Reg. No.333-
-----
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 23, 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
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
2650 WESTVIEW DRIVE
WYOMISSING, PA 19610
Dear Shareholders:
The Board of Trustees and management of William Penn Interest
Income Fund: Pennsylvania 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
Pennsylvania 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 Commonwealth of Pennsylvania. 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
Penn Square 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 Pennsylvania state and local income tax.
-- The Federated Fund offers competitive performance and
comparable expense ratios.
-- The reorganization of the William Penn Portfolio into the
Federated Fund may provide operating efficiencies as a result of
the size of the combined Federated Fund and 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
PENNSYLVANIA 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, PENNSYLVANIA TAX-FREE
INCOME PORTFOLIO:
A Special Meeting of Shareholders of Pennsylvania Tax-Free Income
Portfolio, a portfolio of William Penn Interest Income Fund (the `William
Penn Portfolio') will be held at 9:00 a.m. (general meeting) and 10:45
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
Pennsylvania 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 A Shares to be
distributed pro rata by the William Penn Portfolio to the holders of its
Class A and Class C 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
PENNSYLVANIA 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 A Shares of
FEDERATED PENNSYLVANIA 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 Pennsylvania
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
Pennsylvania 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 A Shares
to be distributed pro rata by the William Penn Portfolio to the holders of
its Class A Shares and Class C 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 Federated Fund's Class
A 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 and
Class C 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 Commonwealth of Pennsylvania. The
William Penn Portfolio's investment objective is to provide a high level of
current income exempt from both Federal income taxes and Pennsylvania
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 March 4, 1997, which is incorporated herein by
reference. Statements of Additional Information for the Federated Fund
dated March 4, 1997 (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 Penn Square 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 Pennsylvania Municipal
Income Fund...............................................
William Penn Interest Income Fund, Pennsylvania 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.........
<TABLE>
<CAPTION>
SUMMARY OF EXPENSES
William Penn William Penn
Portfolio Portfolio Pro Forma
Federated Fund (Class A Shares) (Class C Shares) Combined
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a percentage of
offering price) 4.50%(1) 4.75% None 4.50%(1)
Maximum Sales Charge Imposed on
Reinvested Dividends (as a percentage
of offering price) None None None None
Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds,
as applicable) 0.00%(2) None 1.00%(3) 0.00%(2)
Redemption Fee (as a percentage of
amount redeemed, if applicable)(4) None None None None
Exchange Fee None None None None
</TABLE>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
(after expense reimbursements or waivers)
Management Fee 0.17%(5) 0.37% 0.37% 0.30%(5)
12b-1 Fee(6) 0.00% 0.20% 0.75% 0.00%
Total Other Expenses(7) 0.58% 0.28% 0.52% 0.45%
Total Operating Expenses(8) 0.75% 0.85% 1.64%
0.75%
(1) This sales charge would not be applicable to Class A 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) Class A Shares purchased with the proceeds of a redemption of shares
of an unaffiliated investment company purchased or redeemed with a sales
charge and not distributed by Federated Securities Corp. and not charged a
sales load but may be charged a contingent deferred sales charge of 0.50%
for redemptions made within one full year of purchase. For a more complete
description, see `Summary - Distribution Arrangements.'' This contingent
deferred sales charge would not be applicable to Class A Shares of the
Federated Fund acquired through the proposed reorganization.
(3) The Contingent Deferred Sales Charge assessed is 1.00% of the lesser of
the original purchase price or the net asset value of shares redeemed
within one year of their purchase date. For a more complete description,
see `Summary - Distribution Arrangements.''
(4) 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.
(5) 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%.
(6) The 12b-1 fee with respect to the William Penn Portfolio Class A
Shares has been reduced to reflect the voluntary waiver; the maximum 12b-1
fee for Class A Shares is 0.50%. The Federated Fund's Class A Shares did
not pay or accrue 12b-1 fees during the fiscal year ended August 31, 1996.
