Reg. No.333-
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811-6165
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MUNICIPAL SECURITIES INCOME TRUST
(Exact Name of Registrant as Specified in Charter)
(412) 288-1900
(Area Code and Telephone Number)
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
JOHN W. MCGONIGLE, ESQUIRE
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
Copies to:
Byron F. Bowman, Esquire Matthew G. Maloney, Esquire
Senior Corporate Counsel Dickstein Shapiro Morin & Oshinsky LLP
Federated Investors 2101 L Street, N.W.
Federated Investors Tower Washington, D.C. 20037
Pittsburgh, PA 15222
It is proposed that this filing will become effective on April 24, 1997
pursuant to Rule 488. (Approximate Date of Proposed Public Offering).
Registrant has filed with the Securities and Exchange Commission a declaration
pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended,
that it elects to register an indefinite amount of securities under the
Securities Act of 1933, as amended, and filed the Notice required by that Rule
for Registrant's fiscal year ended August 31, 1995 on October 16, 1995 and
filed the Notice required by Rule 24e-2 for its fiscal year ended August 31,
1996 on October 15, 1996. Accordingly, no filing fee is submitted herewith.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 1(A) OF FORM N-14 SHOWING LOCATION IN
PROSPECTUS OF INFORMATION REQUIRED BY FORM N-14
Item of Part A of Form N-14 and Caption or Location in
Caption Prospectus
1.Beginning of Registration
Statement and Outside Front Cross Reference Sheet;
Cover Page of Prospectus Cover Page
2.Beginning and Outside Back
Cover Page of Prospectus Table of Contents
3.Fee Table, Synopsis Information Summary of Expenses; Summary;
and Risk Factors Risk Factors
4.Information About the Information About the
Transaction Reorganization
5.Information About the Information About the Federated
Registrant Fund, and the William Penn Portfolio
6.Information About the Information About the Federated Fund
Company Being Acquired and the William Penn Portfolio
7.Voting Information Voting Information
8.Interest of Certain Persons
and Experts Not Applicable
9.Additional Information
Required for Reoffering by
Persons Deemed to be
Underwriters Not Applicable
WILLIAM PENN INTEREST INCOME FUND
NEW YORK TAX-FREE INCOME PORTFOLIO
2650 WESTVIEW DRIVE
WYOMISSING, PA 19610
Dear Shareholders:
The Board of Trustees and management of William Penn Interest Income
Fund: New York Tax-Free Income Portfolio (the `William Penn Portfolio'') are
pleased to submit for your vote a proposal for the tax-free transfer of all
the assets of the William Penn Portfolio to Federated New York Municipal
Income Fund (the "Federated Fund"), a portfolio of Municipal Securities Income
Trust (the `Federated Trust''), a mutual fund advised by Federated Advisers.
The Federated Fund has an investment objective similar to that of the William
Penn Portfolio in that it seeks current income which is exempt from federal
regular income tax and the personal income taxes imposed by the State of New
York and New York municipalities. As part of the transaction, holders of
shares in the William Penn Portfolio would receive Shares of the Federated
Fund equal in value to their shares in the William Penn Portfolio and the
William Penn Portfolio would be liquidated. Shareholders would not have to
pay a sales charge upon receiving such shares, nor would they be subject to
any contingent deferred sales charges in connection with the exercise of
exchange rights or redemptions of such shares. Further, William Penn fund
group shareholders who were invested as of November 30, 1988, will not be
charged a sales charge for future purchases made in any Federated Fund,
provided the account has remained open since that date.
The Board of Trustees of the William Penn Portfolio, as well as
William Penn Fund Management Corporation, the William Penn Portfolio's manager
and distributor, believe the proposed agreement and plan of reorganization is
in the best interests of William Penn Portfolio shareholders for the following
reasons:
-- The Federated Fund has an investment objective similar to that of
the William Penn Portfolio and offers an investment portfolio which
invests in municipal securities which are exempt from federal regular
income tax and New York state and local income tax.
-- The Federated Fund offers competitive performance.
-- The reorganization of the William Penn Portfolio into the
Federated Fund may provide operating efficiencies as a result of the
size of the Federated Fund which were not available to William Penn
Portfolio shareholders due to the smaller size of the William Penn
Portfolio.
-- As an investor in the Federated Fund, shareholders would have
access to a dramatically expanded array of investment alternatives in
the Federated retail family of funds.
-- Federated Investors has an excellent reputation for customer
servicing, having received a #1 rating for five surveys in a row by
DALBAR, Inc. The shareholder services for the Federated funds include
advanced technological systems that result in quick shareholder access
to a broad spectrum of information, and efficient routing of telephone
calls to the appropriate person.
The Federated Fund is managed by Federated Advisers, a subsidiary of
Federated Investors. Federated Investors was founded in 1955 and is located
in Pittsburgh, Pennsylvania. Federated Advisers and other subsidiaries of
Federated Investors serve as investment advisers to a number of investment
companies and private accounts. With over $110 billion invested across more
than 300 funds under management and/or administration by its subsidiaries,
Federated Investors is one of the largest mutual fund investment managers in
the United States. With more than 2,000 employees, Federated continues to be
led by the family management who founded the company in 1955. Federated funds
are presently at work in and through 4,500 financial institutions nationwide.
We believe the transfer of the William Penn Portfolio's assets in this
transaction presents an exciting investment opportunity for our shareholders.
Your vote on the transaction is critical to its success. The transfer will be
effected only if approved by a majority of all of the William Penn Portfolio's
outstanding shares on the record date voted in person or represented by proxy.
We hope you share our enthusiasm and will participate by casting your vote in
person, or by proxy if you are unable to attend the meeting. Please read the
enclosed prospectus/proxy statement carefully before you vote.
THE BOARD OF TRUSTEES BELIEVES THAT THE TRANSACTION IS IN THE BEST
INTERESTS OF THE WILLIAM PENN PORTFOLIO AND ITS SHAREHOLDERS, AND UNANIMOUSLY
RECOMMENDS THAT YOU VOTE FOR ITS APPROVAL.
Thank you for your prompt attention and participation.
Sincerely,
James E. Jordan
President
WILLIAM PENN INTEREST INCOME FUND
NEW YORK TAX-FREE INCOME PORTFOLIO
2650 WESTVIEW DRIVE
WYOMISSING, PA 19610
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO SHAREHOLDERS OF WILLIAM PENN INTEREST INCOME FUND, NEW YORK TAX-FREE INCOME
PORTFOLIO:
A Special Meeting of Shareholders of New York Tax-Free Income Portfolio, a
portfolio of William Penn Interest Income Fund (the `William Penn
Portfolio') will be held 9:00 a.m. (general meeting) and
10:30 a.m. (Fund meeting) on May 29,1997 at: Sheraton Berkshire Motor Inn,
1741 Paper Mill Road, Wyomissing, PA 19610, for the following purposes:
1. To approve or disapprove a proposed Agreement and Plan of
Reorganization between the William Penn Portfolio and Federated New York
Municipal Income Fund (the "Federated Fund"), a portfolio of Municipal
Securities Income Trust, whereby the Federated Fund would acquire all of the
assets and assume certain liabilities of the William Penn Portfolio in
exchange for the Federated Fund's Class F Shares to be distributed pro rata by
the William Penn Portfolio to the holders of its Class A Shares in complete
liquidation of the William Penn Portfolio; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
By Order of the Board of Trustees,
Dated: [ ] Sandra J. Houck
Secretary
Shareholders of record at the close of business on [ ], are
entitled to vote at the meeting. Whether or not you plan to attend the
meeting, please sign and return the enclosed proxy card. Your vote is
important.
TO SECURE THE LARGEST POSSIBLE REPRESENTATION AND TO SAVE THE EXPENSE OF
FURTHER MAILINGS, PLEASE MARK YOUR PROXY CARD, SIGN IT, AND RETURN IT IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
YOU MAY REVOKE YOUR PROXY AT ANY TIME AT OR BEFORE THE MEETING OR VOTE IN
PERSON IF YOU ATTEND THE MEETING.
PROSPECTUS/PROXY STATEMENT
[ ]
Acquisition of the Assets of
NEW YORK TAX-FREE INCOME PORTFOLIO,
a portfolio of WILLIAM PENN INTEREST INCOME FUND
2650 Westview Drive
Wyomissing, PA 19610
Telephone Number: 1-800-523-8440
By and in exchange for Class F Shares of
FEDERATED NEW YORK 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 Federated New York Municipal
Income Fund, (the "Federated Fund"), a portfolio of Municipal Securities
Income Trust (the `Federated Trust''), a Massachusetts business trust, would
acquire all of the assets and assume certain liabilities of New York Tax-Free
Income Fund, (the `William Penn Portfolio''), a portfolio of William Penn
Interest Income Fund, a Pennsylvania common law trust (the `Trust''), in
exchange for the Federated Fund's Class F Shares to be distributed pro rata by
the William Penn Portfolio to the holders of its Class A Shares in complete
liquidation of the William Penn Portfolio. As a result of the Plan, each
shareholder of the William Penn Portfolio will become the owner of the
corresponding Federated Fund's Class F Shares having a total net asset value
equal to the total net asset value of his or her holdings in the William Penn
Portfolio's Class A Shares.
THE BOARD OF TRUSTEES OF THE WILLIAM PENN PORTFOLIO UNANIMOUSLY
RECOMMENDS APPROVAL OF THE PLAN.
The shares of each of the Federated Fund and the William Penn
Portfolio represent interests in separate open-end, diversified management
investment companies. The Federated 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 New York and New York municipalities. The
William Penn Portfolio's investment objective is to provide a high level of
current income exempt from both Federal income taxes and New York income and
personal property taxes without assuming any undue risk to income or
principal. For a comparison of the investment policies of the Federated Fund
and the William Penn Portfolio, see "Summary - Investment Objectives, Policies
and Limitations."
This Prospectus/Proxy Statement should be retained for future
reference. It sets forth concisely the information about the Federated Fund
that a prospective investor should know before investing. This
Prospectus/Proxy Statement is accompanied by the Prospectus of the Federated
Fund dated October 31, 1996, which is incorporated herein by reference.
Statements of Additional Information for the Federated Fund dated October 31,
1996 (relating to the Federated Fund's Prospectus of the same date) and
[ ], 1997 (relating to this Prospectus/Proxy Statement), and the
------------
Annual Report to Shareholders dated August 31, 1996 all containing additional
information, have been filed with the Securities and Exchange Commission and
are incorporated herein by reference. Copies of the Statements of Additional
Information and the Annual Report may be obtained without charge by writing or
calling the Federated Fund at the address and telephone number shown above.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS OR
OBLIGATIONS OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES
INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION 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.
Penn Square Management Corp.
TABLE OF CONTENTS
Page No.
Summary of Expenses.......................................
Summary...................................................
About the Proposed Reorganization ......................
Investment Objectives, Policies and Limitations ........
Advisory and Other Fees ................................
Distribution Arrangements ..............................
Purchase, Exchange and Redemption Procedures ...........
Dividends ..............................................
Tax Consequences .......................................
Risk Factors..............................................
Information About the Reorganization......................
Background and Reasons for the Proposed Reorganization .
Agreement Among William Penn Fund Management Corporation,
The William Penn Company and Federated ................
Description of the Plan of Reorganization ..............
Description of Federated Fund Shares ...................
Federal Income Tax Consequences ........................
Comparative Information on Shareholder Rights and Obligations
Capitalization .........................................
Information About the Federated Fund and the William Penn Portfolio
Municipal Securities Income Trust, Federated New York Municipal Income Fund
William Penn Interest Income Fund, New York Tax-Free Income Portfolio
Voting Information........................................
Outstanding Shares and Voting Requirements .............
Dissenter's Right of Appraisal .........................
Other Matters and Discretion of Persons Named in the Proxy
Agreement and Plan of Reorganization -- Exhibit A.........
SUMMARY OF EXPENSES
William Penn
Portfolio Pro Forma
Federated Fund (Class A Shares) Combined
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on
Purchases (as a percentage of offering
price) 1.00%(1) 4.75% 1.00%(1)
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)(2) 1.00% 0.00% 1.00%
Redemption Fee (as a percentage of
amount redeemed, if
applicable)(3) None None None
Exchange Fee None None None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
(after expense reimbursements or waivers)
Management Fee(4) 0.00% 0.00% 0.00%
12b-1 Fee(5) 0.02% 0.00% 0.02%
Total Other Expenses(6) 0.88% 0.00% 0.88%
Total
Operating Expenses(7)0.90% 0.00% 0.90%
(1) This sales charge would not be applicable to Class F Shares of the
Federated Fund acquired through the proposed reorganization, or to William
Penn fund group shareholders invested as of November 30, 1988, for future
purchases of any of the Federated Funds provided the account remains open.
(2) The Contingent Deferred Sales Charge assessed for the Federated Fund and
the Pro Forma Combined Fund 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 `Summary - Distribution
Arrangements.''
(3) Wire-transferred redemptions of Class A Shares of the Federated Fund of
less than $5,000 may be subject to additional fees. A $10.00 fee will be
charged for redemptions of William Penn Portfolio shares by wire transfer.
(4) 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 in its sole discretion. The maximum management fee is
0.40% for the Federated Fund and 0.65% for Class A Shares of the William Penn
Portfolio.
(5) The 12b-1 fee has been reduced to reflect the voluntary waiver for Class
F Shares of the Federated Fund and Class A Shares of the William Penn
Portfolio. The maximum 12b-1 fee for Class F Shares of the Federated Fund and
Class A Shares of the William Penn Portfolio is 0.50%.
(6) Total Other Expenses include a shareholder services fee of 0.23% for the
Federated Fund and the Pro Forma Combined Fund and a shareholder services fee
of 0.00% for the William Penn Portfolio. The shareholder services fee has
been reduced to reflect the voluntary waiver of a portion of the shareholder
services fee. The shareholder service provider can terminate this voluntary
waiver at its sole discretion. The maximum shareholder services fee is 0.25%
for the Federated Fund and the Pro Forma Combined Fund and 0.50% for the Class
A Shares of the William Penn Portfolio.
(7) The Total Operating Expenses for Class F Shares of the Federated Fund
are based on expenses expected during fiscal year ending August 31, 1997. The
Total Operating Expenses were 0.60% for the fiscal year ended August 31, 1996
and would have been 2.53% absent the voluntary expense waiver. The Total
Operating Expenses for the William Penn Portfolio are based upon expenses
incurred by the William Penn Portfolio during its fiscal year ended December
31, 1996, and would have been 1.08% for Class A Shares without expense
reimbursements. The William Penn Portfolio waived all expenses for the fiscal
year ended December 31, 1996.
The purpose of this table is to assist an investor in understanding
the various costs and expenses that a shareholder of shares of each of the
Federated Fund, the William Penn Portfolio and the Pro Forma Combined Fund
will bear, either directly or indirectly. For more complete descriptions of
the various costs and expenses, see "Summary - Advisory and Other Fees" and
"Summary - Distribution Arrangements."
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 Federated Fund 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 Fund (Class F Shares) $9 $29 $50 $111
William Penn Portfolio
(Class A Shares) $10 $30 $53 $117
Pro Forma Combined $9 $29 $50 $111
(2) This Example includes sales charges since Class F Shares purchased
subsequent to the reorganization may be subject to sales charges. For a more
complete description of sales charges, contingent deferred sales charges and
exemptions from such charges, reference is hereby made to the Prospectus of
the Federated Fund dated October 31, 1996, and the Prospectus of the William
Penn Portfolio dated March 15, 1996, each of which is incorporated herein by
reference thereto.
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, and (3) payments of the maximum sales charge.
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 Fund (Class F Shares) $29 $50 $59 $120
William Penn Portfolio
(Class A Shares) $57 $76 $98 $159
Pro Forma Combined $29 $50 $59 $120
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
SUMMARY
This summary is qualified in its entirety by reference to the
additional information contained elsewhere in this Prospectus/Proxy Statement,
the Statement of Additional Information dated April , 1997, related to this
---
Prospectus/Proxy Statement, the Prospectus of the Federated Fund dated
October 31, 1996, the Statement of Additional Information of the Federated
Fund dated October 31, 1996, the Prospectus of the William Penn Portfolio
dated March 15, 1996, the Statement of Additional Information of the William
Penn Portfolio dated March 15, 1996, and the Plan, a copy of which is attached
to this Prospectus/Proxy Statement as Exhibit A all of which are incorporated
herein by reference thereto.
