufficient to make payment for the
obligations to be purchased, are segregated on the Fund's records at
the trade date. These assets are marked to market daily and are
maintained until the transaction is settled.
PORTFOLIO TURNOVER
The Fund may trade or dispose of portfolio securities as considered
necessary to meet its investment objective. It is not anticipated that the
portfolio trading engaged in by the Fund will result in its annual
portfolio turnover rate exceeding 100%. For the fiscal years ended August
31, 1996 and 1995, the portfolio turnover rates were 11% and 33%,
respectively.
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 net 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 ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND
TRUSTEES OF THE FUND
The Fund will not purchase or retain the securities of any issuer if
the officers and Trustees of the Fund or its investment adviser,
owning individually more than 1/2 of 1% of the issuer's securities,
together own more than 5% of the issuer's securities.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in illiquid
obligations, including repurchase agreements providing for settlement
in more than seven days after notice, and certain restricted
securities.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets
in industrial development bonds where the principal and interest are
the responsibility of companies (or guarantors, where applicable) with
less than three years of continuous operations, including the
operation of any predecessor.
INVESTING IN MINERALS
The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, although it may invest
in securities of issuers which invest in or sponsor such programs.
In addition, in order to comply with certain state restrictions, the Fund
may not invest in real estate limited partnerships.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not result
in a violation of such restriction.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings association having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of investment
to be `cash items.''
OHIO INVESTMENT RISKS
The economy of the State of Ohio is reliant in part on durable goods
manufacturing, largely concentrated in motor vehicles and equipment, steel,
rubber products and household appliances. During the past decade,
competition in various industries in the State of Ohio has changed from
being domestic to international in nature. In addition, these industries
may be characterized as having excess capacity in particular product
segments. The steel industry, in particular, and the automobile industry,
to a lesser extent, share these characteristics. Because the State of Ohio
and certain underlying municipalities have large exposure to these
industries and their respective aftermarkets, trends in these industries
may, over the long term, impact the demographic and financial position of
the State of Ohio and its municipalities. To the degree that domestic
manufacturers in industries to which Ohio municipalities have exposure fail
to make competitive adjustments, employment statistics and disposable
income of residents in Ohio may deteriorate, possibly leading to population
declines and erosion of municipality tax bases.
Both the economic trends above and the political climate in various
municipalities may have contributed to the decisions of various businesses
and individuals to relocate outside the State. A municipality's political
climate in particular may affect its own credit standing. For both the
State of Ohio and underlying Ohio municipalities, adjustment of credit
ratings by the rating agencies may affect the ability to issue securities
and thereby affect the supply of obligations meeting the quality standards
for investment by the Fund.
The State acted quickly in response to the national recession. Expenditure
reductions in excess of $700 million coupled with various revenue
adjustments enabled the State to maintain its General Fund balances and
restore $21 million to its budget stabilization reserve during fiscal 1993.
Strong performance in fiscal 1994 and 1995, resulted in additional revenue
levels that were well above the 1990 levels. Ohio's budget stabilization
fund is currently over $800 million. The State has relatively modest debt
outstanding as compared to its economic base.
Economic restructuring continues as the State's traditional manufacturing
sectors are gradually replaced by trade and service sectors. This
transformation will reduce the State's sensitivity to economic cycles.
The State has established procedures for municipal fiscal emergencies under
which joint state/local commissions are established to monitor the fiscal
affairs of a financially troubled municipality. When these procedures are
invoked, the municipality must develop a financial plan to eliminate
deficits and cure any defaults. Since their adoption in 1979, these
procedures have been applied to approximately twenty-one cities and
villages, including the City of Cleveland; in sixteen of these communities,
the fiscal situation has been resolved and the procedures terminated.
The foregoing discussion only highlights some of the significant financial
trends and problems affecting the State of Ohio and underlying
municipalities.
MUNICIPAL SECURITIES INCOME TRUST MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated California Municipal Income Fund, and principal
occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee of the
Funds.
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Trustee,
University of Pittsburgh; Director or Trustee of the Funds.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John
R. Wood and Associates, Inc., Realtors; Partner or Trustee in private real
estate ventures in Southwest Florida; formerly, President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
formerly, Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.;
Director, Ryan Homes, Inc.; Director or Trustee of the Funds.
J. Christopher Donahue *
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President and Trustee
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company, and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee of the Company.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Trustee of the
Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine, University of Pittsburgh; Medical Director,
University of Pittsburgh Medical Center - Downtown; Member, Board of
Directors, University of Pittsburgh Medical Center; formerly, Hematologist,
Oncologist, and Internist, Presbyterian and Montefiore Hospitals; Director
or Trustee of the Funds.
Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.
Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
Trustee
Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street
Boston Corporation; Director or Trustee of the Funds.
Gregor F. Meyer
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney, Member of Miller, Ament, Henny & Kochuba; Chairman, Meritcare,
Inc.; Director, Eat'N Park Restaurants, Inc.; Director or Trustee of the
Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director or Trustee of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., National Defense University, U.S. Space Foundation
and Czech Management Center; President Emeritus, University of Pittsburgh;
Founding Chairman, National Advisory Council for Environmental Policy and
Technology, Federal Emergency Management Advisory Board and Czech
Management Center; Director or Trustee of the Funds.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/Marketing/Conference Planning, Manchester Craftsmen's
Guild; Restaurant Consultant, Frick Art & History Center; Conference
Coordinator, University of Pittsburgh Art History Department; Director or
Trustee of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some
of the Funds; Director or Trustee of some of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company; Trustee or Director of
some of the Funds; President, Executive Vice President and Treasurer of
some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President , Secretary and Treasurer
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; Annuity Management Series; Arrow
Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc. ;
DG Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust;
Federated Adjustable Rate U.S. Government Fund, Inc.; Federated American
Leaders Fund, Inc.; Federated ARMs Fund; Federated Equity Funds; Federated
Equity Income Fund, Inc.; Federated Fund for U.S. Government Securities,
Inc.; Federated GNMA Trust; Federated Government Income Securities, Inc.;
Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated
Income Trust; Federated Index Trust; Federated Institutional Trust;
Federated Insurance Series; Federated Investment Portfolios; Federated
Investment Trust; Federated Master Trust; Federated Municipal Opportunities
Fund, Inc.; Federated Municipal Securities Fund, Inc.; Federated Municipal
Trust; Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock and Bond Fund, Inc.; Federated Stock
Trust; Federated Tax-Free Trust; Federated Total Return Series, Inc.;
Federated U.S. Government Bond Fund; Federated U.S. Government Securities
Fund: 1-3 Years; Federated U.S. Government Securities Fund: 2-5 Years;
Federated U.S. Government Securities Fund: 5-10 Years; Federated Utility
Fund, Inc.; First Priority Funds; Fixed Income Securities, Inc.; High Yield
Cash Trust; Intermediate Municipal Trust; International Series, Inc.;
Investment Series Funds, Inc.; Investment Series Trust; Liberty Term
Trust, Inc. - 1999; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; Peachtree Funds; RIMCO Monument Funds; Targeted Duration
Trust; Tax-Free Instruments Trust; The Planters Funds; The Starburst Funds;
The Starburst Funds II; The Virtus Funds; Trust for Financial Institutions;
Trust for Government Cash Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations; and World Investment
Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the outstanding Shares.
As of October 7, 1996, the following shareholder of record owned 5% or more
of the outstanding Shares of the Fund: Merrill Lynch Pierce Fenner & Smith,
Jacksonville, Florida, owned approximately 2,323,652 Shares (37.33%).