The class has no present intention of paying or accruing the 12b-1 fee
during the fiscal year ending August 31, 1997. If the class were paying or
accruing the 12b-1 fee, the class would be able to pay up to 0.40% of its
average daily net assets for the 12b-1 fee. The maximum 12b-1 fee for
Class C Shares of the William Penn Portfolio is 0.75%.
(7) Total Other Expenses include a shareholder services fee of 0.23% for
the Federated Fund and the Pro Forma Combined Fund and shareholder services
fees of 0.00% and 0.25% for William Penn Portfolio Class A Shares and Class
C Shares, respectively. The shareholder services fees have been reduced to
reflect the voluntary waivers of a portion of the shareholder services
fees. The shareholder service providers can terminate these voluntary
waivers at any time at their sole discretion. The maximum shareholder
services fee is 0.25%, 0.25%, 0.50% and 0.25% for the Federated Fund, the
Pro Forma Combined Fund, and the William Penn Portfolio's Class A Shares
and Class C Shares, respectively.
(8) The Total Operating Expenses for Class A Shares of the Federated Fund
are based on expenses incurred during its fiscal year ended August 31,
1996, and would have been 1.00% absent the voluntary waivers of a portion
of the management fee and a portion of the shareholder services fee. The
Total Operating Expenses for the William Penn Portfolio are based upon
expenses incurred for Class A Shares and for Class C Shares by the William
Penn Portfolio during its fiscal year ended December 31, 1996, and would
have been 1.25% and 2.05, respectively, without expense reimbursements.
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, Class A Shares and Class C
Shares, 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."
LONG TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE
MAXIMUM FRONT-END SALES CHARGE PERMITTED UNDER THE RULES OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC.
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 A 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 A Shares) $8 $24 $42 $93
William Penn Portfolio (Class A Shares) $9 $27 $47 $105
William Penn Portfolio (Class C Shares) $17 $52 $89 $194
Pro Forma Combined $8 $24 $42 $93
(2) This Example includes sales charges since Class A 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 March 4, 1997, 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, (2) redemption at the end of each time
period, and (3) payment of the maximum sales charge.
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Federated Fund (Class A Shares) $52 $68 $85 $134
William Penn Portfolio (Class A Shares) $56 $73 $92 $147
William Penn Portfolio (Class C Shares) $27 $52 $89 $194
Pro Forma Combined $52 $68 $85 $134
</TABLE>
An investor would pay the following expenses
on a $1,000 investment assuming (1) 5% annual return,
(2) no redemption at the end of each time period, and
(3) payment of the maximum sales charge.
1 year 3 years 5 years 10 years
Federated Fund (Class A Shares) $52 $68 $85 $134
William Penn Portfolio (Class A Shares) $56 $73 $92 $147
William Penn Portfolio (Class C Shares) $17 $52 $89 $194
Pro Forma Combined $52 $68 $85 $134
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 March 4, 1997, the Statement of Additional Information of the
Federated Fund dated March 4, 1997, 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 and Class C
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 A Shares to be distributed pro rata by the William Penn
Portfolio to holders of its Class A Shares and Class C 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 and Class C Shares will become
the owner of the Federated Fund's Class A 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 A Shares received by William Penn Portfolio's Class A
Shares and Class C 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 Commonwealth of Pennsylvania.
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 Pennsylvania income and personal property taxes, without assuming
any undue risk to income or principal. In pursuing this objective, the
Portfolio invests principally in investment grade Pennsylvania 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 Pennsylvania state and
local income tax (`Pennsylvania municipal securities''). The Pennsylvania
municipal securities in which the Federated Fund invests
include: obligations issued by or on behalf of the Commonwealth of
Pennsylvania, 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 from both
federal regular income tax and the personal income taxes imposed by the
Commonwealth of Pennsylvania. At least 80% of the value of the Federated
Fund's total assets will be invested in Pennsylvania Municipal Securities.