About the Proposed Reorganization
The Board of Trustees of the William Penn Portfolio has voted
unanimously to recommend to holders of the Class A Shares of the William Penn
Portfolio the approval of the Plan whereby the Federated Fund would acquire
all of the assets and assume certain liabilities of the William Penn Portfolio
in exchange for the Federated Fund's Class F Shares to be distributed pro rata
by the William Penn Portfolio to holders of its Class A Shares in complete
liquidation and dissolution of the William Penn Portfolio (the
"Reorganization"). As a result of the Reorganization, each shareholder of the
William Penn Portfolio Class A Shares will become the owner of the Federated
Fund's Class F Shares having a total net asset value equal to the total net
asset value of his or her holdings in the William Penn Portfolio on the date
of the Reorganization, i.e., the Closing Date (as hereinafter defined).
As a condition to the Reorganization transactions, the Federated Fund
and the William Penn Portfolio 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 (the `Code''), so
that no gain or loss will be recognized by either the Federated Fund or the
William Penn Portfolio or the shareholders of the William Penn Portfolio. The
tax basis of the Federated Fund's corresponding Class F Shares received by
William Penn Portfolio's Class A Shares shareholders will be the same as the
tax basis of their shares in the William Penn Portfolio. After the
acquisition is completed, the William Penn Portfolio will be dissolved.
Investment Objectives, Policies and Limitations
The investment objective of the Federated Fund is to provide current
income which is exempt from federal regular income tax (federal regular income
tax does not include the federal alternative minimum tax) and the personal
income taxes imposed by the State of New York and New York municipalities.
This investment objective may not be changed without the affirmative vote of a
majority of the outstanding voting securities of the Federated Fund, as
defined in the Investment Company Act of 1940, as amended (the `1940 Act'').
The investment objective of the William Penn Portfolio is to provide a
high level of current income exempt from both Federal income taxes and New
York state and city income and personal property taxes, without assuming any
undue risk to income or principal. In pursuing this objective, the Portfolio
will invest principally in investment grade New York state and city municipal
obligations with varying terms of maturity. This investment objective may not
be changed without the affirmative vote of a majority of the outstanding
voting securities of the William Penn Portfolio, as defined in the 1940 Act.
The Federated Fund invests in a portfolio of municipal securities
which are exempt from federal regular income tax and New York state and local
income tax (`New York municipal securities''). The New York municipal
securities in which the Federated Fund invests include obligations issued by
or on behalf of the State of New York, its political subdivisions, or
agencies; debt obligations of any state, territory, or possession of the
United States, or any political subdivision of any of these; and participation
interests, 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
Federated Fund and/or the investment adviser to the Federated Fund, exempt
form both federal regular income tax and the personal income taxes imposed by
the State of New York and New York municipalities.
The Federated Fund may purchase New York municipal securities which
may have variable interest rates; municipal leases which 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;
securities on a when-issued or delayed delivery basis; and restricted
securities, up to 10% of its net assets. The Federated Fund's 10% limit on
restricted securities may not be changed without shareholder approval. The
Federated 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. This investment policy may not be changed without
shareholder approval.
The Federated Fund invests its assets so that at least 80% of its
annual interest income is exempt from federal regular income tax and the
personal income taxes imposed by the State of New York and New York
municipalities. This investment policy cannot be changed without shareholder
approval. However, from time to time when the investment adviser determines
that market conditions call for a temporary defensive posture, the Federated
Fund may invest in short-term non-New York municipal tax-exempt obligations or
taxable temporary investments. These temporary investments include: notes
issued by or on behalf of municipal or corporate issuers; obligations issued
or guaranteed by the U.S. Government, its agencies, or instrumentalities;
other debt securities; commercial paper; certificates of deposit of banks; and
repurchase agreements (arrangements in which the organization selling the
Federated Fund a bond or temporary investment agrees at the time of sale to
repurchase it at a mutually agreed upon time and price). The investment
policies of the Federated Fund may be changed by the Board of Trustees without
shareholder approval unless otherwise indicated.
The William Penn Portfolio invests principally in investment grade
municipal obligations issued by or on behalf of the State of New York and its
political subdivisions, agencies, authorities, and instrumentalities (`New
York bonds'). The William Penn Portfolio, under normal market circumstances,
invests generally 100%, but at least 80% of the value of its total assets in
New York bonds, and no more than 20% will be invested in taxable securities.
Under certain market conditions, however, the Portfolio may invest in non-tax-
exempt securities for temporary defensive purposes. Such temporary
investments may include investments in U.S. government securities or other
high grade investments (two highest categories of Moody's or S&P). The
William Penn Portfolio may invest in futures contracts and options on futures
contracts, provided that the securities underlying such transactions do not
exceed 35% of the portfolio's assets at the time of purchase. The William
Penn Portfolio may engage in futures and/or options transactions only for
hedging purposes and only if such transactions are consistent with its
investment objectives and policies. Unless otherwise designated in the
prospectus, the investment policies of the William Penn Portfolio may be
changed by the Board of Trustees without shareholder approval.
Both the Federated Fund and the William Penn Portfolio are subject to
certain investment limitations. For the Federated Fund, these include
investment limitations which prohibit it from (1) borrowing money except,
under certain circumstances, the Federated Fund may borrow up to 10% of the
value of its total assets; or (2) investing more than 5% of its total assets
in industrial development bonds when the payment of principal and interest is
the responsibility of companies (or guarantors, where applicable) with less
than three years of continuous operations, including the operation of any
predecessor. The first investment limitation listed above may not be changed
without shareholder approval; the other limitation may be changed by the Board
of Trustees without shareholder approval, although shareholders will be
notified before any material change becomes effective.
The William Penn Portfolio may not: (1) invest more than 5% of the
value of its assets in the securities of any single issuer (except of the U.S.
Government, its agencies or instrumentalities), (2) purchase more than 10% of
the voting securities of any issuer; (3) invest more than 5% of its assets in
companies with a continuous operating history (including predecessors) of less
than 3 years; (4) invest more than 25% of its assets in any one industry, with
the exceptions of (i) obligations of the U.S. Government or its agencies or
instrumentalities, and (ii) certificates of deposit or bankers' acceptances;
(5) borrow money, except from a bank and only for temporary or emergency
purposes and not exceeding 5% of the lower of the value or cost of the
portfolio's total assets; (6) pledge, mortgage, or otherwise hypothecate its
assets to an extent greater than 5% of the value of its total assets; and (7)
invest more than 10% of the value of its assets in illiquid securities,
including restricted securities, and repurchase agreements maturing in more
than seven days. The above investment limitations of the William Penn
Portfolio may not be changed without shareholder approval.
In addition to the policies and limitations set forth above, both the
Federated Fund and the William Penn Portfolio are subject to certain
additional investment policies and limitations, described in the Federated
Fund's Statement of Additional Information dated October 31, 1996, and the
William Penn Portfolio's Statement of Additional Information dated March 15,
1996. Reference is hereby made to the Federated Fund's Prospectus and
Statement of Additional Information, each dated October 31, 1996, and to the
William Penn Portfolio's Prospectus and Statement of Additional Information,
each dated March 15, 1996, which set forth in full the investment objective,
policies and investment limitations of each of the Federated Fund and the
William Penn Portfolio, all of which are incorporated herein by reference
thereto.
Advisory and Other Fees
The annual investment advisory fee for the Federated Fund is 0.40% of
the Federated Fund's average daily net assets. The investment adviser to the
Federated Fund, Federated Advisers ("Federated Advisers"), a subsidiary of
Federated Investors, may voluntarily choose to waive a portion of its advisory
fee or reimburse the Federated Fund for certain operating expenses. This
voluntary reimbursement of expenses may be terminated by Federated Advisers at
any time in its sole discretion. The maximum annual management fee for the
William Penn Portfolio is 0.65% of average daily net assets of the William
Penn Portfolio. The investment adviser of the William Penn Portfolio is
William Penn Fund Management Corporation. The adviser is a wholly owned
subsidiary of The William Penn Company, New York, York. Miller, Anderson &
Sherrerd LLP (the Sub-Adviser) serves as an investment adviser for the William
Penn Portfolio pursuant to a sub-advisory agreement with the Adviser. The
Sub-Adviser, a wholly owned subsidiary of Morgan Stanley Group Inc., was
organized in 1969 and is located in West Conshohocken, Pennsylvania. The Sub-
Adviser provides management services to employee benefit plans, endowment
funds, foundations, and other institutional investors, and currently manages
assets in excess of $30 billion. Under an agreement entered into with the
Adviser, the Sub-Adviser provides investment advisory services for the William
Penn Portfolio and is compensated solely by the Adviser. The Adviser pays the
Sub-Adviser a fee based on the aggregate net asset value of the William Penn
Portfolios, as follows: 0.375% on the first $50,000,000, 0.25% on the next
$50,000,000 and 0.20% over $100,000,000.
Federated Services Company, an affiliate of Federated Advisers,
provides certain administrative personnel and services necessary to operate
the Federated Fund at an annual rate based upon the average aggregate daily
net assets of all funds advised by Federated Advisers and its affiliates. The
rate charged is 0.15% on the first $250 million of all such funds' average
aggregate daily net assets, 0.125% on the next $250 million, 0.10% on the next
$250 million and 0.075% of all such funds' average aggregate daily net assets
in excess of $750 million, with a minimum annual fee per portfolio of $125,000
plus $30,000 for each additional class of shares of any such portfolio.
Federated Services Company may choose voluntarily to waive a portion of its
fee. The administrative fee expense for the Federated Fund's fiscal year
ended August 31, 1996 was $125,000, representing an effective rate of 0.58%.
Administrative personnel and services necessary to operate the William Penn
Portfolio are currently provided by William Penn Fund Management Corporation
and are included in the annual transfer agent fee for the William Penn
Portfolio.
The Federated Fund has entered into a Shareholder Services Agreement
under which it may make payments of up to 0.25% of the average daily net asset
value of each of the Class F Shares to obtain certain personal services for
shareholders and the maintenance of shareholder accounts. The Shareholder
Services Agreement provides that Federated Shareholder Services ("FSS"), an
affiliate of Federated Advisers, either will perform shareholder services
directly or will select financial institutions to perform such services.
Financial institutions will receive fees based upon shares owned by their
clients or customers. The schedule of such fees and the basis upon which such
fees will be paid is determined from time to time by the Federated Fund and
FSS. Other than in connection with payments under a Rule 12b-1 plan as
described below, the William Penn Portfolio does not make payments to obtain
similar shareholder services.
The total annual operating expenses for Class F Shares of the
Federated Fund were 0.60% of average daily net assets (after waivers) for its
most recent fiscal year. The Total Operating Expenses expected during the
fiscal year ending August 31, 1997 is 0.90% of average daily net assets. The
total annual operating expenses for Class A Shares of the William Penn
Portfolio were 0.00% of average daily net assets (after expense
reimbursements) for its most recent fiscal year. Without such waivers or
reimbursements, the expense ratios of the Federated Fund would have been 2.53%
(Class F Shares), and for the William Penn Portfolio, 1.08% (Class A Shares).
Distribution Arrangements
Federated Securities Corp. ("FSC"), an affiliate of Federated
Advisers, is the principal distributor for shares of the Federated Fund. The
Federated Fund has adopted a Rule 12b-1 Distribution Plan (the `Distribution
Plan') pursuant to which the Federated Fund will pay a fee to the distributor
in an amount computed at an annual rate of 0.50% of the average daily net
assets of the Class F Shares to finance any activity which is principally
intended to result in the sale of Class F Shares subject to the Distribution
Plan. All or a portion of the Rule 12b-1 fee may be paid to financial
institutions for their efforts in selling Class F Shares. FSC may offer to
pay financial institutions, at the time of purchase, an amount equal to 1.00%
of the net asset value of Class F Shares purchased by their clients. These
payments will be made directly by the distributor from its assets, and will
not be reimbursed by the Federated Fund. In addition, FSC and FSS, from their
own assets, may pay financial institutions supplemental fees as financial
assistance for providing substantial sales services, distribution-related
support services or shareholder services with respect to the Class F Shares of
the Federated 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 FSC may be reimbursed by Federated Advisers or its
affiliates. If a financial institution elects to waive receipt of this
payment, the Federated Fund will waive any applicable contingent deferred
sales charge (such contingent deferred sales charges are discussed below).
Penn Square Management Corporation is the principal distributor for
shares of the William Penn Portfolio. The William Penn Portfolio has adopted
a Rule 12b-1 Distribution Plan (the "Rule 12b-1 Plan") pursuant to which the
William Penn Portfolio reimburses William Penn Fund Management Corporation for
certain of its expenses incurred in connection with its services as
distributor at an annual rate not to exceed 0.50% of the average daily net
assets of the William Penn Portfolio's Class A Shares. The fee may be used by
William Penn Fund Management Corporation for its expenses incurred in
connection with (a) advertising and marketing Class A Shares; (b) printing and
distributing the Prospectus; (c) implementing and operating the Rule 12b-1
Plan; and (d) payments made by the distributor for servicing fees to
broker/dealers, financial institutions, or other industry professionals
(`Service Organizations'') for distribution and/or shareholder administrative
services provided to their customers who own Class A Shares. Pursuant to a
Servicing Agreement with William Penn Fund Management Corporation, a Service
Organization may receive, on an annual basis, up to .50% of the average daily
net asset value of the Class A Shares owned by shareholders with whom the
Service Organization has a servicing relationship. The services provided by a
Service Organization pursuant to a Servicing Agreement may include
distribution or shareholder administrative services, including establishing
and maintaining shareholder accounts, sending confirmations of transactions,
forwarding financial reports and other communications to shareholders, and
responding to shareholder inquiries regarding the William Penn Portfolio.
Certain costs exist with respect to the purchase and sale of Federated
Fund and William Penn Portfolio shares. Shares of the Federated Fund and
shares of the William Penn Portfolio are sold at their net asset value next
determined after an order is received, plus any applicable sales charge. The
Federated Fund Class F Shares and William Penn Portfolio Class A Shares have a
maximum sales charge of 1.00% and 4.75%, respectively. No sales charge will
be imposed in connection with the issuance of Federated Fund Class F Shares to
Class A Shareholders of the William Penn Portfolio as a result of the
Reorganization. Further, William Penn fund group shareholders who were
invested as of November 30, 1988, will not be charged a sales charge for
future purchases made in any Federated fund structured as a retail product,
provided the account has remained open. The contingent deferred sales charges
are not imposed in connection with the exercise of exchange rights, nor will
they be imposed on redemptions of Federated Fund Class F Shares received as a
result of the Reorganization by shareholders of the William Penn Portfolio
Class A Shares. For a complete description of sales charges, contingent
deferred sales charges and exemptions from such charges, reference is hereby
made to the Prospectus of the Federated Fund dated October 31, 1996 and the
Prospectus of the William Penn Portfolio dated March 15, 1996, each of which
is incorporated herein by reference thereto.
Purchase, Exchange and Redemption Procedures
The transfer agent and dividend disbursing agent for the Federated
Fund is Federated Shareholder Services Company. The transfer agent and
dividend disbursing agent for the William Penn Portfolio is William Penn Fund
Management Corporation. Procedures for the purchase, exchange and redemption
of the Federated Fund's Class F Shares differ slightly from procedures
applicable to the purchase, exchange and redemption of the William Penn
Portfolio's Class A Shares. Any questions about such procedures may be
directed to, and assistance in effecting purchases, exchanges or redemptions
of the Federated Fund's Class F Shares or the William Penn Portfolio's Class A
Shares may be obtained from FSC, principal distributor for the Federated Fund,
at 1-800-341-7400, or from William Penn Fund Management Corporation, principal
distributor for the William Penn Portfolio, at 1-800-523-8440.
Reference is made to the Prospectus of the Federated Fund dated
October 31, 1996, and the Prospectus of the William Penn Portfolio dated March
15, 1996, for a complete description of the purchase, exchange and redemption
procedures applicable to purchases, exchanges and redemptions of Federated
Fund and William Penn Portfolio shares each of which is incorporated herein by
reference thereto. Set forth below is a brief listing of the significant
purchase, exchange and redemption procedures applicable to the Federated
Fund's Class F Shares and the William Penn Portfolio's Class A Shares.
Purchases of Class F Shares of the Federated Fund may be made through
a financial institution that has an agreement with FSC or, once an account has
been established, by wire or check. Purchases of shares of the William Penn
Portfolio may be made through William Penn Fund Management Corporation and
through certain broker-dealers under contract with William Penn Fund
Management Corporation or directly by wire or check once an account has been
established. The minimum initial investment in the Federated Fund is $1,500
for Class F Shares. Subsequent investments must be in amounts of at least
$100. The minimum initial investment in the William Penn Portfolio is $500
for Class A Shares, except for retirement accounts for which the minimum is
$250. Subsequent investments must be in amounts of at least $100. The
Federated Fund and the William Penn Portfolio each reserves the right to
reject any purchase request. In connection with the sale of Class F Shares of
the Federated Fund, FSC may from time to time offer certain items of nominal
value to any shareholder.