TRUSTEES COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +
John F. Donahue $ -0- $ -0- for the Trust and
Trustee and Chairman 54 other investment companies in
the Fund Complex
Thomas G. Bigley++ $1,243.22 $86,331 for the Trust and
Trustee 54other investment companies in the
Fund Complex
John T. Conroy $1,363.10 $115,760 for the Trust and
Trustee 54other investment companies in the
Fund Complex
William J. Copeland $1,363.10 $115,760 for the Trust and
Trustee 54other investment companies in the
Fund Complex
J. Christopher Donahue$ -0- $ -0- for the Trust and
Trustee and Exec. Vice Pres. 16 other investment companies
in the Fund Complex
James E. Dowd $1,363.10 $115,760 for the Trust and
Trustee 54other investment companies in the
Fund Complex
Lawrence D. Ellis, M.D. $1,243.22 $104,898 for the Trust
and
Trustee 54other investment companies in the
Fund Complex
Edward L. Flaherty, Jr. $1,363.10 $115,760 for the Trust
and
Trustee 54other investment companies in the
Fund Complex
Peter E. Madden $1,243.22 $104,898 for the Trust and
Trustee 54other investment companies in the
Fund Complex
Gregor F. Meyer $1,243.22 $104,898 for the Trust and
Trustee 54other investment companies in the
Fund Complex
John E. Murray, Jr. $1,243.22 $104,898 for the Trust and
Trustee 54other investment companies in the
Fund Complex
Wesley W. Posvar $1,243.22 $104,898 for the Trust and
Trustee 54other investment companies in the
Fund Complex
Marjorie P. Smuts $1,243.22 $104,898 for the Trust and
Trustee 54other 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.
INVESTMENT ADVISORY SERVICES
ADVISER TO THE FUND
The Fund's investment adviser is Federated Advisers (the `Adviser''). It
is a subsidiary of Federated Investors. All the voting securities of
Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, his wife, and his son, J. Christopher Donahue.
The Adviser shall not be liable to the Trust, the Fund or any shareholder
of the Fund for any losses that may be sustained in the purchase, holding,
or sale of any security, or for anything done or omitted by it, except acts
or omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the
Trust.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment
advisory fee as described in the prospectus. For the fiscal years ended
August 31, 1996, 1995, and 1994, the Adviser earned $285,381, $291,144, and
$332,570, respectively, of which $233,662, $256,279, and $332,570,
respectively, were voluntarily waived.
STATE EXPENSE LIMITATIONS
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares
are registered for sale in those states. If the Fund's normal
operating expenses (including the investment advisory fee, but not
including brokerage commissions, interest, taxes, and extraordinary
expenses) exceed 2.5% per year of the first $30 million of average net
assets, 2% per year of the next $70 million of average net assets, and
1.5% per year of the remaining average net assets, the Adviser will
reimburse the Trust for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this expense
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser
will be limited, in any single fiscal year, by the amount of the
investment advisory fee.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
OTHER SERVICES
FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in
the prospectus. From March 1, 1994, to March 1, 1996, Federated
Administrative Services served as the Fund's Administrator. Prior to March
1, 1994, Federated Administrative Services, Inc. served as the Fund's
Administrator. Both former Administrators are subsidiaries of Federated
Investors. For purposes of this Statement of Additional Information,
Federated Services Company, Federated Administrative Services, and
Federated Administrative Services, Inc. may hereinafter collectively be
referred to as the "Administrators". For the fiscal years ended August 31,
1996, 1995 and 1994, the Administrators collectively earned $125,000,
$125,000 and $224,287, 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.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the Adviser looks for prompt execution of the order
at a favorable price. In working with dealers, the Adviser will generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Trustees. The Adviser
may select brokers and dealers who offer brokerage and research services.
These services may be furnished directly to the Fund or to the Adviser and
may include: advice as to the advisability of investing in securities;
security analysis and reports; economic studies; industry studies; receipt
of quotations for portfolio evaluations; and similar services. Research
services provided by brokers and dealers may be used by the Adviser or by
its affiliates in advising the Fund and other accounts. To the extent that
receipt of these services may supplant services for which the Adviser or
its affiliates might otherwise have paid, it would tend to reduce their
expenses. The Adviser and its affiliates exercise reasonable business
judgment in selecting brokers who offer brokerage and research services to
execute securities transactions. They determine in good faith that
commissions charged by such persons are reasonable in relationship to the
value of the brokerage and research services provided. During the fiscal
years ended August 31, 1996, 1995 and 1994, the Fund paid no brokerage
commissions. Although investment decisions for the Fund are made
independently from those of the other accounts managed by the Adviser,
investments of the type the Fund may make may also be made by those other
accounts. When the Fund and one or more other accounts managed by the
adviser are prepared to invest in, or desire to dispose of, the same
security, available investments or opportunities for sales will be
allocated in a manner believed by the adviser to be equitable to each. In
some cases, this procedure may adversely affect the price paid or received
by the Fund or the size of the position obtained or disposed of by the
Fund. In other cases, however, it is believed that coordination and the
ability to participate in volume transactions will be to the benefit of the
Fund.
PURCHASING CLASS F SHARES
Except under certain circumstances described in the prospectus, Shares are
sold at their net asset value plus a sales charge on days the New York
Stock Exchange is open for business. The procedure for purchasing Shares is
explained in the prospectus under `Investing in Class F Shares.''
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 $285,377, $291,139 and $307,350, respectively, were made pursuant
to the Distribution Plan, of which $171,226, $180,166 and $96,875,
respectively, were waived. In addition, for the fiscal year ended August
31, 1996, the Fund paid shareholder service fees in the amount of $178,361,
of which $7,134 were waived.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be
in federal funds or be converted into federal funds before shareholders
begin to earn dividends. State Street Bank acts as the shareholder's agent
in depositing checks and converting them to federal funds.
PURCHASES BY SALES REPRESENTATIVES, FUND TRUSTEES, AND EMPLOYEES
Trustees, employees, and sales representatives of the Fund, Federated
Advisers, and Federated Securities Corp. or their affiliates, or any
investment dealer who has a sales agreement with Federated Securities Corp.
and their spouses and children under 21, may buy shares at net asset value
without a sales charge. Shares may also be sold without a sales charge to
trusts or pension or profit-sharing plans for these persons. 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.
DETERMINING NET ASSET VALUE
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.
REDEEMING CLASS F SHARES
The Fund redeems Shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures and contingent
deferred sales charges are explained in the prospectus under `Redeeming
Class F Shares.''Although the Fund does not charge for telephone
redemptions, it reserves the right to charge a fee for the cost of wire-
transferred redemptions of less than $5,000.
REDEMPTION IN KIND
The Trust is obligated to redeem Shares solely in cash up to $250,000 or 1%
of the respective class's net asset value, 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 Trust will pay all or a portion
of the remainder of the redemption in portfolio instruments, valued in the
same way that net asset value is determined. The portfolio instruments will
be selected in a manner that the Trustees deem fair and equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving their securities and selling them
before their maturity could receive less than the redemption value of their
securities and could incur certain transaction costs.
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.
TAX STATUS
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:
oderive at least 90% of its gross income from dividends, interest,
and gains from the sale of securities;
oderive less than 30% of its gross income from the sale of securities
held less than three months;
oinvest in securities within certain statutory limits; and
odistribute to its shareholders at least 90% of its net income earned
during the year.
SHAREHOLDERS' TAX STATUS
CAPITAL GAINS
Capital gains or losses may be realized by the Fund on the sale of
portfolio securities and as a result of discounts from par value on
securities held to maturity. Sales would generally be made because of:
o the availability of higher relative yields;
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 Shares. Any loss by a shareholder on Shares held for
less than six months and sold after a capital gains distribution will be
treated as a long-term capital loss to the extent of the capital gains
distribution.
TOTAL RETURN
The Fund's average annual total returns for the fiscal year ended August
31, 1996, and for the period from October 12, 1990 (date of initial public
investment) to August 31, 1996, were 3.29% and 7.52%, respectively.