The Federated Fund may purchase Pennsylvania 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 up to
10% of its net assets in restricted securities. The Federated Fund's 10%
limit on investment in restricted securities may not be changed without
shareholder approval. The Federated Fund may invest in illiquid
securities, including certain restricted securities not determined by the
Trustees to be liquid, up 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
Commonwealth of Pennsylvania personal income taxes. However, from time to
time when the investment adviser determines that market conditions call for
a temporary defensive posture, the Federated Fund may invest in short-term
non-Pennsylvania municipal tax-exempt obligations or taxable temporary
investments. These temporary investments include: notes issued by or on
behalf of municipal or corporate issuers; obligations issued or guaranteed
by the U.S. government, its agencies, or instrumentalities; other debt
securities; commercial paper; certificates of deposit of banks; and
repurchase agreements (arrangements in which the organization selling the
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 Commonwealth of
Pennsylvania and its political subdivisions, agencies, authorities, and
instrumentalities (`Pennsylvania Bonds''). The William Penn Portfolio,
under normal market circumstances, invests generally 100%, but at least
80%, of the value of its total assets in Pennsylvania 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; (2) varying its investments, except to: (i)
eliminate unsafe investments and investments not consistent with the
preservation of the capital or the tax status of the investments of the
Federated Fund; (ii) honor redemption orders, meet anticipated redemption
requirements, and negate gains from discount purchases, (iii) reinvest the
earnings from securities in like securities; or (iv) defray normal
administrative expenses; or (3) 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 two investment limitations listed above cannot
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. Any such borrowings may not
exceed 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; (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
cannot 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 March 4, 1997, 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 Penn Square 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: .375% on the first
$50,000,000, .25% on the next $50,000,000 and .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 fee rate of 0.15%. Administrative personnel and
services necessary to operate the William Penn Portfolio are currently
provided by Penn Square 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 A 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.
The total annual operating expenses for Class A Shares of the
Federated Fund were 0.75% of average daily net assets (after waivers) for
its most recent fiscal year. The total annual operating expenses for Class
A Shares and Class C Shares of the William Penn Portfolio were 0.85% and
1.64% respectively 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
1.00% (Class A Shares), and for the William Penn Portfolio, 1.25% (Class A
Shares) and 2.05% (Class C 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 may pay a fee
to the distributor in an amount computed at an annual rate of 0.40% of the
average daily net assets of the Class A Shares to finance any activity
which is principally intended to result in the sale of Class A 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 A
Shares. Class A Shares did not pay or accrue 12b-1 fees during the fiscal
year ended August 31, 1996. The class has no present intention of paying
or accruing the 12b-1 fee during the fiscal year ending August 31, 1997.
FSC may pay financial institutions, at the time of purchase of Class A
Shares, an amount equal to 0.50% of the net asset value of Class A Shares
purchased by certain qualified plans as approved by FSC. (Such payments
are subject to a reclaim from the financial institution should the assets
leave the program within 12 months after purchase). 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 A 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 Penn Square 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 Penn Square 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 Penn Square
Management Corporation, a Service Organization may receive, on an annual
basis, up to 0.50% 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. The William
Penn Portfolio has adopted a Distribution Plan for Class C Shares to
compensate the distributor for its services and costs in distributing Class
C Shares. Under the Rule 12b-1 Plan, the William Penn Portfolio pays Penn
Square Management Corporation an annual 12b-1 Distribution Fee of 0.75% per
year on Class C Shares. Penn Square Management Corporation also receives a
Service Fee of 0.25% per year. Both fees are computed on the average
annual net assets of Class C Shares, determined as of the close of each
regular business day. The distribution fee allows investors to buy Class C
Shares without a front end sales charge while permitting the distributor to
compensate dealers who sell Class C Shares. The distribution and service
fee increase Class C expenses by 1.00% of average net assets per year.
Penn Square Management Corporation pays sales commissions of 1.00% of the
purchase price to dealers from its own resources at the time of sale. Penn
Square Management Corporation retains the distribution fee during the first
year shares are outstanding to recoup the sales commission it pays, the
advances of service fee payments it makes, and its financing costs. Penn
Square Management Corporation plans to pay the distribution fee as an
ongoing commission to the dealer on Class C Shares that have been
outstanding for a year or more. Penn Square Management Corporation
receives no other compensation for its services as distributor, except that
the sales charge will be paid to the distributor. Penn Square Management
Corporation may, in turn, pay such sales charge to broker/dealers as a
commission for generating sales of Class C Shares.