The purchase price of the Federated Fund's Class F Shares and the
William Penn Portfolio's Class A Shares is based on net asset value plus a
sales charge. The net asset value per share for each class of the Federated
Fund and the William Penn Portfolio is calculated as of the close of trading
(normally 4:00 p.m., Eastern time) on the New York Stock Exchange, Inc. (the
`NYSE'') on each day on which the Federated Fund and the William Penn
Portfolio compute their net asset value. Purchase and redemption orders for
the Federated Fund received from broker/dealers before 5:00 p.m. (Eastern
time) and from financial institutions before 4:00 p.m. (Eastern time) may be
entered at that day's price. Purchase orders for the William Penn Portfolio
are executed based on the net asset value calculated at the close of business
on the day such purchase orders are received. Purchase orders received after
the close of the NYSE will be executed based on the net asset value calculated
on the next business day. Redemption orders for shares of the William Penn
Portfolio presented prior to the close of the NYSE on any business day are
redeemed at the net asset value calculated at the close of the exchange that
day. Federated Fund purchase orders by wire are considered received upon
receipt of payment by wire. Federated Fund purchase orders received by check
are considered received after the check is converted into federal funds, which
normally occurs the business day after receipt.
Holders of Class F Shares of the Federated Fund have exchange
privileges with respect to shares of New York Municipal Cash Trust or
corresponding Class F Shares in certain of the funds for which affiliates of
Federated Investors serve as investment adviser or principal underwriter
(collectively, the "Federated Funds"), each of which has different investment
objectives and policies. Class F Shares of the Federated Fund may be
exchanged for certain Federated Funds at net asset value without a contingent
deferred sales charge. To the extent a shareholder exchanges Class F Shares
of the Federated Fund for shares of New York Municipal Cash Trust or Class F
Shares of other Federated Funds, the time for which the exchanged-for shares
are to be held will be added to the time for which exchanged-from shares were
held for purposes of satisfying the applicable holding period for purposes of
determining the contingent deferred sales charge. Class F Shares to be
exchanged must have a net asset value which meets the minimum investment
requirement for the fund into which the exchange is being made. Holders of
shares of the William Penn Portfolio have exchange privileges with respect to
shares in certain of the other funds for which William Penn Fund Management
Corporation serves as investment manager (collectively, the `William Penn
Fund Group'), each of which has different investment objectives and policies.
Any exchange for shares of other funds in the William Penn Fund Group will
generally be at the respective net asset values next determined after receipt
of the request for exchange, provided the amount exchanged previously incurred
a sales charge. Exercise of the exchange privilege is treated as a sale for
federal income tax purposes and, accordingly, may have tax consequences for
the shareholder. Information on share exchanges may be obtained from the
Federated Fund or the William Penn Portfolio, as appropriate.
Redemptions of Federated Fund Class F Shares may be made through a
financial institution, by telephone, by mailing a written request or through
the Federated Fund's systematic withdrawal program. Redemptions of William
Penn Portfolio shares may be made by presenting share certificates, by letter
form, by telephone, or through the William Penn Portfolio's systematic
withdrawal plan. Class F Shares of the Federated Fund are redeemed at their
net asset value, less any applicable contingent deferred sales charge, next
determined after the redemption request is received. The William Penn
Portfolio imposes no charges for redemptions of Class A Shares. Redemptions
may also be made through a broker/dealer, and that broker/dealer may charge a
transaction fee. Checks for redemption proceeds will be mailed within three
business days. However, redemption checks will not be mailed until all checks
in payment for the shares redeemed have been cleared.
Dividends
Both the Federated Fund and the William Penn Portfolio pay dividends
monthly from net investment income and make annual distributions of net
realized capital gains, if any. With respect to both the Federated Fund and
the William Penn Portfolio, unless a shareholder otherwise instructs,
dividends and capital gain distributions will be reinvested automatically in
additional shares at net asset value, subject to no sales charge.
Tax Consequences
As a condition to the Reorganization, the Federated Trust, on behalf
of the Federated Fund, and the Trust, on behalf of the William Penn Portfolio
will receive an opinion of legal counsel that the Reorganization will be
considered a tax-free "reorganization" under applicable provisions of the Code
so that no gain or loss will be recognized by either the Federated Fund or the
William Penn Portfolio or the shareholders of the William Penn Portfolio. The
tax basis of the Federated Fund shares received by William Penn Portfolio
shareholders will be the same as the tax basis of their shares in the William
Penn Portfolio.
RISK FACTORS
As with other mutual funds that invest in New York municipal
securities, the Federated Fund is subject to market risks. Yields on New York
municipal securities depend on a variety of factors, including, but not
limited to: the general conditions of the short-term municipal note market
and the municipal bond market; the size of the particular offering; the
maturity of the obligations; and the rating of the issue. Further, any adverse
economic conditions or developments affecting the State or City of New York or
its municipalities could impact the Federated Fund's portfolio. The ability
of the Federated Fund to achieve its investment objective also depends on the
continuing ability of the issuers of New York municipal securities and
participation interests, or the guarantors of either, to meet their
obligations for the payment of interest and principal when due. Investing in
New York municipal securities which meet the Federated Fund's quality
standards may not be possible if the State and City of New York or its
municipalities do not maintain their current credit ratings. Since the
William Penn Portfolio also invests primarily in New York municipal
securities, these risk factors are generally also present in an investment in
the William Penn Portfolio. A full discussion of the risks inherent in
investment in the Federated Fund and the William Penn Portfolio is set forth
in the Federated Fund's Prospectus and Statement of Additional Information,
each dated October 31, 1996, and the William Penn Portfolio's Prospectus and
Statement of Additional Information, each dated March 15, 1996, each of which
is incorporated herein by reference thereto.
INFORMATION ABOUT THE REORGANIZATION
Background and Reasons for the Proposed Reorganization
Considerations of the Board of Trustees of the William Penn Portfolio.
On February 12, 1997, William Penn Fund Management Corporation advised the
Board of Trustees of the William Penn Portfolio that The William Penn Company
was considering redirecting its corporate strategy away from the management
and distribution of retail mutual funds and that it was seeking a buyer for
its core businesses. Moreover, William Penn Fund Management Corporation
engaged an investment banker to locate potential buyers for the Corporation.
The potential buyer would provide value-added shareholder services,
technological advancements, comprehensive distribution networks, and
diversified mutual fund product choices that many larger mutual fund complexes
offer. After conducting a screening process, William Penn Fund Management
Corporation determined that in its judgment, the proposed Reorganization was
the most desirable alternative involving the William Penn Portfolio that was
reasonably available and that it should be presented to the William Penn
Portfolio's Board of Trustees for its consideration.
The independent trustees formed a four-person due diligence team. The
due diligence team visited the Federated Investors offices in Pittsburgh,
Pennsylvania, and reviewed with the portfolio manager of the Federated Fund
the investment style and philosophy used to manage the assets of the Federated
Fund. In addition, the due diligence team inspected the Federated customer
services area and the William Penn Fund's independent counsel inspected the
legal records of the Federated Fund.
A meeting of the entire Board of Trustees was held on March 5, 1997,
at which Federated Investors presented to the Board information relating to
the overall reputation, financial strength and stability of Federated
Investors, the parent company of Federated Advisers (together with its
affiliates, `Federated''). Federated, founded in 1955, is among the seven
largest mutual fund sponsors, with over $110 billion invested across more than
522 funds under management and/or administration by its subsidiaries, and over
2,000 employees. Federated's management discussed the Federated Fund's
investment performance history and explained to the Board that the majority of
this growth came from within Federated through its multiple distribution
channels. The Board was also informed of the variety of investment products
available through Federated, including international funds and an array of
domestic funds broader than currently offered in the William Penn Fund Group,
the exchange privileges that would be available to former William Penn
Portfolio shareholders if the Reorganization is consummated, and the multiple
sales charge (or `load'') structures available to prospective shareholders.
The Board took into account that if the Reorganization takes place,
shareholders of the William Penn Portfolio would receive shares of the
Federated Fund without the imposition of any sales charge and without
incurring any tax consequences.
Federated's management advised the Board of its reputation for
customer servicing, noting that it has received a #1 rating for five surveys
in a row by DALBAR, Inc. Federated's management stated that its shareholder
services include advanced technological systems that result in quick
shareholder access to a broad spectrum of information, including: telephonic
automated yield and performance information; consolidated monthly shareholder
statements; no-fee IRAs; quarterly newsletters; year-end tax reporting
information; direct deposit; and telephonic redemption and exchange.
Federated's management also discussed comparative sales loads with the
Board. In particular, it was noted that the maximum front-end sales load of
the Class F Shares of the Federated Fund is lower than that of the Class A
Shares of the William Penn Portfolio. Federated's management also reviewed
with the Board relative asset size and expense ratios, including relative
advisory fees. The Board discussed the fact that the Federated Fund is larger
in asset size than the William Penn Portfolio and considered potential
economies of scale that might be experienced by former William Penn Portfolio
shareholders if they were to become shareholders of a larger fund. The
William Penn Portfolio waived all expenses for the fiscal year ended December
31, 1996.
The Board determined that the investment objectives and policies of
the William Penn Portfolio were substantially similar to those of the
Federated Fund. The Board was also presented with and discussed materials
comparing the performance, and relative risks of the William Penn Portfolio
and the Federated Fund. Federated's management also presented biographical
information about each of the Directors of the Federated Fund and reviewed
with the Board the structure of its compliance and internal audit departments
and the scope of its training programs.
The Board noted that the William Penn Portfolio would not bear any of
the costs involved in the Reorganization, which would be borne entirely by The
William Penn Company and/or Federated. In addition, the Board discussed the
anticipated tax-free nature of the Reorganization to the William Penn
Portfolio and its shareholders.
In connection with their consideration of the Reorganization, the
Board also reviewed their fiduciary obligations under state and federal law.
They considered the requirements of Section 15(f) of the 1940 Act, which
provides that an investment manager to an investment company, and the
affiliates of such manager (such as Penn Square Management Corporation), may
receive any amount or benefit in connection with a sale of any interest in
such investment manager which results in an assignment of an investment
management contract if (1) for a period of three years after such assignment,
at least 75% of the Board of Trustees of the investment company are not
`interested persons'' (as defined in the 1940 Act) of the new investment
manager or its predecessor; and (2) no `unfair burden'' (as defined in the
1940 Act) is imposed on the investment company as a result of the assignment
or any express or implied terms, conditions or understandings applicable
thereto.
With respect to the first condition of Section 15(f) relating to Board
composition, the Board was advised that the Federated Fund's Board of Trustees
presently consists of thirteen (13) Directors, only three (3) of whom are
`interested persons.'' With respect to the second condition of
Section 15(f), while there is no specific definition of `unfair burden,'' it
includes any arrangement, for two years after the transaction, pursuant to
which the predecessor or successor adviser is entitled to receive compensation
from any person in connection with the mutual fund's purchase or sale of
securities, other than bona fide ordinary compensation as principal
underwriter. The definition of unfair burden also includes any payments from
the fund for other than bona fide investment advisory or other services. The
Board considered the fact that representations were made by Federated and Penn
Square Management Corporation that the agreement between Federated and The
William Penn Company would contain representations and covenants that the
Reorganization would not impose an unfair burden on the Penn Square Group.
After reviewing and considering all of the information provided by
Federated and William Penn Fund Management Corporation, including the terms of
the Reorganization, the Board, including all of the Trustees who are not
interested persons of the William Penn Portfolio or William Penn Fund
Management Corporation, voted unanimously in person at the meeting held on
March 5, 1997, to approve the Reorganization and to recommend it to the
shareholders of the William Penn Portfolio for their approval.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
REORGANIZATION.
Considerations of the Board of Directors of the Federated Fund. The
Board of Trustees of the Federated Fund, including the independent Trustees,
have unanimously concluded that consummation of the Reorganization is in the
best interests of the Federated Fund and the shareholders of the Federated
Fund and that the interests of Federated Fund shareholders would not be
diluted as a result of effecting the Reorganization and have unanimously voted
to approve the Plan.
Agreement Among William Penn Fund Group Shareholders, The William Penn Company
and Federated
The Reorganization is being proposed as part of an agreement between
Federated, The William Penn Company and the William Penn Fund Group
Shareholders, pursuant to which the shareholders of The William Penn Company
would be compensated for selling to Federated its capital stock and
cooperating in facilitating the transaction contemplated by the agreement.
Description of the Plan of Reorganization
The Plan provides that the Federated Fund will acquire all of the
assets and assume certain liabilities of the William Penn Portfolio in
exchange for the Federated Fund's Class F Shares to be distributed pro rata by
the William Penn Portfolio to its Class A shareholders in complete liquidation
of the William Penn Portfolio on or about [ ] (the "Closing Date").
Shareholders of the William Penn Portfolio will become shareholders of the
Federated Fund as of the close of business on the Closing Date, and will be
entitled to the Federated Fund's next dividend distribution.
As of or prior to the Closing Date, the William Penn Portfolio will
declare and pay a dividend or dividends which, together with all previous such
dividends, shall have the effect of distributing to its shareholders all
income for the period ending on the Closing Date. In addition, the William
Penn Portfolio's dividend will include its net capital gains realized in the
period ending on the Closing Date.
Consummation of the Reorganization is subject to the conditions set
forth in the Plan, including receipt of an opinion in form and substance
satisfactory to the William Penn Portfolio and the Federated Fund, as
described under the caption "Federal Income Tax Consequences" below. The Plan
may be terminated and the Reorganization may be abandoned at any time before
or after approval by shareholders of the William Penn Portfolio prior to the
Closing Date if a majority of the independent board members of either board
reasonably believe that continuing the transaction would have a material
adverse impact on that fund.
Federated Advisers is responsible for the payment of substantially all
of the expenses of the Reorganization incurred by either party, whether or not
the Reorganization is consummated. Such expenses include, but are not limited
to, registration fees, transfer taxes (if any), and the costs of preparing,
printing, copying and mailing proxy solicitation materials to the William Penn
Portfolio shareholders. William Penn Fund Management Corporation is
responsible for the payment of the legal and accounting fees of the William
Penn Portfolio.
The foregoing description of the Plan entered into between the
Federated Fund and the William Penn Portfolio is qualified in its entirety by
the terms and provisions of the Plan, a copy of which is attached hereto as
Exhibit A and incorporated herein by reference thereto.
Description of Federated Fund Shares
Full and fractional Class F Shares of the Federated Fund will be
issued without the imposition of a sales charge or other fee to the
corresponding shareholders of the William Penn Portfolio in accordance with
the procedures described above. Class F Shares of the Federated Fund to be
issued to shareholders of the William Penn Portfolio under the Plan will be
fully paid and nonassessable when issued and transferable without restriction
and will have no preemptive or conversion rights. Reference is hereby made to
the Prospectus of the Federated Fund dated October 31, 1996, provided herewith
for additional information about Class F Shares of the Federated Fund.
Federal Income Tax Consequences
As a condition to the Reorganization, the Federated Trust, on behalf
of the Federated Fund, and the Trust, on behalf of the William Penn Portfolio,
will receive an opinion from Dickstein Shapiro Morin & Oshinsky LLP, counsel
to the Federated Fund, 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: (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 Federated Fund upon its
receipt of the William Penn Portfolio's assets solely in exchange for
Federated Fund Class F Shares and the assumption of certain stated
liabilities; (3) no gain or loss will be recognized by the William Penn
Portfolio upon the transfer of its assets to the Federated Fund in exchange
for Federated Fund Class F Shares and the assumption of certain stated
liabilities or upon the distribution (whether actual or constructive) of the
Federated Fund Class F Shares to the William Penn Portfolio shareholders in
exchange for their respective shares of the William Penn Portfolio; (4) no
gain or loss will be recognized by shareholders of the William Penn Portfolio
upon the exchange of their William Penn Portfolio shares for Federated Fund
Class F Shares; (5) the tax basis of the William Penn Portfolio's assets
acquired by the Federated Fund will be the same as the tax basis of such
assets to the William Penn Portfolio immediately prior to the Reorganization;
(6) the tax basis of Federated Fund Class F Shares received by each
shareholder of the William Penn Portfolio pursuant to the Plan will be the
same as the tax basis of William Penn Portfolio shares held by such
shareholder immediately prior to the Reorganization; (7) the holding period of
the assets of the William Penn Portfolio in the hands of the Federated Fund
will include the period during which those assets were held by the William
Penn Portfolio; and (8) the holding period of Federated Fund Class F Shares
received by each shareholder of the William Penn Portfolio will include the
period during which the William Penn Portfolio shares exchanged therefor were
held by such shareholder, provided the William Penn Portfolio shares were held
as capital assets on the date of the Reorganization.