The average annual total return for the Shares of the Fund is the average
compounded rate of return for a given period that would equate a $1,000
initial investment to the ending redeemable value of that investment. The
ending redeemable value is computed by multiplying the number of shares
owned at the end of the period by the offering price per Share at the end
of the period. The number of Shares owned at the end of the period is based
on the number of shares purchased at the beginning of the period with
$1,000 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 will be
deducted from the ending value of the investment based on the lesser of the
original purchase price or the offering price of Shares redeemed.
YIELD
The Fund's yield for the 30-day period ended August 31, 1996 was 5.06%.
The yield for the Fund is determined each day by dividing the net
investment income per Share (as defined by the Securities and Exchange
Commission) earned by Fund Shares over a thirty-day period by the maximum
offering price per share of the Fund on the last day of the period. This
value is then annualized using semi-annual compounding. This means that the
amount of income generated during the thirty day period is assumed to be
generated each month over a twelve-month period and is reinvested every six
months. The yield does not necessarily reflect income actually earned by
the Fund because of certain adjustments required by the Securities and
Exchange Commission and, therefore, may not correlate to the dividends or
other distributions paid to shareholders. To the extent that financial
institutions and broker/dealers charge fees in connection with services
provided in conjunction with an investment in the Fund, performance will be
reduced for those shareholders paying those fees.
TAX-EQUIVALENT YIELD
The Fund's tax-equivalent yield for the 30-day period ended August 31, 1996
was 7.57%.
The tax-equivalent yield for shares of the Fund is calculated similarly to
the yield, but is adjusted to reflect the taxable yield that either class
would have had to earn to equal its actual yield, assuming a 28% tax rate
and assuming that income is 100% tax-exempt.
TAX-EQUIVALENCY TABLE
The Fund may also use a tax-equivalency table in advertising and sales
literature. The interest earned by the municipal obligations in the Fund's
portfolio generally remains free from federal regular income tax* and is
free from the income taxes imposed by the State of Ohio. As the table below
indicates, a `tax-free'' investment is an attractive choice for investors,
particularly in times of narrow spreads between `tax-free'' and taxable
yields.
TAXABLE YIELD EQUIVALENT FOR 1996
STATE OF OHIO
FEDERAL TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%
COMBINED FEDERAL AND STATE TAX BRACKET:
19.457% 33.201% 37.900% 43.500% 47.100%
SINGLE $1- $24,001- $58,151- $121,301- OVER
RETURN 24,000 58,150 121,300 263,750 $263,750
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
1.50% 1.86% 2.25% 2.42% 2.65% 2.84%
2.00% 2.48% 2.99% 3.22% 3.54% 3.78%
2.50% 3.10% 3.74% 4.03% 4.42% 4.73%
3.00% 3.72% 4.49% 4.83% 5.31% 5.67%
3.50% 4.35% 5.24% 5.64% 6.19% 6.62%
4.00% 4.97% 5.99% 6.44% 7.08% 7.56%
4.50% 5.59% 6.74% 7.25% 7.96% 8.51%
5.00% 6.21% 7.49% 8.05% 8.85% 9.45%
5.50% 6.83% 8.23% 8.86% 9.73% 10.40%
6.00% 7.45% 8.98% 9.66% 10.62% 11.34%
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional state and
local taxes paid on comparable taxable investments were not used to
increase federal deductions.
The chart above is for illustrative purposes only. It is not an indicator
of past or future performance of Fund shares.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.
PERFORMANCE COMPARISONS
The performance of Shares depends upon such variables as:
oportfolio quality;
oaverage portfolio maturity;
otype of instruments in which the portfolio is invested;
ochanges in interest rates and market value of portfolio securities;
ochanges in the Fund's expenses; and
ovarious 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 as described above.
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:
oLEHMAN 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.
oLIPPER 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.
oMORNINGSTAR, 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
either class of shares based on monthly reinvestment of dividends over a
specified period of time.
Advertisements may quote performance information which does not reflect the
effect of the sales charge.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Fund's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Fund can
compare its performance, or performance for the types of securities in
which it invests, to a variety of other investments, such as bank savings
accounts, certificates of deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on
these developments by Fund portfolio managers and their views and analysis
on how such developments could affect the Funds. In addition, advertising
and sales literature may quote statistics and give general information
about the mutual fund industry, including the growth of the industry, from
sources such as the Investment Company Institute.
ABOUT FEDERATED INVESTORS
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, 1995, Federated Investors
managed 12 bond funds with approximately $2.0 billion in assets and 20
money market funds with approximately $7.8 billion in total assets. In
1976, Federated introduced one of the first municipal bond mutual funds in
the industry and is now one of the largest institutional buyers of
municipal securities. The Funds may quote statistics from organizations
including The Tax Foundation and the National Taxpayers Union regarding the
tax obligations of Americans.
J. Thomas Madden, Executive Vice President, oversees Federated's equity and
high yield corporate bond management while William D. Dawson, Executive
Vice President, oversees Federated's domestic fixed income management.
Henry A. Frantzen, Executive Vice President, oversees the management of
Federated's international portfolios.
MUTUAL FUND MARKET
Twenty-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 trillion to the more than 5,500 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.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than
1,500 banks and trust organizations. Virtually all of the trust divisions
of the top 100 bank holding companies use Federated funds in their clients'
portfolios. The marketing effort to trust clients is headed by Mark R.
Gensheimer, Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated mutual funds are available to consumers through major brokerage
firms nationwide -- including 200 New York Stock Exchange firms --
supported by more wholesalers than any other mutual fund distributor.
Federated's service to financial professionals and institutions has earned
it high rankings in several DALBAR Surveys. The marketing effort to these
firms is headed by James F. Getz, President, Broker/Dealer Division.
*source: Investment Company Institute
APPENDIX
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 bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
BAA--Bonds which are rated Baa are considered as medium grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present, but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
NR--Not rated by Moody's.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its generic rating category; the
modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.
FITCH INVESTORS SERVICE, INC. ("FITCH") LONG-TERM DEBT RATINGS
AAA--Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA--Bonds considered to be investment grade and of very high quality. The
obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated `AAA.'' Because bonds rated in
the `AAA'' and ``AA'' categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than for
bonds with higher ratings.
NR--NR indicates that Fitch does not rate the specific issue.
PLUS (+) OR MINUS (-): Plus and minus signs are used with a rating symbol
to indicate the relative position of a credit within the rating category.
Plus and minus signs, however, are not used in the `AAA'' category.
STANDARD & POOR'S RATINGS GROUP MUNICIPAL NOTE RATINGS
SP-1--Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
Moody's Investors Service, Inc. Short-Term Loan Ratings
MIG1/VMIG1--This designation denotes best quality. 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.
- --------------------------------------------------------------------------------
FEDERATED
OHIO
INTERMEDIATE
MUNICIPAL TRUST
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
NOVEMBER 30, 1996
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Cusip 458810405 LOGO
007148 (1/96)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Investor:
I am pleased to present the Semi-Annual Report to Shareholders for Federated
Ohio Intermediate Municipal Trust for the six-month period ended November 30,
1996. The report begins with an investment review, which is a brief commentary
on the municipal market from the fund's portfolio manager. Following the
investment review, you will find the fund's portfolio of investments and its
financial statements.
The fund pursues monthly income that is free from federal income tax and Ohio
personal income tax by investing in a portfolio of intermediate-term, investment
grade securities issued by Ohio municipalities.*
Over the six-month reporting period, the fund achieved a total return of 4.94%
through dividends totaling $0.24 per share and a 2% share price increase.**
Total assets stood at $8.8 million at the period's end.
Thank you for your confidence in the double-tax-free earning power of Federated
Ohio Intermediate Municipal Trust. We welcome your questions, comments, or
suggestions.