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 A Shares and William Penn Portfolio Class
A Shares have a maximum sales charge of 4.50% and 4.75%, respectively. No
sales charge will be imposed in connection with the issuance of Federated
Fund Class A Shares to Class A and Class C 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.
Class A Shares of the Federated Fund purchased with the proceeds of a
redemption of shares of an unaffiliated investment company purchased or
redeemed with a sales charge and not distributed by FSC may be charged a
contingent deferred sales charge of 0.50% for redemptions made within one
full year of purchase. Any such charge will be imposed on the lesser of
the net asset value of the redeemed shares at the time of purchase or
redemption. 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 A Shares received by shareholders of
the William Penn Portfolio as a result of the Reorganization. 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 March 4, 1997 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 Penn Square
Management Corporation. Procedures for the purchase, exchange and
redemption of the Federated Fund's Class A Shares differ slightly from
procedures applicable to the purchase, exchange and redemption of the
William Penn Portfolio's Class A Shares and Class C Shares. Any questions
about such procedures may be directed to, and assistance in effecting
purchases, exchanges or redemptions of the Federated Fund's Class A Shares
or the William Penn Portfolio's Class A Shares and Class C Shares may be
obtained from FSC, principal distributor for the Federated Fund, at 1-800-
341-7400, or from Penn Square 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
March 4, 1997, 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, respectively, 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 A Shares and the
William Penn Portfolio's Class A Shares and Class C Shares.
Purchases of Class A 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 Penn Square Management
Corporation and through certain broker-dealers under contract with Penn
Square Management Corporation or directly by wire or check once an account
has been established. The minimum initial investment in the Federated Fund
is $1,000 for Class A Shares. Subsequent investments must be in amounts of
at least $100. The minimum initial investment in the William Penn
Portfolio is $500 for either Class of 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.
The purchase price of the Federated Fund's Class A 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, except that some
Class C Shares may be subject to a 1.0% contingent deferred sales charge.
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 A Shares of the Federated Fund have exchange
privileges with respect to corresponding Class A 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 A
Shares of the Federated Fund may be exchanged for corresponding Class A
Shares of certain Federated Funds at net asset value without a contingent
deferred sales charge. To the extent a shareholder exchanges Class A
Shares of the Federated Fund for Class A 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 A 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 Penn Square 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 A 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. The William Penn Portfolio imposes no charges
for redemptions of Class A Shares. For Class C shares of the William Penn
Portfolio, redemptions within the first year of purchase will bear a
contingent deferred sales charge. 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 Pennsylvania Municipal
Securities, the Federated Fund is subject to market risks. Yields on
Pennsylvania Municipal Securities depend on a variety of factors,
including, but not limited to: the general conditions of the municipal
bond market; the size of the particular offering; the maturity of the
obligations; and the rating of the issue. Further, any adverse economic
conditions or developments affecting the Commonwealth of Pennsylvania or
its municipalities could impact the 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 Pennsylvania Municipal
Securities and participation interests, or the guarantors of either, to
meet their obligations for the payment of interest and principal when due.
Investing in Pennsylvania Municipal Securities which meet the Federated
Fund's quality standards may not be possible if the Commonwealth of
Pennsylvania or its municipalities do not maintain their current credit
ratings. In addition, any Pennsylvania constitutional amendments,
legislative measures, executive orders, administrative regulations, and
voter initiatives could result in adverse consequences affecting
Pennsylvania Municipal Securities. Since the William Penn Portfolio also
invests primarily in Pennsylvania 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 March 4,
1997, 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, Penn Square 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, Penn Square
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, Penn Square 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 A 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 considered potential economies of scale
that might be experienced by former William Penn Portfolio shareholders of
the combined Federated Fund and William Penn Portfolio.