Shareholders should recognize that an opinion of counsel is not
binding on the Internal Revenue Service (`IRS'') or any court. The William
Penn Portfolio does not expect to obtain a ruling from the IRS regarding the
consequences of the Reorganization. Accordingly, if the IRS sought to
challenge the tax treatment of the Reorganization and was successful, neither
of which is anticipated, the Reorganization would be treated as a taxable sale
of assets of the William Penn Portfolio, followed by the taxable liquidation
of the William Penn Portfolio.
Comparative Information on Shareholder Rights and Obligations
General. Both the Federated Fund and the William Penn Portfolio are
open-end, diversified management investment companies registered under the
1940 Act, which continuously offer to sell shares at their current net asset
value. The Federated Fund is organized as a separate series of Municipal
Securities Income Trust as a Massachusetts business trust under the laws of
the State of Massachusetts and is governed by its Declaration of Trust, By-
Laws, and Board of Trustees, in addition to applicable state and federal law.
The William Penn Portfolio is organized as a separate series of William Penn
Interest Income Fund as a common law trust under the laws of the Commonwealth
of Pennsylvania and is governed by its Declaration of Trust and Board of
Trustees, in addition to applicable state and federal law. Set forth below is
a brief summary of the significant rights of shareholders of the Federated
Fund and the William Penn Portfolio.
Shares of the Federated Fund and the William Penn Portfolio. The
Federated Fund is authorized to issue an indefinite number of full and
fractional shares of beneficial interest without par value. The Board of
Trustees has established Class F Shares of the Federated Fund. The William
Penn Portfolio is authorized to issue an unlimited number of shares of
beneficial interest which have no par value. The William Penn Portfolio is
currently one of five investment portfolios of William Penn Interest Income
Fund and has established Class A Shares and Class C Shares. Issued and
outstanding shares of both the Federated Fund and William Penn Portfolio are
fully paid and nonassessable, and freely transferable.
Voting Rights. Neither the Federated Fund nor the William Penn
Portfolio is required to hold annual meetings of shareholders, except as
required under the 1940 Act. Shareholder approval is necessary only for
certain changes in operations or the election of directors under certain
circumstances. The Federated Fund requires that a special meeting of
shareholders be called for any permissible purpose upon the written request of
the holders of at least 10% of the outstanding shares of the series of the
Federated Fund entitled to vote. A special meeting of the shareholders of the
William Penn Portfolio is required to be called upon the written request of
shareholders representing not less than 30% of the issued and outstanding
shares entitled to vote. Each share of the Federated Fund gives the
shareholder one vote in director elections and other matters submitted to
shareholders for vote. All shares of each series or class in the Federated
Fund have equal voting rights except that in matters affecting only a
particular series or class, only shares of that series or class are entitled
to vote.
Trustees. The Declaration of Trust of the Federated Fund provide that
the term of office of each Trustee shall be until his or her resignation or
removal or until the annual meeting next held after his or her election or
until election and qualification of his or her successor. A Trustee of the
Federated Fund may be removed by a vote of a majority of all shares
outstanding and entitled to vote at any special meeting of shareholders, and
such shareholders may elect a Trustee to replace the Trustee so removed to
serve for the remainder of the term and until the election and qualification
of his or her successor. A vacancy on the Board may be filled by the action
of a majority of the Trustees remaining in office, and such elected Trustee
shall hold office until the next annual meeting of shareholders or until his
or her successor is duly elected and qualifies. Notwithstanding the
foregoing, the shareholders may, at any time during the term of such Trustee
elected to fill a vacancy, elect some other person to fill said vacancy and
thereupon the election by the Board shall be superseded. The Declaration of
Trust of the William Penn Portfolio provides that each Trustee appointed or
elected in accordance with the Declaration of Trust serves until their
successors have been elected and qualified, unless they resign or are removed.
Regarding the William Penn Portfolio, a majority of the Trustees may accept
the written resignation of another Trustee or may remove him or her from
office by written notice to him and to the custodian. In addition, the
holders of record of not less than two-thirds of the outstanding shares of the
Portfolio may have a Trustee removed by filing a declaration with the
custodian or by a vote at a meeting called for such purpose. The Trustees
shall promptly call a meeting of shareholders for the purpose of voting upon
removal of such Trustee(s) when requested in writing by holders of at least
10% of the Portfolio's outstanding shares. Pending the filling of any vacancy
or vacancies caused by death, resignation, or removal, the remaining Trustee
or Trustees shall have all the powers and duties of the whole number of
Trustees. If a vacancy occurs in the office of a Trustee for any reason,
including an increase in the number of Trustees, the other Trustees shall by
written notice delivered to the custodian appoint a Trustee to fill the
vacancy and will promptly notify the shareholders that they have done so,
subject to the provisions of Section 16(a) of the 1940 Act. The agreement to
be entered into with the custodian will provide that, if at any time the
custodian decides that there is no Trustee available or able to serve, it will
call a meeting of the shareholders to elect at least three (3) Trustees. With
respect to the Federated Fund, a meeting of shareholders will be required for
the purpose of electing additional Trustees whenever fewer than a majority of
the Trustees then in office were elected by shareholders.
Liability of Trustees and Officers. Under the Declaration of Trust of
the Federated Fund, a Trustee or officer will be personally liable only for
his or her own willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office. The
Declaration of Trust further provides that Trustees and officers will be
indemnified by the Federated Fund against reasonable costs and expenses
incurred in connection with any claim or litigation unless the person's
conduct is determined to constitute willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of the
person's office. The Declaration of Trust for the William Penn Portfolio
contains a provision eliminating personal liability of the Trustees.
Claimants must look only to the assets of the portfolio for payment or
satisfaction of claims. Trustees of the Portfolio are not protected from
liability by reason of willful misconduct, bad faith, recklessness, or gross
negligence in the performance of his duties as Trustee. Further, the Trustees
have the power to indemnify the officers and employees of the Portfolio
against reasonable liabilities and expenses unless incurred in bad faith or
reckless disregard of his duties, or with willful misconduct or gross
negligence. In addition, due to the provisions of the 1940 Act, shareholders
would still have the right to pursue monetary claims against directors or
officers for acts involving willful malfeasance, bad faith, gross negligence
or reckless disregard of their duties as directors or officers.
Termination or Liquidation. In the event of the termination or
liquidation of the Federated Fund or any series or class of the Federated Fund
or of the termination or liquidation of the William Penn Portfolio, the
shareholders of the respective fund or class are entitled to receive, when and
as declared by its Trustees or Trustees, the excess of the assets belonging to
the respective fund or class over the liabilities belonging to the respective
fund or class. In either case, the assets belonging to the fund or class will
be distributed among the shareholders in proportion to the number of shares of
the respective fund or class held by them.
Capitalization. The following table sets forth the unaudited
capitalization of the Class A Shares of the Federated Fund and the Class A
Shares of the William Penn Portfolio as of February 28, 1997, and on a pro
forma combined basis as of that date:
Class F Shares Class A Shares Pro Forma
Fed. Fund Wm. Penn Combined
Net Assets $22,754,836 $291,183 $23,046,019
Net Asset Value Per Share $10.42 $10.17 $10.42
Shares Outstanding 2,184,566 28,618 2,212,521
INFORMATION ABOUT THE FEDERATED FUND
AND THE WILLIAM PENN PORTFOLIO
Municipal Securities Income Trust, Federated New York Municipal Income Fund
Information about the Federated Fund is contained in the Federated
Fund's current Prospectus dated October 31, 1996, a copy of which is included
herewith and incorporated herein by reference. Additional information about
the Federated Fund is included in the Federated Fund's Annual Report to
Shareholders dated August 31, 1996, the Statement of Additional Information
dated October 31, 1996, and the Statement of Additional Information dated [
] (relating to this Prospectus/Proxy Statement), each of which
is incorporated herein by reference. Copies of the Annual Report and
Statements of Additional Information, which have been filed with the
Securities and Exchange Commission (the "SEC"), may be obtained upon request
and without charge by contacting the Federated Fund at 1-800-341-7400, option
one, or by writing the Federated Fund at Federated Investors Tower,
Pittsburgh, PA 15222-3779. The Federated Fund is subject to the informational
requirements of the Securities Act of 1933, as amended (the `1933 Act''), the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the 1940 Act
and in accordance therewith files reports and other information with the SEC.
Reports, proxy and information statements, charter documents and other
information filed by the Federated Fund can be obtained by calling or writing
the Federated Fund and can also be inspected and copied by the public at the
public reference facilities maintained by the SEC in Washington, DC located at
Room 1024, 450 Fifth Street, N.W., Washington, DC 20549 and at certain of its
regional offices located at Suite 1400, Northwestern Atrium Center, 500 West
Madison Street, Chicago, IL 60661 and 13th Floor, Seven World Trade Center,
New York, NY 10048. Copies of such material can be obtained from the Public
Reference Branch, Office of Consumer Affairs and Information Services, SEC,
450 Fifth Street, N.W., Washington, DC 20549 at prescribed rates or
electronically at Internet Web Site (www.sec.gov).
This Prospectus/Proxy Statement, which constitutes part of a
Registration Statement filed by the Federated Fund with the SEC under the 1933
Act, omits certain of the information contained in the Registration Statement.
Reference is hereby made to the Registration Statement and to the exhibits
thereto for further information with respect to the Federated Fund and the
shares offered hereby. Statements contained herein concerning the provisions
of documents are necessarily summaries of such documents, and each such
statement is qualified in its entirety by reference to the copy of the
applicable document filed with the SEC.
William Penn Interest Income Fund, New York Tax-Free Income Portfolio
Information about the William Penn Interest Income Fund, New York Tax-
Free Income Portfolio is contained in the William Penn Portfolio's current
Prospectus dated March 15, 1996, the Annual Report to Shareholders dated
December 31, 1996, the Statement of Additional Information dated March 15,
1996, and the Statement of Additional Information dated [ ]
(relating to this Prospectus/Proxy Statement), each of which is incorporated
herein by reference. Copies of such Prospectus, Annual Report, and Statements
of Additional Information, which have been filed with the SEC, may be obtained
upon request and without charge from the William Penn Portfolio by calling 1-
800-523-8440 or by writing to the William Penn Portfolio at 2650 Westview
Drive, Wyomissing, PA 19610. The William Penn Portfolio is subject to the
informational requirements of the 1933 Act, the 1934 Act and the 1940 Act and
in accordance therewith files reports and other information with the SEC.
Reports, proxy and information statements, charter documents and other
information filed by William Penn Interest Income Fund or its portfolio, the
William Penn Portfolio, can be obtained by calling or writing the William Penn
Portfolio and can also be inspected at the public reference facilities
maintained by the SEC or obtained at prescribed rates at the addresses listed
in the previous section.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with the
solicitation by the Board of Trustees of the William Penn Portfolio of proxies
for use at the Special Meeting of Shareholders (the "Special Meeting") to be
held at 9:00 a.m. (general meeting) and 10:30 a.m. (Fund meeting) (local time)
on May 29, 1997 at: Sheraton Berkshire Motor Inn, 1741 Paper Mill Road,
Wyomissing, PA 19610, and at any adjournments 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 Special
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
William Penn Portfolio an instrument revoking the proxy, by submitting a proxy
bearing a later date or by attending and voting at the Special 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 William Penn
Portfolio, Federated Advisers and their respective affiliates at no additional
cost to the William Penn Portfolio. Such solicitations may be by telephone,
telegraph, or personal contact. Any telephonic solicitations will follow
procedures designed to insure accuracy and prevent fraud including requiring
identifying shareholder information, and recording 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 William Penn Portfolio has fixed the
close of business on [ ], as the record date for the determination
of shareholders entitled to notice of and to vote at the Special Meeting and
any adjournments thereof. As of the record date, there were [ ] Class
A Shares of the William Penn Portfolio outstanding. Each of the William Penn
Portfolio's shares is entitled to one vote and fractional shares have
proportionate voting rights. On the record date, the Trustees and Officers of
the William Penn Portfolio as a group owned less than [ ] of the
outstanding shares of the William Penn Portfolio. To the best knowledge of
William Penn Fund Management Corporation, as of the record date, no person
owned beneficially or of record 5% or more of the William Penn Portfolio's
outstanding shares.
As of the record date, there were [ ] Class F Shares of the
Federated Fund outstanding. On the record date, the Trustees and officers of
the Federated Fund as a group owned less than 1% of the outstanding Class F
Shares of the Federated Fund. To the best knowledge of Federated Advisers, as
of the record date, no person, except as set forth in the table below, owned
beneficially or of record 5% or more of the Federated Fund's outstanding Class
F Shares.
CLASS F SHARES NAME AND ADDRESS SHARES OWNED PERCENT OF
OUTSTANDING SHARES
Approval of the Plan requires the affirmative vote of a majority of
the outstanding shares of the William Penn Portfolio. The votes of
shareholders of the Federated Fund are not being solicited since their
approval is not required in order to effect the Reorganization.
One-third of the issued and outstanding shares of the William Penn
Portfolio, represented in person or by proxy, will be required to constitute a
quorum at the Special Meeting for the purpose of voting on the proposed
Reorganization. For purposes of determining the presence of a quorum, shares
represented by abstentions and "broker non-votes" will be counted as present,
but not as votes cast, at the Special Meeting. Because approval of the
Reorganization requires the approval of a majority of the outstanding shares
of the William Penn Portfolio, abstentions and "broker non-votes" will have
the same effect as if they were votes against the Reorganization.
Dissenter's Right of Appraisal
Shareholders of the William Penn Portfolio objecting to the
Reorganization have no appraisal rights under the William Penn Portfolio's
Declaration of Trust or Pennsylvania law. Under the Plan, if approved by
William Penn Portfolio shareholders, each shareholder will become the owner of
Class F Shares of the Federated Fund having a total net asset value equal to
the total net asset value of his or her holdings in the William Penn
Portfolio's Class A Shares at the Closing Date.
OTHER MATTERS AND DISCRETION OF PERSONS NAMED IN THE PROXY
Management of the William Penn Portfolio knows of no other matters
that may properly be, or which are likely to be, brought before the Special
Meeting. However, if any other business shall properly come before the
Special Meeting, the persons named in the proxy intend to vote thereon in
accordance with their best judgment.
If at the time any session of the Special Meeting is called to order,
a quorum is not present in person or by proxy, the persons named as proxies
may vote those proxies which have been received to adjourn the Special Meeting
to a later date. In the event that a quorum is present but sufficient votes
in favor of one or more of the proposals have not been received, the persons
named as proxies may propose one or more adjournments of the Special Meeting
to permit further solicitation of proxies with respect to any such proposal.
All such adjournments will require the affirmative vote of a majority of the
shares present in person or by proxy at the session of the Special Meeting to
be adjourned. The persons named as proxies will vote those proxies which they
are entitled to vote in favor of the proposal, in favor of such an
adjournment, and will vote those proxies required to be voted against the
proposal, against any such adjournment.
Whether or not shareholders expect to attend the Special Meeting, all
shareholders are urged to sign, fill in and return the enclosed proxy form
promptly.
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated , 1997 (the
--------
"Agreement"), between MUNICIPAL SECURITIES INCOME TRUST, a Massachusetts
business trust (the `Federated Trust'') on behalf of its portfolio FEDERATED
NEW YORK MUNICIPAL INCOME FUND (hereinafter called the "Acquiring Fund"), and
WILLIAM PENN INTEREST INCOME FUND, a Pennsylvania Common Law Trust
(hereinafter called the "Trust") on behalf of its portfolio NEW YORK TAX-FREE
INCOME PORTFOLIO (hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of
the United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all the
assets and the assumption of certain liabilities of the Acquired Fund in
exchange solely for Class F Shares of the Acquiring Fund (the "Acquiring Fund
Shares") and the distribution, after the Closing Date (as hereinafter
defined), of the Acquiring Fund Shares to the shareholders of the Acquired
Fund in liquidation of the Acquired Fund as provided herein, all upon the
terms and conditions hereinafter set forth in this Agreement.