Sincerely,
LOGO
Glen R. Johnson
President
January 15, 1997
* Income may be subject to the federal alternative minimum tax.
** Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
At the end of the six month period ended November 30, 1996 the municipal yield
curve remained considerably steeper than the Treasury yield curve. This was due
mainly to supply and demand imbalances which exist along different segments of
the maturity spectrum. Currently, the spread between bonds of 5 and 10 years in
maturity is in excess of 50 basis points while the spread in the same maturity
range of the Treasury yield curve is approximately 20 basis points. The ratio of
"AAA" rated general obligation municipal bond yields to Treasury bond yields
provides some indication as to the richness or cheapness of municipal bonds
versus comparable maturity Treasury securities. This ratio has narrowed, or
municipal bonds have become more expensive relative to Treasury securities, as a
result of significant institutional interest (property and casualty insurance
companies and commercial banks) in intermediate maturities.
Ohio's economy continued to perform very well. Ohio tax-exempt bonds traded 5 to
10 basis points richer than Pennsylvania or Michigan paper as a result of market
supply and demand differences. The second half of 1996 became a better market
environment for fixed income investors. The Federal Reserve Board (the "Fed")
remained on hold, the economy was showing signs of slowing or providing at best
moderate growth and inflation remained under control. As a result, yields
trended lower into the winter of 1996 and have settled into a trading range
around the 6.50% level. The municipal bond market experienced a considerable
uptick in supply as rates fell during the second half of the year and finished
approximately 14% ahead of last year's supply figures, mainly with the
assistance of additional refunding activity. The presidential election ended
quite favorably for the municipal market with the threat of major tax reform
dying with the republican presidential candidates hopes for the White House. The
major investment themes which characterize the municipal bond market include
narrow credit spreads, a flat yield curve beyond the 15 year maturity range, the
prevalence of bond insurance and uncertainty as to the Fed's next move. As a
result of these conditions which currently exist in the marketplace, management
is stressing credit quality and attempting to swap into higher quality credits
with minimal yield give up. At this late stage of the business cycle it is
important to pay attention to the trade off between risk and return. The
traditionally higher yielding sectors of the municipal market (such as
healthcare, housing, and electric utilities) have performed strongly this year
as investors have chased yield and we are assessing our exposures to these
sectors and making appropriate adjustments in the portfolio. Management intends
to continue to maintain a neutral duration target relative to our peer group
until the markets direction becomes clearer. We feel that structure will
continue to be an important aspect of performance in 1997 so particular
attention must be paid to call protection, coupon and convexity. Institutional
buying (property and casualty insurance companies and commercial banks) has been
strong in the intermediate part of the yield curve which has resulted in making
intermediate maturity municipal bonds expensive relative to longer maturity
municipal bonds.
The fund's performance over the past six months reflects the funds' intermediate
maturity and duration position relative to the funds' peer group. The funds'
total return was 4.94% for the period June 1, 1996 to November 30, 1996.* The
concentration of high coupon premium bonds in the portfolio helped to dampen net
asset value volatility over the period. However, the fund is managed
predominately for tax-exempt income and posted a 30-day distribution rate of
4.71% as of November 30, 1996, which is comparable to a tax-equivalent yield of
7.80%, assuming a top marginal tax rate of 39.6%. The fund's 30-day SEC yield
for the period ended November 30, 1996 was 4.73%.*
* Performance quoted represents past performance. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed may
be worth more or less than their original cost.
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- --------- ---------------------------------------------------------- ------- -----------
<C> <C> <S> <C> <C>
INTERMEDIATE-TERM MUNICIPAL SECURITIES--97.6%
- -------------------------------------------------------------------------
OHIO--95.3%
----------------------------------------------------------
$200,000 Akron, OH, Various Purpose LT GO, 5.50% (MBIA INS),
12/1/2005 AAA $ 212,166
----------------------------------------------------------
400,000 Clermont County, OH , Hospital Facilities Refunding &
Revenue Bonds (Series B), 5.00% (Mercy Health
Systems)/(AMBAC INS)/(Original Issue Yield: 5.15%),
9/1/2006 AAA 403,972
----------------------------------------------------------
200,000 Cleveland, OH Airport System, Revenue Bonds (Series A),
5.40% (FGIC INS)/(Original Issue Yield: 5.55%), 1/1/2004 AAA 209,146
----------------------------------------------------------
250,000 Cleveland, OH, LT GO Bonds, 6.00% (MBIA INS)/(Original
Issue Yield: 6.10%), 11/15/2004 AAA 273,367
----------------------------------------------------------
500,000 Columbus, OH Municipal Airport Authority, Revenue Bonds,
5.55% (Port Columbus International Airport)/(MBIA
INS)/(Original Issue Yield: 5.65%), 1/1/2004 AAA 525,965
----------------------------------------------------------
100,000 Columbus, OH Water System, Revenue Refunding Bonds,
6.375%, 11/1/2010 AA- 106,067
----------------------------------------------------------
150,000 Columbus, OH, LT GO Bonds, 5.50% (Original Issue Yield:
5.55%), 5/15/2004 AA+ 159,855
----------------------------------------------------------
250,000 Franklin County, OH Mortgage Revenue, Mortgage Revenue
Bonds, 5.875% (Seton Square North, OH)/(FHA GTD)/(Original
Issue Yield: 6.00%), 10/1/2004 Aa 260,730
----------------------------------------------------------
300,000 Franklin County, OH, Hospital Refunding & Improvement
Revenue Bonds (1996 Series A), 5.20% (Children's
Hospital)/(Original Issue Yield: 5.30%), 11/1/2004 Aa 307,422
----------------------------------------------------------
400,000 Franklin County, OH, Hospital Revenue Bonds (Series 1996),
5.50% (Holy Cross Health System Corp.), 6/1/2004 AA 419,268
----------------------------------------------------------
500,000 Hamilton County, OH Hospital Facilities Authority,
Refunding Revenue Bonds (Series 1992), 6.80% (Episcopal
Retirement Homes, Inc.)/(Fifth Third Bank, Cincinnati
LOC), 1/1/2008 Aa2 533,535
----------------------------------------------------------
</TABLE>
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- --------- ---------------------------------------------------------- ------- -----------
<C> <C> <S> <C> <C>
INTERMEDIATE-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------
OHIO--CONTINUED
----------------------------------------------------------
$490,000 Hamilton County, OH Hospital Facilities Authority, Revenue
Refunding Bonds (Series A), 5.50% (Bethesda Hospital,
OH)/(Original Issue Yield: 5.65%), 1/1/2000 A $ 504,107
----------------------------------------------------------
155,000 Huron County, OH, LT GO Correctional Facility Bonds, Issue
I, 5.30% (MBIA INS), 12/1/2006 AAA 161,914
----------------------------------------------------------
100,000 Kings Local School District, OH, UT GO Bonds, 6.25%,
12/1/2001 NR 108,091
----------------------------------------------------------
100,000 Kings Local School District, OH, UT GO Bonds, 6.50%,
12/1/2003 NR 111,206
----------------------------------------------------------
300,000 Miami County, OH, Hospital Facilities Revenue Refunding &
Improvement Bonds (Series 1996B), 5.20% (Upper Valley
Medical Center, OH)/(MBIA INS)/(Original Issue Yield:
5.30%), 5/15/2004 AAA 310,584
----------------------------------------------------------
150,000 Miami Valley Regional Transit Authority, OH, LT GO Bonds,
5.40%, 12/1/2004 A 157,602
----------------------------------------------------------
300,000 Muskingum County, OH, (Series 1995) Hospital Facilities
Refunding Revenue Bonds, 5.10% (Franciscan Sisters of
Christian Charity HealthCare Ministry, Inc.)/(Connie Lee
INS)/(Original Issue Yield: 5.30%), 2/15/2006 AAA 305,049
----------------------------------------------------------
150,000 North Canton OH City School District, LT GO Energy
Conservation Bonds, 5.50%, 12/1/2003 A 157,640
----------------------------------------------------------
300,000 Ohio Enterprise Bond Fund, (Series 1995-3) State Economic
Development Revenue Bonds, 5.60% (Smith Steelite),
12/1/2003 A- 306,615
----------------------------------------------------------
150,000 Ohio HFA, Residential Mortgage Revenue Bonds (Series A-1),
5.40% (GNMA COL), 3/1/2004 AAA 154,208
----------------------------------------------------------
590,000 Ohio HFA, Residential MortgageRevenue Bonds (Series B-1),
5.80% (GNMA COL), 9/1/2005 AAA 607,482
----------------------------------------------------------
400,000 Ohio State Building Authority, State Correctional
Facilities Revenue Refunding Bonds, Series A, 5.80%
(Original Issue Yield: 5.95%), 10/1/2006 A+ 431,276
----------------------------------------------------------
</TABLE>