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 Penn Square 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 Penn Square 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 Directors of the Federated Fund, including the independent
Directors, 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 A Shares to be distributed pro rata
by the William Penn Portfolio to its Class A and Class C shareholders
respectively, 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. Penn Square 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 A 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 A 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 March 4, 1997,
provided herewith for additional information about Class A 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 A 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 A Shares and the assumption of
certain stated liabilities or upon the distribution (whether actual or
constructive) of the Federated Fund Class A Shares to the William Penn
Portfolio shareholders in exchange for their 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 A 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 A
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 A 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 the
Federated 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 A Shares and Class B 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 Class A Shares and Class C Shares
outstanding. 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 and
the William Penn Portfolio 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 and the William Penn
Portfolio 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 Trust provides
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 Articles of Incorporation further provide 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, 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 shares
of the William Penn Portfolio as of February 28, 1997, and on a pro forma
combined basis as of that date:
Class A Shares Class C Shares Pro Forma
Fed. Fund Wm. Penn Wm. Penn Combined
Net Assets $85,237,124 $128,662,876 $1,655,528 $15,555,528
Net Asset Value Per Share $11.53 $11.07 $11.06 $11.53
Shares Outstanding7,390,441 11,623,704 149,657 18,689,631
INFORMATION ABOUT THE FEDERATED FUND
AND THE WILLIAM PENN PORTFOLIO
Municipal Securities Income Trust, Federated Pennsylvania Municipal Income
Fund
Information about the Federated Fund is contained in the Federated
Fund's current Prospectus dated March 4, 1997, 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 March 4, 1997, 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, Pennsylvania Tax-Free Income Portfolio
Information about the William Penn Interest Income Fund,
Pennsylvania 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 Semi-Annual Report to
Shareholders dated June 30, 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, Semi-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 10:45 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 and [ ] Class C 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 Penn Square
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 A 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 A 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 A.
CLASS A 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 A 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 or Class C 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 PENNSYLVANIA 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 PENNSYLVANIA 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 A 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 Federated Trust 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
directors who are not "interested persons" (as defined under the Investment
Company Act of 1940, as amended (the "1940 Act")), of the Acquiring Fund
has determined that the 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
trustees 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 shareholders
of 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 Penn Square 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 Acquiring Fund 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 Federated Trust 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 Federated Trust, 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 Acquiring Fund shall have delivered to the Acquired Fund on
the Closing Date a certificate executed in its name by its President or
Vice President and its Treasurer, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Acquiring Fund made in this Agreement are true and correct 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. Penn Square
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: PENNSYLVANIA TAX-FREE
INCOME PORTFOLIO
By:
Name: Name:
Title: Title:
Acquiring Fund:
Attest: MUNICIPAL SECURITIES INCOME TRUST
on behalf of its portfolio,
FEDERATED PENNSYLVANIA 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
PENNSYLVANIA 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 A SHARES OF
FEDERATED PENNSYLVANIA 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 Pennsylvania
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 Pennsylvania
Municipal Income Fund, a portfolio of Municipal Securities Income Trust,
dated March 4, 1997.
2. Statement of Additional Information of Pennsylvania Tax-Free Income
Portfolio, a portfolio of William Penn Interest Income Fund, dated
March 15, 1996.
3. Financial Statements of Federated Pennsylvania Municipal Income Fund,
a portfolio of Municipal Securities Income Trust, dated August 31, 1996.
4. Financial Statements of Pennsylvania Tax-Free Income Portfolio, a
portfolio of William Penn Interest Income Fund, dated December 31, 1996.
5. Pro forma Financial Statements (unaudited) of the combined
Pennsylvania Tax-Free Income Portfolio, a portfolio of William Penn
Interest Income Fund, dated August 31, 1996 and the Federated Pennsylvania
Municipal Income Fund, a portfolio of Municipal Securities Income Trust,
dated August 31, 1996.
The Statement of Additional Information of Federated Pennsylvania
Municipal Income Fund (the "Federated Fund"), a portfolio of Municipal
Securities Income Trust, dated March 4, 1997, is incorporated herein by
reference to Post-Effective Amendment No.22 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 February
12, 1997. 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 Pennsylvania 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.