WHEREAS, the Trust and the Acquiring Fund are registered open-end
management investment companies and the Acquired Fund owns securities in which
the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are authorized
to issue shares of common stock or shares of beneficial interest, as the case
may be;
WHEREAS, the Board of 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 Federated Trust has determined
that the transfer of all of the assets and the assumption of certain
liabilities 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 directors
who are not "interested persons" (as defined under the 1940 Act), of the Trust
has determined that the transfer of all of the assets and the assumption of
certain liabilities of the Acquired Fund for Acquiring Fund Shares is in the
best interests of the Acquired Fund shareholders;
NOW THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties agree as follows:
1.TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the Acquired
Fund agrees to assign, transfer and convey to the Acquiring Fund all of the
assets of the Acquired Fund, including all securities and cash, other than
cash in an amount necessary to pay any unpaid dividends and distributions as
provided in paragraph 1.5, beneficially owned by the Acquired Fund, 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,
determined as set forth in paragraph 2.3. Such transaction shall take place
at the closing (the "Closing") on the closing date (the "Closing Date")
provided for in paragraph 3.1. In lieu of delivering certificates for the
Acquiring Fund Shares, the Acquiring Fund shall credit the Acquiring Fund
Shares to the Acquired Fund's account, for the benefit of its shareholders, on
the stock record books of the Acquiring Fund and shall deliver a confirmation
thereof to the Acquired Fund.
1.2 The Acquiring Fund will assume only those certain liabilities which
are set forth in a certificate to be provided by the Acquired Fund at Closing
and accepted by the Acquiring Fund.
1.3 Delivery of the assets of the Acquired Fund to be transferred shall
be made on the Closing Date and shall be delivered to State Street Bank and
Trust Company (hereinafter called "State Street"), Boston, Massachusetts, the
Acquiring Fund's custodian (the "Custodian"), for the account of the Acquiring
Fund, together with proper instructions and all necessary documents to
transfer to the account of the Acquiring Fund, free and clear of all liens,
encumbrances, rights, restrictions and claims created by the Acquired Fund.
All cash delivered shall be in the form of immediately available funds payable
to the order of the Custodian for the account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring Fund
any dividends or interest received on or after the Closing Date with respect
to assets transferred to the Acquiring Fund thereunder. The Acquired Fund
will transfer to the Acquiring Fund any distributions, rights or other assets
received by the Acquired Fund after the Closing Date as distributions on or
with respect to the securities transferred. Such assets shall be deemed
included in assets transferred to the Acquiring Fund on the Closing Date and
shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable, the
Acquired Fund will liquidate and distribute pro rata to the Acquired Fund's
shareholders of record, determined as of the close of business on the Closing
Date (the "Acquired Fund Shareholders"), the Acquiring Fund Shares received by
the Acquired Fund pursuant to paragraph 1.1. In addition, each Acquired Fund
Shareholder shall have the right to receive any unpaid dividends or other
distributions which were declared before the Valuation Date (as hereinafter
defined) with respect to the shares of the Acquired Fund that are held by the
shareholder on the Valuation Date. Such liquidation and distribution will be
accomplished by the transfer of the Acquiring Fund Shares then credited to the
account of the Acquired Fund on the books of the Acquiring Fund to open
accounts on the share record books of the Acquiring Fund in the names of the
Acquired Fund Shareholders, and representing the respective pro rata number of
the Acquiring Fund Shares due such shareholders, based on their ownership of
shares of the Acquired Fund on the Closing Date. 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 shall not
issue certificates representing the Acquiring Fund Shares in connection with
such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be issued
in the manner described in the Acquiring Fund's current prospectus and
statement of additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund
Shares in a name other than the registered holder of the Acquired Fund shares
on the books of the Acquired Fund as of that time shall, as a condition of
such issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of the Trust up to and including the Closing Date
and such later dates, with respect to dissolution and deregistration of the
Trust, on which the Trust is dissolved and deregistered.
1.9 The Trust shall be deregistered as an investment company under the
1940 Act and dissolved as a Pennsylvania common law trust as promptly as
practicable following the Closing Date and the making of all distributions
pursuant to paragraph 1.5.
2.VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of the
close of the New York Stock Exchange (normally 4:00 p.m. Eastern time) on the
Closing Date (such time and date being herein 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 each Acquiring Fund Share shall be the net
asset value per share computed as of the close of the New York Stock Exchange
(normally 4:00 p.m. Eastern time) on the Valuation Date, using the valuation
procedures set forth in the Acquiring Fund's then-current prospectus or
statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall be determined by dividing the value of the net assets of the Acquired
Fund determined using the same valuation procedures referred to in paragraph
2.1, by the net asset value of one Acquiring Fund Share determined in
accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular practices of the Acquiring Fund, which practices have been reviewed by
the Acquired Fund's Board of Trustees.
3.CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be [ ] or such later date as the
parties may mutually agree. All acts taking place at the Closing shall be
deemed to take place simultaneously as of the close of business on the Closing
Date unless otherwise provided. The Closing shall be held at 4:00 p.m.
(Eastern time) at the offices of the Acquiring Fund, Federated Investors
Tower, Pittsburgh, PA 15222-3779, or such other time and/or place as the
parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for
portfolio securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereon shall be restricted; or (b) trading or
the reporting of trading shall be disrupted so that accurate appraisal of the
value of the net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting
shall have been restored.
3.3 William Penn Fund Management Corporation, as transfer agent for the
Acquired Fund, shall deliver at the Closing a certificate of an authorized
officer stating that its records contain the names and addresses of the
Acquired Fund Shareholders and the number and percentage ownership of
outstanding shares owned by each such shareholder immediately prior to the
Closing. The Acquiring Fund shall issue and deliver a confirmation evidencing
the Acquiring Fund Shares to be credited on the Closing Date to the Secretary
of the Acquired Fund, or provide evidence satisfactory to the Acquired Fund
that such Acquiring Fund Shares have been credited to the Acquired Fund's
account on the books of the Acquiring Fund. At the Closing, each party shall
deliver to the other such bills of sale, checks, assignments, assumption
agreements, share certificates, if any, receipts or other documents as such
other party or its counsel may reasonably request.
4.REPRESENTATIONS AND WARRANTIES.
4.1 The Trust represents and warrants to the Acquiring Fund as follows:
(a) The Trust is a Common Law Trust duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania and has power to own all of its properties and assets and to
carry out this Agreement.
(b) The Trust is registered under the 1940 Act, as an open-
end, management investment company, and such registration has not been revoked
or rescinded and is in full force and effect.
(c) The Trust is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of the
Trust's Declaration of Trust or of any agreement, indenture, instrument,
contract, lease or other undertaking to which the Acquired Fund is a party or
by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or to its knowledge threatened against the Acquired Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquired Fund knows of no facts which might form the basis for the institution
of such proceedings, and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which materially
and adversely affects its business or its ability to consummate the
transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the 1940 Act and the rules and regulations of the Securities and
Exchange Commission (the "Commission") 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.
(g) The Statement of Assets and Liabilities of the Acquired
Fund at December 31, 1995 and at December 31, 1996 has been audited by Ernst &
Young LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, consistently applied, and such
statements (copies of which have been furnished to the Acquiring Fund) fairly
reflect the financial condition of the Acquired Fund as of such dates, and
there are no known contingent liabilities of the Acquired Fund as of such
dates not disclosed therein.
(h) Since December 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 indebtedness maturing more than one
year from the date such indebtedness was incurred, except as otherwise
disclosed to and accepted by the Acquiring Fund.
(i) At the Closing Date, all federal and other tax returns and
reports of the Acquired Fund required by law to have been filed by such date
shall have been filed or an appropriate extension obtained, and all federal
and other taxes shall have been paid so far as due, or provision shall have
been made for the payment thereof or contest in good faith, and to the best of
the Acquired Fund's knowledge no such return is currently under audit and no
assessment has been asserted with respect to such returns.
(j) For each fiscal year of its operation, the Acquired Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company.
(k) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. All of the issued and outstanding shares of
the Acquired Fund will, at the time of the Closing, be held by the persons and
in the amounts set forth in the records of the transfer agent as provided in
paragraph 3.3. The Acquired Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Acquired Fund
shares, nor is there outstanding any security convertible into any of the
Acquired Fund shares.
(l) On the Closing Date, the Acquired Fund will have full
right, power and authority to sell, assign, transfer and deliver the assets to
be transferred by it hereunder.
(m) The execution, delivery and performance of this Agreement
will have been duly authorized prior to the Closing Date by all necessary
action on the part of the Trust 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 (regardless of
whether the enforceability is considered in a proceeding in equity or at law).
(n) The prospectus/proxy statement of the Acquired Fund (the
"Prospectus/Proxy Statement") to be included in the Registration Statement
referred to in paragraph 5.5 (only insofar as it relates to the Acquired Fund)
will, on the effective date of the Registration Statement and on the Closing
Date, not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not misleading.
4.2 The Federated Trust represents and warrants to the Trust as follows:
(a) The Federated Trust is a Massachusetts business trust duly
organized, validly existing and in good standing under the laws of the State
of Massachusetts and has the power to carry on its business as it is now being
conducted and to carry out this Agreement.
(b) The Federated Trust is registered under the 1940 Act as an
open-end, diversified, management investment company, and such registration
has not been revoked or rescinded and is in full force and effect.
(c) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of the
Federated Trust's Declaration of Trust or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Acquiring Fund
is a party or by which it is bound.
(d) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or to its knowledge threatened against the Acquiring Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business. The
Acquiring Fund knows of no facts which might form the basis for the
institution of such proceedings, and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
which materially and adversely affects its business or its ability to
consummate the transactions contemplated herein.
(e) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(f) The Statement of Assets and Liabilities of the Acquiring
Fund at August 31, 1995 and 1996, have been audited by Deloitte & Touche LLP,
independent auditors, and have been prepared in accordance with generally
accepted accounting principles, and such statements (copies of which have been
furnished to the Acquired Fund) fairly reflect the financial condition of the
Acquiring Fund as of such dates, and there are no known contingent liabilities
of the Acquiring Fund as of such dates not disclosed therein.
(g) Since August 31, 1996, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course of
business.
(h) At the Closing Date, all federal and other tax returns and
reports of the Acquiring Fund required by law to have been filed or an
appropriate extension obtained, by such date shall have been filed, and all
federal and other taxes shall have been paid so far as due, or provision shall
have been made for the payment thereof or contest in good faith, and to the
best of the Acquiring Fund's knowledge no such return is currently under audit
and no assessment has been asserted with respect to such returns.
(i) For each fiscal year of its operation, the Acquiring Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company.
(j) All issued and outstanding Acquiring Fund Shares are, and
at the Closing Date will be, duly and validly issued and outstanding, fully
paid and non-assessable. The Acquiring Fund does not have outstanding any
options, warrants or other rights to subscribe for or purchase any of the
Acquiring Fund Shares, nor is there outstanding any security convertible into
any Acquiring Fund Shares.
(k) The execution, delivery and performance of this Agreement
has been duly authorized by all necessary action on the part of the Acquiring
Fund, and this Agreement constitutes the valid and legally binding obligation
of the Acquiring Fund enforceable in accordance with its terms, subject to the
effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other similar laws relating to or affecting creditors' rights
generally and court decisions with respect thereto, and to general principles
of equity and the discretion of the court (regardless of whether the
enforceability is considered in a proceeding in equity or at law).
(l) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on the Closing
Date, not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not misleading.
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 Trust will call a meeting of the Acquired Fund Shareholders to
consider and act upon this Agreement and to take all other action necessary to
obtain approval of the transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund and
the Acquired Fund will each take, or cause to be taken, all action, and do or
cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.4 As promptly as practicable, but in any case within sixty days after
the Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in such
form as is reasonably satisfactory to the Acquiring Fund, a statement of the
earnings and profits of the Acquired Fund for federal income tax purposes
which will be carried over to the Acquiring Fund as a result of Section 381 of
the Code and which will be certified by the Trust's President and its
Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of the Prospectus/Proxy Statement,
referred to in paragraph 4.1(o), all to be included in a Registration
Statement on Form N-14 of the Acquiring Fund (the "Registration Statement"),
in compliance with the 1933 Act, the Securities Exchange Act of 1934, as
amended, and the 1940 Act in connection with the meeting of the Acquired Fund
Shareholders to consider approval of this Agreement and the transactions
contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act and the 1940 Act as
it may deem appropriate in order to continue its operations after the Closing
Date.
5.7 Prior to the Valuation Date, the Acquired Fund shall have declared a
dividend or dividends, with a record date and ex-dividend date prior to the
Valuation Date, which, together with all previous dividends, shall have the
effect of distributing to its shareholders all of its investment company
taxable income, if any, plus the excess of its interest income, if any,
excludable from gross income under Section 103(a) of the Code over its
deductions disallowed under Sections 265 and 171(a)(2) of the Code for the
taxable periods or years ended on or before December 31, 1996 and for the
period from said date to and including the Closing Date (computed without
regard to any deduction for dividends paid), and all of its net capital gain,
if any, realized in taxable periods or years ended on or before December 31,
1996 and in the period from said date to and including the Closing Date.
6.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by
the Acquired Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of the Trust 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 Trust shall have delivered to the Acquiring Fund a statement of
the Acquired Fund's assets, together with a list of the Acquired Fund's
portfolio securities showing the tax costs of such securities by lot and the
holding periods of such securities, as of the Closing Date, certified by the
Treasurer of the Trust.
6.3 The Trust shall have delivered to the Acquiring Fund on the Closing
Date a certificate executed in its name by its President or Vice President and
its Treasurer, in form and substance satisfactory to the Acquiring Fund, to
the effect that the representations and warranties of the Trust made in this
Agreement are true and correct in all material respects 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.
6.4 The Acquired Fund shall have delivered to the Acquiring Fund a
certificate specifying the liabilities which are to be assumed by the
Acquiring Fund all of which shall be reflected in the net asset value of the
Acquired Fund on the Closing Date, which liabilities shall be acceptable to
the Acquiring Fund in its sole discretion.
7.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Federated Trust 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 Federated Trust shall have delivered to the Acquired Fund on the
Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Federated Trust made in this Agreement are true and correct in all material
respects at and as of the Closing Date, except as they may be affected by the
transactions contemplated by this Agreement, and as to such other matters as
the Acquired Fund shall reasonably request.
7.3 There shall not have been any material adverse change in the
Acquiring Fund's financial condition, assets, liabilities or business since
the date hereof other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness, except
as otherwise disclosed to and accepted by the Acquired Fund.
8.FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING FUND
AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Acquired Fund or the Acquiring Fund, either
party to this Agreement shall, at its option, not be required to consummate
the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares
of the Acquired Fund in accordance with the provisions of the Trust's Articles
of Incorporation and the 1940 Act.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit consummation,
in all material respects, of the transactions contemplated hereby shall have
been obtained, except where failure to obtain any such consent, order or
permit would not involve a risk of a material adverse effect on the assets or
properties of the Acquiring Fund or the Acquired Fund, provided that either
party hereto may for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act.
8.5 The Federated Trust and the Trust shall have received an opinion of
Dickstein Shapiro Morin & Oshinsky LLP substantially to the effect that for
federal income tax purposes:
(a) The transfer of all of the Acquired Fund assets and the
assumption of certain liabilities in exchange for the Acquiring Fund Shares
and the distribution of the Acquiring Fund Shares to the Acquired Fund
Shareholders in liquidation of the Acquired Fund will constitute a
"reorganization" within the meaning of Section 368(a)(1)(C) of the Code; (b)
No gain or loss will be recognized by the Acquiring Fund upon the receipt of
the assets of the Acquired Fund solely in exchange for the Acquiring Fund
Shares and the assumption of certain liabilities; (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 and the
assumption of certain liabilities or upon the distribution (whether actual or
constructive) of the Acquiring Fund Shares to Acquired Fund Shareholders in
exchange for their shares of the Acquired Fund; (d) No gain or loss will be
recognized by the Acquired Fund Shareholders upon the exchange of their
Acquired Fund shares for the Acquiring Fund Shares; (e) The tax basis of the
Acquired Fund assets acquired by the Acquiring Fund will be the same as the
tax basis of such assets to the Acquired Fund immediately prior to the
Reorganization; (f) The tax basis of the Acquiring Fund Shares received by
each of the Acquired Fund Shareholders pursuant to the Reorganization will be
the same as the tax basis of the Acquired Fund shares held by such shareholder
immediately prior to the Reorganization; (g) The holding period of the assets
of the Acquired Fund in the hands of the Acquiring Fund will include the
period during which those assets were held by the Acquired Fund; and (h) The
holding period of the Acquiring Fund Shares to be received by each Acquired
Fund Shareholder will include the period during which the Acquired Fund shares
exchanged therefor were held by such shareholder (provided the Acquired Fund
shares were held as capital assets on the date of the Reorganization).