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- --------- ---------------------------------------------------------- ------- -----------
<C> <C> <S> <C> <C>
INTERMEDIATE-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------
OHIO--CONTINUED
----------------------------------------------------------
$350,000 Ohio State Turnpike Commission, Revenue Bonds (Series A),
6.00% (FSA INS), 2/15/2005 AAA $ 381,045
----------------------------------------------------------
250,000 Ohio State, UT GO Bonds, 5.60% (Original Issue Yield:
5.65%), 8/1/2002 AA 266,175
----------------------------------------------------------
250,000 Olentangy, OH Local School District, UT GO Bonds (Series
A), 5.60% (Original Issue Yield: 5.70%), 12/1/2004 AA- 266,498
----------------------------------------------------------
195,000 Stow, OH, LT GO Safety Center Construction Bonds, 7.75%,
12/1/2003 A1 232,268
----------------------------------------------------------
260,000 Summit County, OH, LT Various Purpose GO Bonds, 5.75%
(AMBAC INS), 12/1/2005 AAA 281,146
----------------------------------------------------------
200,000 Toledo, OH Sewer System, Revenue Bonds, 5.75% (AMBAC
INS)/(Original Issue Yield: 5.85%), 11/15/2005 AAA 217,114
---------------------------------------------------------- -----------
Total 8,371,513
---------------------------------------------------------- -----------
VIRGIN ISLANDS--2.3%
----------------------------------------------------------
200,000 Virgin Islands HFA, SFM Revenue Refunding Bonds (Series
A), 5.70% (GNMA COL), 3/1/2004 AAA 204,822
---------------------------------------------------------- -----------
TOTAL INTERMEDIATE-TERM MUNICIPAL SECURITIES
(IDENTIFIED COST $8,234,613) 8,576,335
---------------------------------------------------------- -----------
SHORT-TERM MUNICIPAL SECURITIES--4.6%
- -------------------------------------------------------------------------
PUERTO RICO--4.6%
----------------------------------------------------------
400,000 Puerto Rico Government Development Bank Weekly VRDNs
(Credit Suisse, Zurich LOC) AA+ 400,000
---------------------------------------------------------- -----------
TOTAL SHORT-TERM MUNICIPAL SECURITIES
(AT AMORTIZED COST) 400,000
---------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $8,634,613)(A) $ 8,976,335
---------------------------------------------------------- -----------
</TABLE>
(a) The cost of investments for federal tax purposes amounts to $8,634,613. The
net unrealized appreciation of investments on a federal tax basis amounts to
$341,722 which is comprised of $346,164 appreciation and $4,442 depreciation
at November 30, 1996.
* Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings.
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
- --------------------------------------------------------------------------------
Note: The categories of investments are shown as a percentage of net assets
($8,782,899) at November 30, 1996.
The following acronyms are used throughout this portfolio:
<TABLE>
<S> <C>
AMBAC -- American Municipal Bond Assurance Corporation
COL -- Collateralized
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
GO -- General Obligation
GTD -- Guaranty
HFA -- Housing Finance Authority
INS -- Insured
LOC -- Letter of Credit
LT -- Limited Tax
MBIA -- Municipal Bond Investors Assurance
SFM -- Single Family Mortgage
UT -- Unlimited Tax
VRDNs -- Variable Rate Demand Notes
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost
$8,634,613) $8,976,335
- ---------------------------------------------------------------------------------
Cash 43,358
- ---------------------------------------------------------------------------------
Income receivable 149,749
- ---------------------------------------------------------------------------------
Prepaid expenses 46,878
- ---------------------------------------------------------------------------------
Deferred expenses 7,223
- --------------------------------------------------------------------------------- ----------
Total assets 9,223,543
- ---------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------
Payable for investments purchased $398,138
- ----------------------------------------------------------------------
Payable for shares redeemed 8,785
- ----------------------------------------------------------------------
Income distribution payable 33,721
- ---------------------------------------------------------------------- --------
Total liabilities 440,644
- --------------------------------------------------------------------------------- ----------
Net Assets for 879,104 shares outstanding $8,782,899
- --------------------------------------------------------------------------------- ----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------
Paid in capital $8,667,709
- ---------------------------------------------------------------------------------
Net unrealized appreciation of investments 341,722
- ---------------------------------------------------------------------------------
Accumulated net realized loss on investments (226,532)
- --------------------------------------------------------------------------------- ----------
Total Net Assets $8,782,899
- --------------------------------------------------------------------------------- ----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ---------------------------------------------------------------------------------
$8,782,899 / 879,104 shares outstanding $9.99
- --------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
STATEMENT OF OPERATIONS
SIX MONTHS ENDED NOVEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------
Interest $223,449
- ----------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------
Investment advisory fee $ 21,312
- ----------------------------------------------------------------------------
Administrative personnel and services fee 62,672
- ----------------------------------------------------------------------------
Custodian fees 8,884
- ----------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 9,141
- ----------------------------------------------------------------------------
Directors'/Trustees' fees 1,586
- ----------------------------------------------------------------------------
Auditing fees 8,296
- ----------------------------------------------------------------------------
Legal fees 1,281
- ----------------------------------------------------------------------------
Portfolio accounting fees 24,927
- ----------------------------------------------------------------------------
Shareholder services fee 10,656
- ----------------------------------------------------------------------------
Share registration costs 8,723
- ----------------------------------------------------------------------------
Printing and postage 5,307
- ----------------------------------------------------------------------------
Insurance premiums 1,830
- ----------------------------------------------------------------------------
Taxes 122
- ----------------------------------------------------------------------------
Miscellaneous 7,503
- ---------------------------------------------------------------------------- --------
Total expenses 172,240
- ----------------------------------------------------------------------------
Waivers and reimbursements --
- ----------------------------------------------------------------------------
Waiver of investment advisory fee $ (21,312)
- ----------------------------------------------------------------
Waiver of shareholder services fee (6,393)
- ----------------------------------------------------------------
Reimbursement of other operating expenses (125,165)
- ---------------------------------------------------------------- ---------
Total waivers and reimbursements (152,870)
- ---------------------------------------------------------------------------- --------
Net expenses 19,370
- ---------------------------------------------------------------------------------------- --------
Net investment income 204,079
- ---------------------------------------------------------------------------------------- --------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ----------------------------------------------------------------------------------------
Net realized loss on investments (20,892)
- ----------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments 234,263
- ---------------------------------------------------------------------------------------- --------
Net realized and unrealized gain on investments 213,371
- ---------------------------------------------------------------------------------------- --------
Change in net assets resulting from operations $417,450
- ---------------------------------------------------------------------------------------- --------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
(UNAUDITED) YEAR ENDED
NOVEMBER 30, 1996 MAY 31, 1996
----------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------
Net investment income $ 204,079 $ 343,551
- ------------------------------------------------------
Net realized gain (loss) on investments ($20,892 net
loss and $14,757 net gain respectively, as computed
for federal tax purposes) (20,892) 47,388
- ------------------------------------------------------
Net change in unrealized appreciation (depreciation) 234,263 (101,917)
- ------------------------------------------------------ ----------- -----------
Change in net assets resulting from operations 417,450 289,022
- ------------------------------------------------------ ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------------
Distributions from net investment income (204,079) (343,551)
- ------------------------------------------------------ ----------- -----------
SHARE TRANSACTIONS--
- ------------------------------------------------------
Proceeds from sale of shares 2,833,312 10,235,445
- ------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 45,773 75,252
- ------------------------------------------------------
Cost of shares redeemed (2,684,834) (8,487,981)
- ------------------------------------------------------ ----------- -----------
Change in net assets resulting from share
transactions 194,251 1,822,716
- ------------------------------------------------------ ----------- -----------
Change in net assets 407,622 1,768,187
- ------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------
Beginning of period 8,375,277 6,607,090
- ------------------------------------------------------ ----------- -----------
End of period $ 8,782,899 $ 8,375,277
- ------------------------------------------------------ ----------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED MAY 31,
NOVEMBER 30, -----------------------------------
1995 1996 1995 1994(A)
------------ ------ ------ -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.75 $9.79 $9.53 $10.00
- ---------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------
Net investment income 0.24 0.47 0.47 0.22
- ---------------------------------------------
Net realized and unrealized gain (loss) on
investments 0.24 (0.04) 0.26 (0.47)
- --------------------------------------------- ----- ----- ----- ------
Total from investment operations 0.48 0.43 0.73 (0.25)
- --------------------------------------------- ----- ----- ----- ------
LESS DISTRIBUTIONS
- ---------------------------------------------
Distributions from net investment income (0.24) (0.47) (0.47) (0.22)
- --------------------------------------------- ----- ----- ----- ------
NET ASSET VALUE, END OF PERIOD $9.99 $9.75 $9.79 $9.53
- --------------------------------------------- ----- ----- ----- ------
TOTAL RETURN (B) 4.94% 4.41% 7.98% (2.52%)
- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------
Expenses 0.45%* 0.45%* 0.45% 0.24%*
- ---------------------------------------------
Net investment income 4.79%* 4.78%* 5.05% 4.69%*
- ---------------------------------------------
Expense waiver/reimbursement (c) 3.59%* 4.08%*(d) 4.80%(d) 3.07%*
- ---------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------
Net assets, end of period (000 omitted) $8,783 $8,375 $6,607 $3,379
- ---------------------------------------------
Portfolio turnover 18% 46% 56% 48%
- ---------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from December 2, 1993 (date of initial
public investment) to May 31, 1994.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) For the years ended May 31, 1996, and May 31, 1995, the adviser waived
$35,966 and $26,346, respectively, of the investment advisory fee, which
represents 0.50% and 0.50% of average net assets, and the adviser reimbursed
other operating expenses of $128,177 and $115,674, respectively, which
represents 1.78% and 2.20% of average net assets, to comply with certain
state expense limitations. The remainder of the waiver reimbursement is
voluntary. The expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Intermediate Municipal 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 three portfolios. The financial
statements included herein are only those of Federated Ohio Intermediate
Municipal Trust (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 exempt from federal regular income tax and the personal
income taxes imposed by the State of Ohio.
(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 May 31, 1996, the Fund, for federal tax purposes, had a capital loss
carryforward of $193,820, 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:
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EXPIRATION YEAR EXPIRATION AMOUNT
--------------- -----------------
<S> <C>
2003 $ 179,063
2004 $ 14,757
</TABLE>
Additionally, net capital losses of $11,820 attributable to security
transactions incurred after October 31, 1995 are treated as arising on the
first day of the Fund's next taxable year.
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.
DEFERRED EXPENSES -- The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being
amortized over a period not to exceed five years from the Fund's
commencement 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:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 1996 MAY 31, 1996
----------------- ------------
<S> <C> <C>
- ------------------------------------------------------
Shares sold 289,983 1,037,604
- ------------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 4,666 7,616
- ------------------------------------------------------
Shares redeemed (274,723) (861,086)
- ------------------------------------------------------ -------- ---------
Net change resulting from share transactions 19,926 184,134
- ------------------------------------------------------ -------- ---------
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE -- Federated Management, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to 0.50% of the Fund's average daily net assets.
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
- --------------------------------------------------------------------------------
The Adviser may voluntarily choose to waive any portion of its fee and/or
reimburse certain operating expenses of the Fund. The Adviser can modify or
terminate this voluntary waiver and/or reimbursement 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 shares for the period. The fee paid to
FSS is used to finance certain services for shareholders and to maintain
shareholder accounts. FSS may voluntarily choose to waive any portion of its
fee. FSS can modify or terminate this voluntary waiver at any time at its sole
discretion.
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.
ORGANIZATIONAL EXPENSES -- Organizational expenses of $55,182 were borne
initially by Adviser. The Fund has agreed to reimburse Adviser for the
organizational expenses during the five year period following effective date.
For the period ended November 30, 1996, the Fund paid $13,182 pursuant to this
agreement.
INTERFUND TRANSACTIONS -- During the period ended November 30, 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 $1,000,000 and $700,000, respectively.
GENERAL -- Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUST
- --------------------------------------------------------------------------------
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended November 30, 1996, were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
Purchases $1,519,590
- -------------------------------------------------------------------------------- ----------
Sales $1,780,180
- -------------------------------------------------------------------------------- ----------
</TABLE>
(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
November 30, 1996, 49.8% 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 percentage of investments insured
by or supported (backed) by a letter of credit from any one institution or
agency did not exceed 16.5% of total investments.
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- --------------------------------------------------------------------------------
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Glen R. Johnson
William J. Copeland President
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Edward L. Flaherty, Jr. Edward C. Gonzales
Glen R. Johnson Executive Vice President
Peter E. Madden John W. McGonigle
Gregor F. Meyer Executive Vice President,
John E. Murray, Jr. Treasurer and Secretary
Wesley W. Posvar Richard B. Fisher
Marjorie P. Smuts Vice President
S. Elliott Cohan
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses and other information.
FORM N-14
PART C - OTHER INFORMATION
Item 15. Indemnification:
Indemnification is provided to Officers and Trustees of the
Registrant pursuant to Section 4 of Article XI of Registrant's
Declaration of Trust. The Investment Advisory Contract between
the Registrant and Federated Advisers (the "Adviser") provides
that, in the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the obligations or duties
under the Investment Advisory Contract on the part of the
Adviser, the Adviser shall not be liable to the Registrant or to
any shareholder for any act or omission in the course of or
connected in any way with rendering services or for any losses
that may be sustained in the purchase, holding, or sale of any
security. Registrant's Trustees and Officers are covered by an
Errors and Omissions Policy.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Act"), may be permitted
to Trustees, Officers, and controlling persons of the Registrant
by the Registrant pursuant to the Declaration of Trust or
otherwise, the Registrant is aware that in the opinion of the
Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and, therefore, is
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by Trustees, Officers, or
controlling persons of the Registrant in connection with the
successful defense of any act, suit, or proceeding) is asserted
by such Trustees, Officers, or controlling persons in connection
with the shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be
governed by the final adjudication of such issues.