9.TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Trustees of the Trust
or the Board of Trustees of the Federated Trust at any time prior to the
Closing Date (and notwithstanding any vote of the Acquired Fund Shareholders)
if circumstances should develop that, in the opinion of either of the parties'
Board, make proceeding with this Agreement inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated hereby
is abandoned pursuant to the provisions of this Section 9, this Agreement
shall become void and have no effect, without any liability on the part of any
party hereto or the trustees or officers of the Trust or the Federated Trust
or the shareholders of the Acquiring Fund or of the Acquired Fund, in respect
of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing conditions
may be waived by the Board of Trustees of the Federated Trust or the Board of
Trustees of the 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. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided for
herein shall survive consummation of the transactions contemplated hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements and understandings of
every kind and nature between them relating to the subject matter hereof.
Neither party shall be bound by any condition, definition, warranty or
representation, other than as set forth or provided in this Agreement or as
may be set forth in a later writing signed by the party to be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the Commonwealth of Pennsylvania, without giving effect
to principles of conflicts of laws.
11.4 This Agreement may be executed in any number of counterparts, each
of which, when executed and delivered, shall be deemed to be an original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason
of this Agreement.
11.6 An agreement has been entered into under which Federated Advisers
will assume substantially all of the expenses of the Reorganization including
registration fees, transfer taxes (if any), the fees of banks and transfer
agents and the costs of preparing, printing, copying and mailing proxy
solicitation materials to the Acquired Fund Shareholders and the costs of
holding the special meeting of shareholders. William Penn Fund Management
Corporation will assume the legal and accounting fees of the Acquired Fund.
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have each
caused this Agreement and Plan of Reorganization to be executed and attested
on its behalf by its duly authorized representatives as of the date first
above written.
Acquired Fund:
WILLIAM PENN INTEREST INCOME FUND,
on behalf of its portfolio,
Attest: NEW YORK TAX-FREE INCOME PORTFOLIO
By:
Name: Name:
Title: Title:
Acquiring Fund:
Attest: MUNICIPAL SECURITIES INCOME TRUST
on behalf of its portfolio,
FEDERATED NEW YORK MUNICIPAL INCOME
FUND
By:
Name: S. Elliott Cohan Name: Richard B. Fisher
Title:Assistant Secretary Title: President
STATEMENT OF ADDITIONAL INFORMATION
[ ]
ACQUISITION OF THE ASSETS OF
NEW YORK TAX-FREE INCOME PORTFOLIO,
A PORTFOLIO OF
WILLIAM PENN INTEREST INCOME FUND
2650 WESTVIEW DRIVE
WYOMISSING, PENNSYLVANIA 19610
TELEPHONE NUMBER: 1-800-523-8440
BY AND IN EXCHANGE FOR CLASS F SHARES OF
FEDERATED NEW YORK MUNICIPAL INCOME FUND
A PORTFOLIO OF
MUNICIPAL SECURITIES INCOME TRUST
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
TELEPHONE NUMBER: 1-800-341-7400
This Statement of Additional Information dated [ ] is not a
prospectus. A Prospectus/Proxy Statement dated [ ] related to the above-
referenced matter may be obtained from Federated New York Municipal Income
Fund, a Portfolio of Municipal Securities Income Trust, Inc., Federated
Investors Tower, Pittsburgh, Pennsylvania 15222-3779. This Statement of
Additional Information should be read in conjunction with such
Prospectus/Proxy Statement.
TABLE OF CONTENTS
1. Statement of Additional Information of Federated New York Municipal
Income Fund, a portfolio of Municipal Securities Income Trust, dated
October 31, 1996.
2. Statement of Additional Information of New York Tax-Free Income
Portfolio, a portfolio of William Penn Interest Income Fund, dated March 15,
1996.
3. Financial Statements of Federated New York Municipal Income Fund, a
portfolio of Municipal Securities Income Trust, dated August 31, 1996.
4. Financial Statements of New York Tax-Free Income Portfolio, a portfolio
of William Penn Interest Income Fund, dated December 31, 1996.
The Statement of Additional Information of Federated New York
Municipal Income Fund (the "Federated Trust"), a portfolio of Municipal
Securities Income Trust, dated October 31, 1996, is incorporated herein by
reference to Post-Effective Amendment No. 21 to the Federated Trust's
Registration Statement on Form N-1A (File Nos. 33-36729 and 811-6165) which
was filed with the Securities and Exchange Commission on or about October 24,
1996. A copy may be obtained, upon request and without charge, from the
Federated Fund at Federated Investors Tower, Pittsburgh, PA 15222-3279;
telephone number: 1-800-341-7400.
The Statement of Additional Information of New York Tax-Free Income
Portfolio (the "William Penn Portfolio"), a portfolio of William Penn Interest
Income Fund (the "Trust"), dated March 15, 1996, is incorporated herein by
reference to Post-Effective Amendment No. 16 to the Trust's Registration
Statement on Form N-1A (File Nos. 33-14609 and 811-5177) which was filed with
the Securities and Exchange Commission on or about March 21, 1996. A copy may
be obtained, upon request and without charge, from the William Penn Portfolio
at 2650 Westview Drive, Wyomissing, Pennsylvania 19610; telephone number: 1-
800-523-8440.
The audited financial statements of the Federated Fund, dated August
31, 1996, are incorporated herein by reference to the Federated Fund's Annual
Report to Shareholders dated August 31, 1996 which was filed with the
Securities and Exchange Commission. A copy may be obtained, upon request and
without charge, from the Federated Fund at Federated Investors Tower,
Pittsburgh, PA 15222-3279; telephone number: 1-800-341-7400.
The audited financial statements of the William Penn Portfolio, dated
December 31, 1996, are incorporated herein by reference to the William Penn
Portfolio's Annual Report to Shareholders dated December 31, 1996, which was
filed with the Securities and Exchange Commission. A copy may be obtained,
upon request and without charge, from the State Bond Fund at 2650 Westview
Drive, Wyomissing, Pennsylvania 19610; telephone number 1-800-523-8440.
Sheraton Berkshire Motor Inn
1741 Paper Mill Road
Wyomissing, PA 19610
NEW YORK TAX-FREE INCOME PORTFOLIO,
a Portfolio of
WILLIAM PENN INTEREST INCOME FUND,
SPECIAL MEETING OF SHAREHOLDERS
May 29, 1997
NEW YORK TAX-FREE INCOME PORTFOLIO,
a Portfolio of
WILLIAM PENN INTEREST INCOME FUND
The undersigned shareholder(s) of New York Tax-Free Income Portfolio,
a portfolio of William Penn Interest Income Fund (the `William Penn
Portfolio'), hereby appoint(s) James E. Jordan, Sandra Houck, and Dennis
Westley, or any of them true and lawful proxies, with power of substitution of
each, to vote all shares of the William Penn Portfolio which the undersigned
is entitled to vote, at the Special Meeting of Shareholders to be held on May
29, 1997, at Sheraton Berkshire Motor Inn, 1741 Paper Mill Road, Wyomissing,
PA 19610 , at 9:00 a.m. (general meeting) and 10:30 a.m. (Fund meeting)
(local time) and at any adjournment thereof.
Discretionary authority is hereby conferred as to all other matters as may
properly come before the Special Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. The proxies named
will vote the shares represented by this proxy in accordance with the choice
made on this ballot. IF NO CHOICE IS INDICATED, THIS PROXY WILL BE VOTED
AFFIRMATIVELY ON THAT MATTER.
The Board Of Trustees unanimously recommends a vote FOR the proposal below.
Please sign EXACTLY as your name(s)
appear(s) above. When signing as
attorney, executor, administrator,
guardian, trustee, custodian, etc.,
please give your full title as
such. If a corporation or
partnership, please sign the full
name by an authorized officer or
partner. If stock is owned
jointly, all owners should sign.
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.
DETACH AND RETURN THIS PORTION ONLY.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
NEW YORK TAX-FREE INCOME PORTFOLIO
RECORD DATE SHARES:
-----------------
Vote on Proposal
TO APPROVE OR DISAPPROVE AN AGREEMENT AND PLAN OF REORGANIZATION BETWEEN THE
WILLIAM PENN INTEREST INCOME FUND, NEW YORK TAX-FREE INCOME PORTFOLIO AND THE
FEDERATED NEW YORK MUNICIPAL INCOME FUND, A PORTFOLIO OF MUNICIPAL SECURITIES
INCOME TRUST.
FOR AGAINST ABSTAIN
- -----------------------------------
Signature
Signature (Joint Owners)
Date:
---------------------------------
PART C - OTHER INFORMATION
Item 15. Indemnification
Indemnification is provided to trustees and officers of the Registrant
pursuant to the Registrant's Declaration of Trust, except where such
indemnification is not permitted by law. However, the Declaration of Trust
does not protect the trustees or officers from liability based on willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of their office.
Trustees and officers of the Registrant are insured against certain
liabilities, including liabilities arising under the Securities Act of 1933
(the "Act").
Insofar as indemnification for liabilities arising under the Act may
be permitted to trustees, officers, and controlling persons of the Registrant
by the Registrant pursuant to the Declaration of Trust or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by 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 issue.
Insofar as indemnification for liabilities may be permitted pursuant
to Section 17 of the Investment Company Act of 1940 for trustees, officers, or
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 in a written opinion
that the indemnitee was not liable for an act of willful misfeasance, bad
faith, gross negligence, or reckless disregard of duties. The Registrant
further undertakes that advancement of expenses incurred in the defense of a
proceeding (upon undertaking for repayment unless it is ultimately determined
that indemnification is appropriate) against an officer, 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 Conformed Copy of Declaration of Trust of the Registrant (1)
1.2 Conformed Copy of Amendment No. 1 (dated August 26, 1991) to Declaration
of Trust (2)
1.3 Conformed Copy of Amendment No. 2 (dated August 6, 1990) to Declaration
of Trust (3)
1.4 Conformed Copy of Amendment No. 3 (dated August 31, 1992) to Declaration
of Trust (4)
1.5 Conformed Copy of Amendment No. 4 (dated September 17, 1992) to
Declaration of
Trust (4)
1.6 Conformed Copy of Amendment No. 5 (dated February 4, 1993) to Declaration
of Trust (5)
1.7 Conformed Copy of Amendment No. 6 (dated May 24, 1993) to Declaration of
Trust (6)
2.1 Bylaws of the Registrant(1)
3 Not Applicable
4 Agreement and Plan of Reorganization dated as of March 25, 1997, between
William Penn Interest Income Fund, a Pennsylvania common law trust, on behalf
of its portfolio, New York Tax-Free Income Portfolio, and Municipal Securities
Income Trust, a Massachusetts business trust, on behalf of its portfolio
Federated New York Municipal Income Fund*
5 Copy of Specimen Certificate for Shares of Beneficial Interest of the
Registrant(7)
6.1 Conformed Copy of Investment Advisory Contract of the Registrant(4)
6.2 Conformed Copies of Amendments to the Investment Advisory Contract(8)
7.1 Conformed Copy of Distributor's Contract of the Registrant(4)
7.2 Conformed Copy of Amendment to Distributor's Contract(8)
7.3 The Registrant hereby incorporates the conformed copy of the specimen
Mutual Funds 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 on Form N-1A, filed with the Commission
on July 24, 1995. (File Nos. 33-38550 and 811-6269)
8 Not Applicable
9 Conformed Copy of Custodian Agreement of the Registrant(9)
10.1 Conformed Copy of Rule 12b-1 Plan of the Registrant(10)
10.2 Copy of Rule 12b-1 Agreement of the Registrant(4)
10.3 The Registrant hereby incorporates the conformed copy of the specimen
Multiple Class Plan from Item 24(b)(18) of the World Investment Series, Inc.
Registration Statement on Form N-1A, filed with the Commission on January 26,
1996. (File Nos. 33-52149 and 811-07141)
10.4 The responses described in Item 16 (7.4) are hereby incorporated by
reference
11 Opinion of S. Elliott Cohan, Deputy General Counsel, Federated Investors
regarding legality of shares being issued*
12 Opinion of Dickstein Shapiro Morin & Oshinsky LLP regarding tax
consequences of Reorganization(12)
13.1 Conformed Copy of Agreement for Fund Accounting Services, Administrative
Services, Transfer Agency Services and Custody Services Procurement(7)
13.2 Conformed Copy of Shareholder Services Agreement(11)
13.3 The responses described in Item 16 (7.4) and Item 16 (10.3) are hereby
incorporated by reference
13.4 With regard to Federated New York Municipal Income Fund, the Registrant
hereby incorporates the conformed copy of the Shareholders Services
Subcontract between Fidelity and Federated Shareholder Services from Item
24(b)(9)(iii) of the Federated GNMA Trust Registration on Form N-1A, filed
with the Commission on March 25, 1996. (File Nos. 2-75670 and 811-3375).
14.1 Conformed copy of Consent of Independent Auditors of the Registrant,
Deloitte & Touche LLP*
14.2 Conformed copy of Consent of Independent Auditors of New York Tax-Free
Income Portfolio, Ernst & Young LLP*
15 Not Applicable
16 Conformed Copy of Power of Attorney*
17.1 Declaration under Rule 24f-2*
17.2 Form of Proxy of New York Tax-Free Income Portfolio*
* 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)
(2) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 4 on Form N-1A filed on October 28, 1991. (File Nos. 33-36729
and 811-6165)
(3) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed on January 24, 1992. (File Nos. 33-36729
and 811-6165)
(4) Response is incorporated by reference to Registrant's Post-Effective
Amendment
No. 7 on Form N-1A filed on September 25, 1992. (File Nos. 33-36729 and
811-6165)
(5) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed March 24, 1993. (File Nos. 33-36729 and
811-6165)
(6) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 on Form N-1A filed on July 2, 1993. (File Nos. 33-36729 and
811-6165)
(7) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 21 on Form N-1A filed on October 23, 1996. (File Nos. 33-36729
and 811-6165)
(8) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 on Form N-1A filed on October 28, 1993. (File Nos. 33-36729
and 811-6165)
(9) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed on October 30, 1995. (File Nos. 33-36729
and 811-6165)
(10) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 on Form N-1A filed on May 17, 1993. (File Nos. 33-36729 and
811-6165)
(11) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 17 on Form N-1A filed on December 30, 1994. (File Nos. 33-36729
and 811-6165)
(12) To be filed by Post-Effective Amendment pursuant to `Dear Registrant''
letter dated February 15, 1996.
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 a part of this Registration Statement by any person or party who is deemed
to be an underwriter within the meaning of Rule 145(c) of the Securities Act
of 1933, the reoffering prospectus will contain the information called for by
the applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act of 1933, each
post-effective amendment shall be deemed to be a new Registration Statement
for the securities offered therein, and the offering of the securities at that
time shall be deemed to be the initial bona fide offering of them.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Municipal Securities Income Trust, has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Pittsburgh, Commonwealth of
Pennsylvania on March 25, 1997.
MUNICIPAL SECURITIES INCOME TRUST
(Registrant)
By: *
Richard B. Fisher
President
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on
March 25, 1997:
* Chairman and Trustee
John F. Donahue
(Chief Executive Officer)
* President
Richard B. Fisher
* Executive Vice President and Trustee
J. Christopher Donahue
* Treasurer, Executive Vice President, and
Secretary
John W. McGonigle
(Principal Financial and
Accounting Officer)
* Trustee
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., J.D., S.J.D.
* Trustee
Wesley W. Posvar
* Trustee
Marjorie P. Smuts
1* By: /s/ S. Elliott Cohan
Attorney in Fact
EXHIBIT 11
FEDERATED NEW YORK MUNICIPAL INCOME FUND
A Portfolio of Municipal Securities Income Trust
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
March 25, 1997
The Trustees of
Municipal Securities Income Trust
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
Federated New York Municipal Income Fund (the `Fund''), a portfolio of
Municipal Securities Income Trust, a Massachusetts business trust
(`Trust''), proposes to issue shares of beneficial interest (such shares
of beneficial interest being herein referred to as `Shares'') in
connection with the acquisition of the assets of New York Tax-Free Income
Portfolio, a portfolio of William Penn Interest Income Fund, a Pennsylvania
common law trust, pursuant to the Agreement and Plan of Reorganization
dated as of March 25, 1997 (`Agreement''), filed as an exhibit to the
registration statement of the Trust filed on Form N-14 (Securities Act of
1933 No. to be assigned) under the Securities Act of 1933 as amended (`N-
14 Registration').
As counsel I have participated in the organization of the Trust, its
registration under the Investment Company Act of 1940, the registration of
its securities on Form N-1A under the Securities Act of 1933 and its N-14
Registration. I have examined and am familiar with the written Declaration
of Trust dated August 6, 1990 (`Declaration of Trust''), the Bylaws of the
Trust, the Agreement and such other documents and records deemed relevant.
I have also reviewed questions of law and consulted with counsel thereon
as deemed necessary or appropriate for the purposes of this opinion.
Based upon the foregoing, it is my opinion that:
1. The Trust is duly organized and validly existing pursuant to the
Declaration of Trust.
2. The Shares which are currently being registered by the N-14
Registration may be legally and validly issued in accordance with the
provisions of the Agreement and the Declaration of Trust upon receipt of
consideration sufficient to comply with the provisions of Article III,
Section 3, of the Declaration of Trust and subject to compliance with the
Investment Company Act of 1940, as amended, and applicable state laws
regulating the sale of securities. Such Shares, when so issued, will be
fully paid and non-assessable.
I consent to your filing this opinion as an exhibit to the N-14
Registration referred to above and to any application or registration
statement filed under the securities laws of any of the states of the
United States.
Very truly yours,
FEDERATED NEW YORK MUNICIPAL INCOME FUND
A Portfolio of Municipal Securities Income
Trust
By:/s/ S. Elliott Cohan
S. Elliott Cohan
Title: Assistant Secretary
Exhibit 14.1
INDEPENDENT AUDITORS' CONSENT
To the Board of Trustees of MUNICIPAL SECURITIES INCOME TRUST
and Shareholders of FEDERATED NEW YORK MUNICIPAL INCOME FUND:
We consent to the incorporation by reference in this Registration Statement
on Form N-14 of Federated New York 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 New York Municipal Income
Fund for the year ended August 31, 1996, included in the Prospectus of
Federated New York 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
Deloitte & Touche
Pittsburgh, Pennsylvania
March 20, 1997
Exhibit 14.2
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in the Registration Statement
on Form N-14 ("Registration Statement") of Federated New York Municipal
Income Fund, a portfolio of Municipal Securities Income Trust, of our
report dated January 22, 1997, appearing in the Annual Report of New York
Tax-Free Income Portfolio, a portfolio of William Penn Interest Income
Fund, for the year ended December 31, 1996.
By:/s/ ERNST & YOUNG LLP
Ernst & Young LLP
Reading, PA
March 19, 1997
Exhibit 16
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of MUNICIPAL SECURITIES
INCOME TRUST and the Deputy General Counsel of Federated Services Company,
and each of them, their true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution for them and in their names,
place and stead, in any and all capacities, to sign any and all documents
to be filed with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, by means of the Securities and Exchange
Commission's electronic disclosure system known as EDGAR; and to file the
same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
sign and perform each and every act and thing requisite and necessary to be
done in connection therewith, as fully to all intents and purposes as each
of them might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
SIGNATURES TITLE DATE
/s/John F. Donahue Chairman and Trustee February 25, 1997
John F. Donahue (Chief Executive Officer)
/s/Richard B. Fisher President February 25, 1997
Richard B. Fisher
/s/J. Christopher Donahue Executive Vice President February 25, 1997
J. Christopher Donahue and Trustee
/s/John W. McGonigle Treasurer, Executive February 25, 1997
John W. McGonigle Vice President and Secretary
(Principal Financial and
Accounting Officer)
/s/Thomas G. Bigley Trustee February 25, 1997
Thomas G. Bigley
/s/John T. Conroy, Jr. Trustee February 25, 1997
John T. Conroy, Jr.
/s/William J. Copeland Trustee February 25, 1997
William J. Copeland
/s/James E. Dowd Trustee February 25, 1997
James E. Dowd
/s/Lawrence D. Ellis, M.D. Trustee February 25, 1997
Lawrence D. Ellis, M.D.
/s/Edward L. Flaherty, Jr. Trustee February 25, 1997
Edward L. Flaherty, Jr.
/s/Peter E. Madden Trustee February 25, 1997
Peter E. Madden
/s/Gregor F. Meyer Trustee February 25, 1997
Gregor F. Meyer
/s/John E. Murray, Jr. Trustee February 25, 1997
John E. Murray, Jr.
/s/Wesley W. Posvar Trustee February 25, 1997
Wesley W. Posvar
/s/Marjorie P. Smuts Trustee February 25, 1997
Marjorie P. Smuts
Sworn to and subscribed before me this 25th day of February, 1997
/s/Marie M. Hamm
Marie M. Hamm
Notarial Seal
Marie M. Hamm, Notary Public
Plum Boro, Alleghny County
My Commission Expires Oct. 9, 2000
Member, Pennsylvania Association of Notaries
EXHIBIT 17.1
MUNICIPAL SECURITIES INCOME TRUST
Federated Investors
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
October 16, 1995
EDGAR Operations Branch
Securities and Exchange Commission
Division of Investment Management
450 Fifth Street, Northwest
Washington, DC 20549
RE: Rule 24f-2 Notice for Municipal Securities Income Trust
1933 Act File No. 33-36729
1940 Act File No. 811-6165
Dear Sir or Madam:
Pursuant to the provisions of Rule 24f-2 of the Investment Company Act
of 1940, I enclose the Rule 24f-2 Notice for Municipal Securities Income
Trust.
Since the aggregate redemption price of redeemed securities exceeded
the aggregate sales price of securities sold during the period for which
the Rule 24f-2 Notice is filed, an additional filing fee pursuant to Rule
24f-2(c) has not been filed.
As required by Rule 24f-2(b)(1)(v), a conformed opinion of counsel has
been electronically filed herewith which indicates whether the securities,
the registration of which this Notice makes definite in number, were
legally issued, fully paid and non-assessable.
Very truly yours,
/s/ Charles H. Field
Charles H. Field
Assistant Secretary
Enclosures
cc: Charles H. Morin, Esquire
Matthew G. Maloney, Esquire
Linda L. Banas
Rule 24f-2 Notice
MUNICIPAL SECURITIES INCOME TRUST
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
1933 Act No. 33-36729
(i) fiscal period for which notice is filed August 31, 1995
(ii) The number or amount of securities of the
same class or series, if any, which had
been registered under the Securities Act
of 1933, other than pursuant to Rule 24f-2
but which remained unsold at September 1, 1994,
the beginning of the Registrant's fiscal
period -0-
(iii) The number or amount of securities,
if
any, registered during the fiscal period
of this notice other than pursuant to
Rule 24f-2 -0- -0-
(iv) The number or amount of securities
sold during the fiscal period of this
notice 7,909,183
(v) The number or amount of securities sold
during the fiscal period of this notice
in reliance upon registration pursuant
to Rule 24f-2 (see attached Computation
of Fee) 7,909,183
WITNESS the due execution hereof this 16th day of October, 1995.
By: /s/Charles H. Field
Charles H. Field
Assistant Secretary
COMPUTATION OF FEE
1.Actual aggregate sale price of Registrant's
securities sold pursuant to Rule 24f-2 during
the fiscal period for which the 24f-2 notice
is filed (see Section v) ................... $52,045,483
2.Reduced by the difference between:
(a) actual aggregate redemption price
of such securities redeemed by the
issuer during the fiscal period for
which the 24f-2 notice is filed $123,470,581
(b) actual aggregate redemption price
of such redeemed securities
previously applied by the issuer
pursuant to Section 24e(2)(a) for
the fiscal period for which the
24f-2 notice is filed .... -0- $123,470,581
Total amount upon which the fee calculation specified
in Section 6(b) of the Securities Act of 1933 is
based......................................... $(71,425,098)
FEE SUBMITTED (1/29 of 1% of Total amount) . $-0-
CONVERSION OF NET REDEMPTIONS ON
RULE 24f-2 NOTICE TO FILING
UNDER RULE 24e-2
When a negative amount appears on the line captioned "Total amount upon
which the fee calculated specified in Section 6(b) of the Securities Act of
1933 is based", the following calculation should be made to determine the
share information needed to file under Rule 24e-2:
Total redemptions (per annual report) 15,702,272
Less: Line (v) - Rule 24f-2 Notice 7,909,183
Shares available to register under
Rule 24e-2 7,793,089(a)
Fund's Current Net Asset Value $11.60(b)
Multiply: Shares available to register
under Rule 24e-2 by the fund's current
net asset value (a x b) to obtain Proposed
Maximum Aggregate Offering Price $90,399,832
FEDERATED ADMINISTRATIVE
SERVICES
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
412-288-1900
October 16, 1995
Municipal Securities Income Trust
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
You have requested my opinion for use in conjunction with a Rule 24f-2
Notice for Municipal Securities Income Trust (`Trust'') to be filed in
respect of shares of the Trust (`Shares'') sold for the fiscal year ended
August 30, 1995, pursuant to the Trust's registration statement filed with
the Securities and Exchange Commission (`SEC'') under the Securities Act
of 1933 (File No. 33-36729) (`Registration Statement'').
In its Registration Statement, the Trust elected to register an
indefinite number of shares pursuant to the provisions of Investment
Company Act Rule 24f-2.
As counsel, I have participated in the preparation and filing of the
Trust's amended Registration Statement under the Securities Act of 1933.
Further, I have examined and am familiar with the provisions of the
Declaration of Trust dated August 6, 1990 (`Declaration of Trust''), the
Bylaws of the Trust and such other documents and records deemed relevant.
I have also reviewed questions of law and consulted with counsel thereon as
deemed necessary or appropriate by me for the purposes of this opinion.
On the basis of the foregoing, it is my opinion the Shares sold for
the fiscal year ended August 30, 1995, registration of which the Rule 24f-2
Notice makes definite in number, were legally issued, fully paid and non-
assessable by the Trust.
I hereby consent to the filing of this opinion as an exhibit to the
Rule 24f-2 Notice referred to above, the Registration Statement of the
Trust and to any application or registration statement filed under the
securities laws of any of the States of the United States.
The foregoing opinion is limited to the Federal laws of the United
States and the laws of the Commonwealth of Massachusetts, and I am
expressing no opinion as to the effect of the laws of any other
jurisdiction.
Very truly yours,
/s/ Charles H. Field
Charles H. Field
Fund Attorney
EXHIBIT 17.2
Sheraton Berkshire Motor Inn
1741 Paper Mill Road
Wyomissing, PA 19610
NEW YORK TAX-FREE INCOME PORTFOLIO,
a Portfolio of
WILLIAM PENN INTEREST INCOME FUND,
SPECIAL MEETING OF SHAREHOLDERS
May 29, 1997
NEW YORK TAX-FREE INCOME PORTFOLIO,
a Portfolio of
WILLIAM PENN INTEREST INCOME FUND
The undersigned shareholder(s) of New York Tax-Free Income
Portfolio, a portfolio of William Penn Interest Income Fund (the `William
Penn Portfolio'), hereby appoint(s) James E. Jordan, Sandra Houck, and
Dennis Westley, or any of them true and lawful proxies, with power of
substitution of each, to vote all shares of the William Penn Portfolio
which the undersigned is entitled to vote, at the Special Meeting of
Shareholders to be held on May 29, 1997, at Sheraton Berkshire Motor Inn,
1741 Paper Mill Road, Wyomissing, PA 19610 , at 9:00 a.m. (general
meeting) and 10:30 a.m. (Fund meeting) (local time) and at any adjournment
thereof.
Discretionary authority is hereby conferred as to all other matters
as may properly come before the Special Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. The
proxies named will vote the shares represented by this proxy in accordance
with the choice made on this ballot. IF NO CHOICE IS INDICATED, THIS PROXY
WILL BE VOTED AFFIRMATIVELY ON THAT MATTER.
The Board Of Trustees unanimously recommends a vote FOR the proposal below.
Please sign EXACTLY as your name(s)
appear(s) above. When signing as
attorney, executor, administrator,
guardian, trustee, custodian, etc.,
please give your full title as
such. If a corporation or
partnership, please sign the full
name by an authorized officer or
partner. If stock is owned
jointly, all owners should sign.
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.
DETACH AND RETURN THIS PORTION ONLY.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
NEW YORK TAX-FREE INCOME PORTFOLIO
RECORD DATE SHARES:
-----------------
Vote on Proposal
TO APPROVE OR DISAPPROVE AN AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN THE WILLIAM PENN INTEREST INCOME FUND, NEW YORK TAX-FREE INCOME
PORTFOLIO AND THE FEDERATED NEW YORK MUNICIPAL INCOME FUND, A PORTFOLIO OF
MUNICIPAL SECURITIES INCOME TRUST.
FOR AGAINST ABSTAIN
-----------------------------------
Signature
Signature (Joint Owners)
Date:
EXHIBIT 4
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated as of , 1997
--------
(the "Agreement"), between MUNICIPAL SECURITIES INCOME TRUST, a
Massachusetts business trust (the `Federated Trust'') on behalf of its
portfolio FEDERATED NEW YORK MUNICIPAL INCOME FUND (hereinafter called the
"Acquiring Fund"), and WILLIAM PENN INTEREST INCOME FUND, a Pennsylvania
Common Law Trust (hereinafter called the "Trust") on behalf of its
portfolio NEW YORK TAX-FREE INCOME PORTFOLIO (hereinafter called the
"Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C)
of the United States Internal Revenue Code of 1986, as amended (the
"Code"). The reorganization (the "Reorganization") will consist of the
transfer of all the assets and the assumption of certain liabilities of the
Acquired Fund in exchange solely for Class F Shares of the Acquiring Fund
(the "Acquiring Fund Shares") and the distribution, after the Closing Date
(as hereinafter defined), of the Acquiring Fund Shares to the shareholders
of the Acquired Fund in liquidation of the Acquired Fund as provided
herein, all upon the terms and conditions hereinafter set forth in this
Agreement.
WHEREAS, the Trust and the Acquiring Fund are registered open-end
management investment companies and the Acquired Fund owns securities in
which the Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are
authorized to issue shares of common stock or shares of beneficial
interest, as the case may be;
WHEREAS, the Board of 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 Federated Trust
has determined that the transfer of all of the assets and the assumption of
certain liabilities 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
directors who are not "interested persons" (as defined under the 1940 Act),
of the Trust has determined that the transfer of all of the assets and the
assumption of certain liabilities of the Acquired Fund for Acquiring Fund
Shares is in the best interests of the Acquired Fund shareholders;
NOW THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties agree as
follows:
1.TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE
ACQUIRING FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the
Acquired Fund agrees to assign, transfer and convey to the Acquiring Fund
all of the assets of the Acquired Fund, including all securities and cash,
other than cash in an amount necessary to pay any unpaid dividends and
distributions as provided in paragraph 1.5, beneficially owned by the
Acquired Fund, 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, determined as set forth in paragraph 2.3.
Such transaction shall take place at the closing (the "Closing") on the
closing date (the "Closing Date") provided for in paragraph 3.1. In lieu
of delivering certificates for the Acquiring Fund Shares, the Acquiring
Fund shall credit the Acquiring Fund Shares to the Acquired Fund's account,
for the benefit of its shareholders, on the stock record books of the
Acquiring Fund and shall deliver a confirmation thereof to the Acquired
Fund.
1.2 The Acquiring Fund will assume only those certain liabilities
which are set forth in a certificate to be provided by the Acquired Fund at
Closing and accepted by the Acquiring Fund.
1.3 Delivery of the assets of the Acquired Fund to be transferred
shall be made on the Closing Date and shall be delivered to State Street
Bank and Trust Company (hereinafter called "State Street"), Boston,
Massachusetts, the Acquiring Fund's custodian (the "Custodian"), for the
account of the Acquiring Fund, together with proper instructions and all
necessary documents to transfer to the account of the Acquiring Fund, free
and clear of all liens, encumbrances, rights, restrictions and claims
created by the Acquired Fund. All cash delivered shall be in the form of
immediately available funds payable to the order of the Custodian for the
account of the Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring
Fund any dividends or interest received on or after the Closing Date with
respect to assets transferred to the Acquiring Fund thereunder. The
Acquired Fund will transfer to the Acquiring Fund any distributions, rights
or other assets received by the Acquired Fund after the Closing Date as
distributions on or with respect to the securities transferred. Such
assets shall be deemed included in assets transferred to the Acquiring Fund
on the Closing Date and shall not be separately valued.
1.5 As soon after the Closing Date as is conveniently practicable,
the Acquired Fund will liquidate and distribute pro rata to the Acquired
Fund's shareholders of record, determined as of the close of business on
the Closing Date (the "Acquired Fund Shareholders"), the Acquiring Fund
Shares received by the Acquired Fund pursuant to paragraph 1.1. In
addition, each Acquired Fund Shareholder shall have the right to receive
any unpaid dividends or other distributions which were declared before the
Valuation Date (as hereinafter defined) with respect to the shares of the
Acquired Fund that are held by the shareholder on the Valuation Date. Such
liquidation and distribution will be accomplished by the transfer of the
Acquiring Fund Shares then credited to the account of the Acquired Fund on
the books of the Acquiring Fund to open accounts on the share record books
of the Acquiring Fund in the names of the Acquired Fund Shareholders, and
representing the respective pro rata number of the Acquiring Fund Shares
due such shareholders, based on their ownership of shares of the Acquired
Fund on the Closing Date. 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 shall not
issue certificates representing the Acquiring Fund Shares in connection
with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be
issued in the manner described in the Acquiring Fund's current prospectus
and statement of additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund
Shares in a name other than the registered holder of the Acquired Fund
shares on the books of the Acquired Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall
remain the responsibility of the Trust up to and including the Closing Date
and such later dates, with respect to dissolution and deregistration of the
Trust, on which the Trust is dissolved and deregistered.