Insofar as indemnification for liabilities may be permitted
pursuant to Section 17 of the Investment Company Act of 1940, as
amended, for Trustees, Officers, and controlling persons of the
Registrant by the Registrant pursuant to the Declaration of Trust
or otherwise, the Registrant is aware of the position of the
Securities and Exchange Commission as set forth in Investment
Company Act Release No. IC-11330. Therefore, the Registrant
undertakes that in addition to complying with the applicable
provisions of the Declaration of Trust or otherwise, in the
absence of a final decision on the merits by a court or other
body before which the proceeding was brought, that an
indemnification payment will not be made unless in the absence of
such a decision, a reasonable determination based upon factual
review has been made: (i) by a majority vote of a quorum of non-
party Trustees who are not interested persons of the Registrant,
or (ii) by independent legal counsel for an act of willful
misfeasance, bad faith, gross negligence, or reckless disregard
of duties. The Registrant further undertakes that advancement of
expenses incurred in the defense of a proceeding (upon
undertaking for repayment unless it is ultimately determined that
indemnification is appropriate) against an Officer, Trustee, or
controlling person of the Registrant will not be made absent the
fulfillment of at least one of the following conditions: (i) the
indemnitee provides security for his undertaking; (ii) the
Registrant is insured against losses arising by reason of any
lawful advances; or (iii) a majority of a quorum of disinterested
non-party Trustees or independent legal counsel in a written
opinion makes a factual determination that there is reason to
believe the indemnitee will be entitled to indemnification.
Item 16
EXHIBITS
1.1 Paper Copy of Declaration of Trust of the Registrant dated August 6,
1990. (1)
1.2 Paper Copy of Amendment No. 1 to the Declaration of Trust dated August
26, 1991. (5)
1.3 Conformed Copy of Amendment No. 2 to Declaration of Trust. (6)
1.4 Conformed Copy of Amendment No. 3 to Declaration of Trust dated August
31, 1992. (8)
1.5 Conformed Copy of Amendment No. 4 to Declaration of Trust dated
September 17, 1992. (8)
1.6 1.4 Conformed Copy of Amendment No. 5 to Declaration of Trust dated
February 4, 1993. (10)
1.7 1.4 Conformed Copy of Amendment No. 6 to Declaration of Trust dated
May 24, 1993. (13)
2. Copy of Bylaws of the Registrant. (1)
3. Not Applicable.
4. Agreement and Plan of Reorganization is included as Exhibit A to the
Combined Proxy Statement and Prospectus of this Registration
Statement. *
5. Copy of Specimen Certificate for Shares of Beneficial Interest of the
Registrant. (19)
6.1 Copy of new Investment Advisory Contract of the Registrant. (8)
6.2 Copy of Amendment to Investment Advisory Contract (12)
6.3 Conformed Copies of Amendments to Investment Advisory Contract. (14)
7.1 Copy of Distributor's Contract of the Registrant (8)
7.2 Copy of Amendment to Distributor's Contract of the Registrant. (12)
7.3 Copy of Amendment to Distributor's Contract of the Registrant. (14)
7.4 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).
8. Not Applicable.
9.1 Conformed Copy of Custodian Agreement of the Registrant (18)
9.2 Conformed Copy of Agreement of Fund Accounting Services,
Administrative Services, Transfer Agency Services and Custody Services
Procurement. (19)
9.3 Conformed Copy of Shareholder Services Agreement. (17)
9.4 The response and exhibits described in Item 24(b)(6)(iii) are hereby
incorporated by reference.
10.1 Copy of Rule 12b-1 Agreement. (8)
10.2 Copy of Distribution Plan. (12)
10.3 Conformed Copy of Rule 18-3 Plan (19)
11. Copy of Opinion and Consent of Counsel as to legality of shares being
registered. (1)
12. Form of Tax Opinion of Howard & Howard Attorneys, P.C. (Definitive
copy to be filed by amendment).*
13. Not applicable.
14.1 Conformed Copy of Consent of Deloitte & Touche LLP.*
14.2 Conformed Copy of Consent of Arthur Andersen LLP. *
15. Not Applicable.
16. Conformed Copy of Power of Attorney. (19)
17.1 Copy of Declaration under Rule 24f-2. (19)
17.2 Form of Proxy.*
* 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 to its Registration Statement on Form N-1A filed
October 28, 1991. (File Nos. 33-36729 and 811-6165).
(6) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 to its Registration Statement on Form N-1A filed
January 24, 1992. (File Nos. 33-36729 and 811-6165).
(8) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 to its Registration Statement on Form N-1A filed
September 25, 1992. (File Nos. 33-36729 and 811-6165).
(10)Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 to its Registration Statement on Form N-1A filed
March 24, 1993. (File Nos. 33-36729 and 811-6165).
(12)Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 to its Registration Statement on Form N-1A filed May
17, 1993. (File Nos. 33-36729 and 811-6165).
(13)Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 to its Registration Statement on Form N-1A filed July
2, 1993. (File Nos. 33-36729 and 811-6165).
(14)Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 to its Registration Statement on Form N-1A filed
October 28, 1993. (File Nos. 33-36729 and 811-6165).
(18)Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 to its Registration Statement on Form N-1A filed
October 30, 1995. (File Nos. 33-36729 and 811-6165).
(19)Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 21 to its Registration Statement on Form N-1A filed
October 23, 1996. (File Nos. 33-36729 and 811-6165).
Item 17. Undertakings:
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is part of this Registration Statement by any
person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act of 1933, as amended,
the reoffering prospectus will contain the information called for
by the applicable registration form for the reofferings by
persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as part of an
amendment to the Registration Statement and will not be used
until the amendment is effective, and that in determining any
liability under the Securities Act of 1933, as amended, each
post-effective amendment shall be deemed to be a new Registration
Statement for the securities offered therein; and the offering of
the securities at that time shall be deemed to be the initial
bona fide offering of them.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant, MUNICIPAL SECURITIES INCOME TRUST, certifies that it meets
all of the requirements for effectiveness of this Registration Statement
pursuant to Form N-14 under the Securities Act of 1933 and has duly caused
this 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 1st day of April, 1997.
MUNICIPAL SECURITIES INCOME TRUST
BY: /s/ S. Elliott Cohan
S. Elliott Cohan, Assistant Secretary
Attorney in Fact for John F. Donahue
April 1, 1997
Pursuant to the requirements of the Securities Act of 1933, this
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 April 1, 1997
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
Glen R. Johnson* 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
Marjorie P. Smuts* Trustee
* By Power of Attorney
[FORM OF TAX OPINION]
HOWARD & HOWARD ATTORNEYS, P.C.EXHIBIT 12{PRIVATE }
SUITE 101
1400 NORTH WOODWARD AVENUE
BLOOMFIELD HILLS, MICHIGAN 48304-2856
TELEPHONE (810) 645-1483
FAX: (810) 645-1568
July 7, 1997
Municipal Securities Income Trust
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Intermediate Municipal Trust
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Gentlemen:
We have acted as special tax counsel in connection with, and you have
requested our opinion concerning the federal income tax consequences of, a
transaction in which substantially all of the assets of Federated Ohio
Intermediate Municipal Trust, a portfolio of Intermediate Municipal Trust
(the "Acquired Fund") will be acquired by Municipal Securities Income
Trust, on behalf of its portfolio, Federated Ohio Municipal Income Fund
(the "Acquiring Fund"), in exchange for voting shares of beneficial
interest of the Acquiring Fund. The terms and conditions of this
transaction are set forth in an Agreement and Plan of Reorganization dated
February , 1997, among the Acquired Fund, Federated Management, the
--
Acquiring Fund and Federated Advisers (the "Reorganization Agreement").
This opinion is rendered to you pursuant to paragraph 8.5 of the
Reorganization Agreement, and all capitalized terms used herein have the
meanings assigned to them in the Reorganization Agreement.
The Acquiring Fund and the Acquired Fund are organized as portfolios
of Massachusetts business trusts. Both the Acquired Fund and the Acquiring
Fund are open-end, diversified investment companies which qualify as
regulated investment companies described in Section 851(a) of the Internal
Revenue Code of 1986, as amended (the "Code"). Both the Acquiring Fund and
the Acquired Fund are engaged in the business of investing in a
professionally managed portfolio of municipal securities that provide
current income excempt from federal regular income tax and the personal
income taxes imposed by the State of Ohio and/or Ohio municipalities.