1.9 The Trust shall be deregistered as an investment company under
the 1940 Act and dissolved as a Pennsylvania common law trust as promptly
as practicable following the Closing Date and the making of all
distributions pursuant to paragraph 1.5.
2.VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of
the close of the New York Stock Exchange (normally 4:00 p.m. Eastern time)
on the Closing Date (such time and date being herein 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 each Acquiring Fund Share shall be the net
asset value per share computed as of the close of the New York Stock
Exchange (normally 4:00 p.m. Eastern time) on the Valuation Date, using the
valuation procedures set forth in the Acquiring Fund's then-current
prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall be determined by dividing the value of the net assets of the Acquired
Fund determined using the same valuation procedures referred to in
paragraph 2.1, by the net asset value of one Acquiring Fund Share
determined in accordance with paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular practices of the Acquiring Fund, which practices have been reviewed
by the Acquired Fund's Board of Trustees.
3.CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be [ ] or such later date as
the parties may mutually agree. All acts taking place at the Closing shall
be deemed to take place simultaneously as of the close of business on the
Closing Date unless otherwise provided. The Closing shall be held at
4:00 p.m. (Eastern time) at the offices of the Acquiring Fund, Federated
Investors Tower, Pittsburgh, PA 15222-3779, or such other time and/or place
as the parties may mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for
portfolio securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereon shall be restricted; or (b) trading or
the reporting of trading shall be disrupted so that accurate appraisal of
the value of the net assets of the Acquiring Fund or the Acquired Fund is
impracticable, the Closing Date shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting
shall have been restored.
3.3 William Penn Fund Management Corporation, as transfer agent for
the Acquired Fund, shall deliver at the Closing a certificate of an
authorized officer stating that its records contain the names and addresses
of the Acquired Fund Shareholders and the number and percentage ownership
of outstanding shares owned by each such shareholder immediately prior to
the Closing. The Acquiring Fund shall issue and deliver a confirmation
evidencing the Acquiring Fund Shares to be credited on the Closing Date to
the Secretary of the Acquired Fund, or provide evidence satisfactory to the
Acquired Fund that such Acquiring Fund Shares have been credited to the
Acquired Fund's account on the books of the Acquiring Fund. At the
Closing, each party shall deliver to the other such bills of sale, checks,
assignments, assumption agreements, share certificates, if any, receipts or
other documents as such other party or its counsel may reasonably request.
4.REPRESENTATIONS AND WARRANTIES.
4.1 The Trust represents and warrants to the Acquiring Fund as
follows:
(a) The Trust is a Common Law Trust duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania and has power to own all of its properties and assets and to
carry out this Agreement.
(b) The Trust is registered under the 1940 Act, as an open-
end, management investment company, and such registration has not been
revoked or rescinded and is in full force and effect.
(c) The Trust is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of the
Trust's Declaration of Trust or of any agreement, indenture, instrument,
contract, lease or other undertaking to which the Acquired Fund is a party
or by which it is bound.
(d) The Acquired Fund has no material contracts or other
commitments outstanding (other than this Agreement) which will result in
liability to it after the Closing Date.
(e) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently
pending or to its knowledge threatened against the Acquired Fund or any of
its properties or assets which, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its
business. The Acquired Fund knows of no facts which might form the basis
for the institution of such proceedings, and is not a party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or
its ability to consummate the transactions herein contemplated.
(f) The current prospectus and statement of additional
information of the Acquired Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and the 1940 Act and the rules and regulations of the
Securities and Exchange Commission (the "Commission") 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.
(g) The Statement of Assets and Liabilities of the Acquired
Fund at December 31, 1995 and at December 31, 1996 has been audited by
Ernst & Young LLP, independent auditors, and have been prepared in
accordance with generally accepted accounting principles, consistently
applied, and such statements (copies of which have been furnished to the
Acquiring Fund) fairly reflect the financial condition of the Acquired Fund
as of such dates, and there are no known contingent liabilities of the
Acquired Fund as of such dates not disclosed therein.
(h) Since December 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 indebtedness
maturing more than one year from the date such indebtedness was incurred,
except as otherwise disclosed to and accepted by the Acquiring Fund.
(i) At the Closing Date, all federal and other tax returns
and reports of the Acquired Fund required by law to have been filed by such
date shall have been filed or an appropriate extension obtained, and all
federal and other taxes shall have been paid so far as due, or provision
shall have been made for the payment thereof or contest in good faith, and
to the best of the Acquired Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such
returns.
(j) For each fiscal year of its operation, the Acquired
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(k) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. All of the issued and
outstanding shares of the Acquired Fund will, at the time of the Closing,
be held by the persons and in the amounts set forth in the records of the
transfer agent as provided in paragraph 3.3. The Acquired Fund does not
have outstanding any options, warrants or other rights to subscribe for or
purchase any of the Acquired Fund shares, nor is there outstanding any
security convertible into any of the Acquired Fund shares.
(l) On the Closing Date, the Acquired Fund will have full
right, power and authority to sell, assign, transfer and deliver the assets
to be transferred by it hereunder.
(m) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Trust 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 (regardless of whether the enforceability is
considered in a proceeding in equity or at law).
(n) The prospectus/proxy statement of the Acquired Fund
(the "Prospectus/Proxy Statement") to be included in the Registration
Statement referred to in paragraph 5.5 (only insofar as it relates to the
Acquired Fund) will, on the effective date of the Registration Statement
and on the Closing Date, not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which such statements were made, not misleading.
4.2 The Federated Trust represents and warrants to the Trust as
follows:
(a) The Federated Trust is a Massachusetts business trust
duly organized, validly existing and in good standing under the laws of the
State of Massachusetts and has the power to carry on its business as it is
now being conducted and to carry out this Agreement.
(b) The Federated Trust is registered under the 1940 Act as
an open-end, diversified, management investment company, and such
registration has not been revoked or rescinded and is in full force and
effect.
(c) The Acquiring Fund is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of
the Federated Trust's Declaration of Trust or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Acquiring
Fund is a party or by which it is bound.
(d) No litigation or administrative proceeding or
investigation of or before any court or governmental body is currently
pending or to its knowledge threatened against the Acquiring Fund or any of
its properties or assets which, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its
business. The Acquiring Fund knows of no facts which might form the basis
for the institution of such proceedings, and is not a party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or
its ability to consummate the transactions contemplated herein.
(e) The current prospectus and statement of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(f) The Statement of Assets and Liabilities of the
Acquiring Fund at August 31, 1995 and 1996, have been audited by Deloitte &
Touche LLP, independent auditors, and have been prepared in accordance with
generally accepted accounting principles, and such statements (copies of
which have been furnished to the Acquired Fund) fairly reflect the
financial condition of the Acquiring Fund as of such dates, and there are
no known contingent liabilities of the Acquiring Fund as of such dates not
disclosed therein.
(g) Since August 31, 1996, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary course
of business.
(h) At the Closing Date, all federal and other tax returns
and reports of the Acquiring Fund required by law to have been filed or an
appropriate extension obtained, by such date shall have been filed, and all
federal and other taxes shall have been paid so far as due, or provision
shall have been made for the payment thereof or contest in good faith, and
to the best of the Acquiring Fund's knowledge no such return is currently
under audit and no assessment has been asserted with respect to such
returns.
(i) For each fiscal year of its operation, the Acquiring
Fund has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company.
(j) All issued and outstanding Acquiring Fund Shares are,
and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of the Acquiring Fund Shares, nor is there outstanding any
security convertible into any Acquiring Fund Shares.
(k) The execution, delivery and performance of this
Agreement has been duly authorized by all necessary action on the part of
the Acquiring Fund, and this Agreement constitutes the valid and legally
binding obligation of the Acquiring Fund enforceable in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws relating to or
affecting creditors' rights generally and court decisions with respect
thereto, and to general principles of equity and the discretion of the
court (regardless of whether the enforceability is considered in a
proceeding in equity or at law).
(l) The Prospectus/Proxy Statement to be included in the
Registration Statement (only insofar as it relates to the Acquiring Fund)
will, on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which such
statements were made, not misleading.
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 Trust will call a meeting of the Acquired Fund Shareholders
to consider and act upon this Agreement and to take all other action
necessary to obtain approval of the transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund
and the Acquired Fund will each take, or cause to be taken, all action, and
do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by
this Agreement.
5.4 As promptly as practicable, but in any case within sixty days
after the Closing Date, the Acquired Fund shall furnish the Acquiring Fund,
in such form as is reasonably satisfactory to the Acquiring Fund, a
statement of the earnings and profits of the Acquired Fund for federal
income tax purposes which will be carried over to the Acquiring Fund as a
result of Section 381 of the Code and which will be certified by the
Trust's President and its Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with
information reasonably necessary for the preparation of the
Prospectus/Proxy Statement, referred to in paragraph 4.1(o), all to be
included in a Registration Statement on Form N-14 of the Acquiring Fund
(the "Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934, as amended, and the 1940 Act in connection
with the meeting of the Acquired Fund Shareholders to consider approval of
this Agreement and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act and the 1940 Act
as it may deem appropriate in order to continue its operations after the
Closing Date.
5.7 Prior to the Valuation Date, the Acquired Fund shall have
declared a dividend or dividends, with a record date and ex-dividend date
prior to the Valuation Date, which, together with all previous dividends,
shall have the effect of distributing to its shareholders all of its
investment company taxable income, if any, plus the excess of its interest
income, if any, excludable from gross income under Section 103(a) of the
Code over its deductions disallowed under Sections 265 and 171(a)(2) of the
Code for the taxable periods or years ended on or before December 31, 1996
and for the period from said date to and including the Closing Date
(computed without regard to any deduction for dividends paid), and all of
its net capital gain, if any, realized in taxable periods or years ended on
or before December 31, 1996 and in the period from said date to and
including the Closing Date.
6.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance
by the Acquired Fund of all the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the following
conditions:
6.1 All representations and warranties of the Trust 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 Trust shall have delivered to the Acquiring Fund a statement
of the Acquired Fund's assets, together with a list of the Acquired Fund's
portfolio securities showing the tax costs of such securities by lot and
the holding periods of such securities, as of the Closing Date, certified
by the Treasurer of the Trust.
6.3 The Trust shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer, in form and substance satisfactory to the
Acquiring Fund, to the effect that the representations and warranties of
the Trust made in this Agreement are true and correct in all material
respects 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.
6.4 The Acquired Fund shall have delivered to the Acquiring Fund a
certificate specifying the liabilities which are to be assumed by the
Acquiring Fund all of which shall be reflected in the net asset value of
the Acquired Fund on the Closing Date, which liabilities shall be
acceptable to the Acquiring Fund in its sole discretion.
7.CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by
the Acquiring Fund of all the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the following
conditions:
7.1 All representations and warranties of the Federated Trust
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 Federated Trust shall have delivered to the Acquired Fund on
the Closing Date a certificate executed in its name by its President or
Vice President and its Treasurer, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Federated Trust made in this Agreement are true and correct in all material
respects at and as of the Closing Date, except as they may be affected by
the transactions contemplated by this Agreement, and as to such other
matters as the Acquired Fund shall reasonably request.
7.3 There shall not have been any material adverse change in the
Acquiring Fund's financial condition, assets, liabilities or business since
the date hereof other than changes occurring in the ordinary course of
business, or any incurrence by the Acquiring Fund of any indebtedness,
except as otherwise disclosed to and accepted by the Acquired Fund.
8.FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING
FUND AND THE ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund,
either party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding
shares of the Acquired Fund in accordance with the provisions of the
Trust's Articles of Incorporation and the 1940 Act.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those
of the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit
consummation, in all material respects, of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve a risk of a material adverse
effect on the assets or properties of the Acquiring Fund or the Acquired
Fund, provided that either party hereto may for itself waive any of such
conditions.
8.4 The Registration Statement shall have become effective under the
1933 Act and no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no
investigation or proceeding for that purpose shall have been instituted or
be pending, threatened or contemplated under the 1933 Act.
8.5 The Federated Trust and the Trust shall have received an opinion
of Dickstein Shapiro Morin & Oshinsky LLP substantially to the effect that
for federal income tax purposes:
(a) The transfer of all of the Acquired Fund assets and the
assumption of certain liabilities in exchange for the Acquiring Fund Shares
and the distribution of the Acquiring Fund Shares to the Acquired Fund
Shareholders in liquidation of the Acquired Fund will constitute a
"reorganization" within the meaning of Section 368(a)(1)(C) of the Code;
(b) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund solely in exchange for the
Acquiring Fund Shares and the assumption of certain liabilities; (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 and the assumption of certain liabilities or upon the
distribution (whether actual or constructive) of the Acquiring Fund Shares
to Acquired Fund Shareholders in exchange for their shares of the Acquired
Fund; (d) No gain or loss will be recognized by the Acquired Fund
Shareholders upon the exchange of their Acquired Fund shares for the
Acquiring Fund Shares; (e) The tax basis of the Acquired Fund assets
acquired by the Acquiring Fund will be the same as the tax basis of such
assets to the Acquired Fund immediately prior to the Reorganization;
(f) The tax basis of the Acquiring Fund Shares received by each of the
Acquired Fund Shareholders pursuant to the Reorganization will be the same
as the tax basis of the Acquired Fund shares held by such shareholder
immediately prior to the Reorganization; (g) The holding period of the
assets of the Acquired Fund in the hands of the Acquiring Fund will include
the period during which those assets were held by the Acquired Fund; and
(h) The holding period of the Acquiring Fund Shares to be received by each
Acquired Fund Shareholder will include the period during which the Acquired
Fund shares exchanged therefor were held by such shareholder (provided the
Acquired Fund shares were held as capital assets on the date of the
Reorganization).
9.TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Trustees of the
Trust or the Board of Trustees of the Federated Trust at any time prior to
the Closing Date (and notwithstanding any vote of the Acquired Fund
Shareholders) if circumstances should develop that, in the opinion of
either of the parties' Board, make proceeding with this Agreement
inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated
hereby is abandoned pursuant to the provisions of this Section 9, this
Agreement shall become void and have no effect, without any liability on
the part of any party hereto or the trustees or officers of the Trust or
the Federated Trust or the shareholders of the Acquiring Fund or of the
Acquired Fund, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing
conditions may be waived by the Board of Trustees of the Federated Trust or
the Board of Trustees of the 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. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided
for herein shall survive consummation of the transactions contemplated
hereby.
11.2 This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
merges and supersedes all prior discussions, agreements and understandings
of every kind and nature between them relating to the subject matter
hereof. Neither party shall be bound by any condition, definition,
warranty or representation, other than as set forth or provided in this
Agreement or as may be set forth in a later writing signed by the party to
be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the internal laws of the Commonwealth of Pennsylvania, without giving
effect to principles of conflicts of laws.
11.4 This Agreement may be executed in any number of counterparts,
each of which, when executed and delivered, shall be deemed to be an
original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or
give any person, firm or corporation, other than the parties hereto and
their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
11.6 An agreement has been entered into under which Federated Advisers
will assume substantially all of the expenses of the Reorganization
including registration fees, transfer taxes (if any), the fees of banks and
transfer agents and the costs of preparing, printing, copying and mailing
proxy solicitation materials to the Acquired Fund Shareholders and the
costs of holding the special meeting of shareholders. William Penn Fund
Management Corporation will assume the legal and accounting fees of the
Acquired Fund.
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have
each caused this Agreement and Plan of Reorganization to be executed and
attested on its behalf by its duly authorized representatives as of the
date first above written.
Acquired Fund:
WILLIAM PENN INTEREST INCOME FUND,
on behalf of its portfolio,
Attest: NEW YORK TAX-FREE INCOME PORTFOLIO
By:
Name: Name:
Title: Title:
Acquiring Fund:
Attest: MUNICIPAL SECURITIES INCOME TRUST
on behalf of its portfolio,
FEDERATED NEW YORK MUNICIPAL INCOME
FUND
By:
Name: S. Elliott Cohan Name: Richard B. Fisher
Title:Assistant Secretary Title: President