On the Closing Date under the Reorganization Agreement, the Acquired
Fund will transfer its entire investment portfolio to the Acquiring Fund.
In exchange, the Acquiring Fund will transfer to the Acquired Fund shares
of beneficial interest in the Acquiring Fund in an amount equal in value to
the assets transferred by the Acquired Fund to the Acquiring Fund. The
Acquired Fund will thereupon liquidate and distribute its Acquiring Fund
shares pro rata to its shareholders.
We have reviewed and relied upon the representations contained in the
Reorganization Agreement and in such other documents and instruments as we
have deemed necessary for the purposes of this opinion, and have reviewed
the applicable provisions of the Code, current regulations and
administrative rules thereunder and pertinent case law.
Based upon the foregoing, we are of the opinion that, for Federal
income tax purposes:
(a) The transfer of all or substantially all of the Acquired Fund
assets in exchange for the Acquiring Fund Shares and the distribution of
the Acquiring Fund Shares to the shareholders of the Acquired Fund in
liquidation of the Acquired Fund will constitute a "reorganization" within
the meaning of Section 368(a)(1)(C) of the Code;
(b) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund solely in exchange for the
Acquiring Fund Shares;
(c) No gain or loss will be recognized by the Acquired Fund upon the
transfer of the Acquired Fund assets to the Acquiring Fund in exchange for
the Acquiring Fund Shares or upon the distribution (whether actual or
constructive) of the Acquiring Fund Shares to Acquired Fund Shareholders in
exchange for their shares of the Acquired Fund;
(d) No gain or loss will be recognized by the Acquired Fund
Shareholders upon the exchange of their Acquired Fund shares for the
Acquiring Fund Shares;
(e) The tax basis of the Acquired Fund assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the
Acquired Fund immediately prior to the Reorganization;
(f) The tax basis of the Acquiring Fund Shares received by each of
the Acquired Fund Shareholders pursuant to the Reorganization will be the
same as the tax basis of the Acquired Fund shares held by such shareholder
immediately prior to the Reorganization;
(g) The holding period of the assets of the Acquired Fund in the
hands of the Acquiring Fund will include the period during which those
assets were held by the Acquired Fund; and
(h) The holding period of the Acquiring Fund Shares to be received by
each Acquired Fund Shareholder will include the period during which the
Acquired Fund shares exchanged therefor were held by such shareholder
(provided the Acquired Fund shares were held as capital assets on the date
of the Reorganization).
We hereby consent to the filing of a copy of this opinion with the
Securities and Exchange Commission as an exhibit to the Registration
Statement on Form N-14 filed by the Acquiring Fund in connection with the
Reorganization, and to the references to this firm and this opinion in the
Prospectus/Proxy Statement which is contained in such Registration
Statement.
Very truly yours,
HOWARD & HOWARD ATTORNEYS, P.C.
Robert C. Rosselot
RCR/lat
Exhibit 14.1
INDEPENDENT AUDITORS' CONSENT
To the Board of Trustees of MUNICIPAL SECURITIES INCOME TRUST and
Shareholders of FEDERATED OHIO MUNICIPAL INCOME FUND:
We consent to the incorporation by reference in this Registration Statement
on Form N-14 of Federated Ohio Municipal Income Fund (a portfolio of the
Municipal Securities Income Trust) of our report dated October 11, 1996,
appearing in the Annual Report of Federated Ohio Municipal Income Fund for
the year ended August 31, 1996, included in the Prospectus of Federated
Ohio Municipal Income Fund for the year ended August 31, 1996, dated
October 31, 1996, and to the references to us within this Registration
Statement.
By:/s/DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
March 31, 1997
Exhibit 14.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement on Form N-14 of Intermediate
Municipal Trust of our report dated July 12, 1996, included in the
Federated Ohio Intermediate Municipal Trust Prospectus dated July 31, 1996,
and to all references to our firm included in this registration statement.
By:/s/ARTHUR ANDERSEN LLP
Arthur Andersen LLP
Pittsburgh, Pennsylvania
March 31, 1997
FEDERATED EXHIBIT 17.2
SHAREHOLDER INTERMEDIATE MUNICIPAL TRUST
SERVICES COMPANY FEDERATED OHIO INTERMEDIATE
P.O. BOX 8600 MUNICIPAL TRUST
BOSTON, MASSACHUSETTS SPECIAL MEETING OF SHAREHOLDERS
02266-8600 JULY 7, 1997
KNOW ALL PERSONS BY THESE PRESENTS
that the undersigned Shareholder of
FEDERATED OHIO INTERMEDIATE
MUNICIPAL TRUST, a portfolio of
Intermediate Municipal Trust,
hereby appoints
or any of them, true and lawful
attorneys, with power of
substitution of each, to vote all
shares of FEDERATED OHIO
INTERMEDIATE MUNICIPAL TRUST, a
portfolio of Intermediate Municipal
Trust, which the undersigned is
entitled to vote, at the Special
Meeting of Shareholders to be held
on July 7, 1997, at Federated
Investors Tower, 1001 Liberty
Avenue, Nineteenth Floor,
Pittsburgh, Pennsylvania 15222-
3779, at 2:00 p.m., and at any
adjournment thereof.
Discretionary authority is hereby
conferred as to all other manners
as may properly come before the
Special Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. THE ATTORNEYS NAMED
WILL VOTE THE SHARES REPRESENTED BY THIS PROXY IN ACCORDANCE WITH THE CHOICE
MADE ON THIS BALLOT. IF THIS PROXY IS RETURNED AND NO CHOICE IS INDICATED AS TO
ANY MATTER, THIS PROXY WILL BE VOTED AFFIRMATIVELY ON THE MATTER PRESENTED.
PLEASE RETURN BOTTOM PORTION WITH YOUR VOTE IN THE ENCLOSED ENVELOPE AND RETAIN
THE TOP PORTION.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS X KEEP THIS
PORTION FOR YOUR RECORDS
FEDERATED OHIO INTERMEDIATE MUNICIPAL TRUSTDETACH AND RETURN THIS
PORTION ONLY
VOTE ON
PROPOSAL
FOR AGAINST ABSTAIN
" " " 1. APPROVAL OF A PROPOSED AGREEMENT
AND PLAN OF REORGANIZATION
BETWEEN INTERMEDIATE MUNICIPAL
TRUST, ON BEHALF OF FEDERATED
OHIO INTERMEDIATE MUNICIPAL TRUST
(THE "FUND"), AND MUNICIPAL
SECURITIES INCOME TRUST (THE
"TRUST"), ON BEHALF OF ITS
PORTFOLIO, FEDERATED OHIO
MUNICIPAL INCOME FUND (THE
"PORTFOLIO"), WHEREBY THE TRUST
WOULD ACQUIRE ALL OF THE ASSETS
OF THE FUND IN EXCHANGE FOR CLASS
F SHARES OF THE PORTFOLIO TO BE
DISTRIBUTED PRO RATA BY THE FUND
TO HOLDERS OF FUND SHARES IN
COMPLETE LIQUIDATION OF THE FUND.
PLEASE SIGN EXACTLY YOUR NAME(S) AS IT APPEARS BELOW. WHEN SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR, GUARDIAN, TRUSTEE, CUSTODIAN, ETC.,
PLEASE GIVE YOUR FULL TITLE AS SUCH. IF A CORPORATION OR PARTNERSHIP,
PLEASE SIGN THE FULL NAME BY AN AUTHORIZED OFFICER OR PARTNER. IF SHARES
ARE OWNED JOINTLY, ALL PARTIES SHOULD SIGN.
SIGNATURE SIGNATURE (JOINT OWNERS) DATE