Pro forma financial statements are included herein as the total net
assets of the William Penn Portfolio do exceed 10% of the total assets of
the Federated Fund. At February 28, 1997, the total net assets of the
William Penn Portfolio were $130,318,404 and the total net assets of the
Federated Fund were $85,237,124.
FEDERATED PENNSYLVANIA MUNICIPAL INCOME FUND
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
INTRODUCTION TO PROPOSED MERGER
The accompanying unaudited Pro Forma Combining Portfolio of Investments and
Statement of Assets and Liabilities reflect the accounts of Federated
Pennsylvania Municipal Income Fund and Pennsylvania Tax-Free Income
Portfolio, collectively (`the Funds''), as of August 31, 1996. These
statements have been derived from the books and records utilized in
calculating daily net asset values at August 31, 1996. The accompanying
unaudited Pro Forma Combining Statement of Operations reflects the
accounts of Federated Pennsylvania Municipal Income Fund's most recent
fiscal year ended August 31, 1996, and the twelve month period ended August
31, 1996, for Pennsylvania Tax-Free Income Portfolio.
The Pro Forma statements give effect to the proposed transfer of
assets from Pennsylvania Tax-Free Income Portfolio in exchange for Class A
Shares of Federated Pennsylvania Municipal Income Fund.
<TABLE>
<CAPTION>
FEDERATED PENNSYLVANIA MUNICIPAL INCOME FUND
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
PRO FORMA COMBINING PORTFOLIO OF INVESTMENTS
AUGUST 31, 1996 (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
FEDERATED PENNSYLVANIA FEDERATED PENNSYLVANIA
PENNSYLVANIA TAX-FREE PENNSYLVANIA TAX-FREE
MUNICIPAL INCOME PRO-FORMA MUNICIPAL INCOME PRO-FORMA
INCOME FUND PORTFOLIO COMBINED INCOME FUND PORTFOLIO COMBINED
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT AMOUNT AMOUNT VALUE VALUE VALUE
LONG-TERM MUNICIPALS--96.1%
PENNSYLVANIA--96.1%
- ----- $ 685,000 $ 685,000 Aliquippa, PA,
Aliquippa School ----- $ 245,894 $ 245,894
District, 6/1/2013
- ----- 585,000 585,000 Aliquippa, PA,
Aliquippa School ----- 196,858 196,858
District, 6/1/2014
- ----- 690,000 690,000 Allegheny County,
PA, GO Bonds, ----- 700,840 700,840
7.300%, 2/15/1997
- ----- 325,000 325,000 Allegheny County,
PA Hospital ----- 346,593 346,593
Authority, (MBIA
INS), 7.600%,
3/1/2008
- ----- 3,465,000 3,465,000 Allegheny County,
PA Hospital ----- 3,815,242 3,815,242
Authority,
(ESCROW), 6.625%,
7/1/2009
$ 2,000,000 ----- 2,000,000 Allegheny County,
PA HDA, Health &
Education Revenue
Bonds, 7.000% $ 2,027,100 ----- 2,027,100
(Rehabilitation
Institute of
Pittsburgh)/(Origin
al Issue Yield:
7.132%), 6/1/2022
2,325,000 ----- 2,325,000 Allegheny County,
PA HDA, Revenue
Refunding Bonds,
6.875% (Children's 2,467,337 ----- 2,467,337
Hospital of
Pittsburgh)/(MBIA
INS)/(Original
Issue Yield:
7.061%), 7/1/2014
- ----- 500,000 500,000 Allegheny County,
PA INS District, ----- 537,840 537,840
6.800%, (MBIA INS),
4/1/2000
- ----- 500,000 500,000 Allegheny County,
PA INS District, ----- 536,450 536,450
7.300%, (MBIA INS),
4/1/2009
465,000 ----- 465,000 Allegheny County,
PA Residential
Finance Agency, SFM 489,087 ----- 489,087
Revenue Bonds
(Series K), 7.750%
(GNMA COL),
12/1/2022
775,000 ----- 775,000 Allegheny County,
PA Residential
Finance Agency, SFM 815,548 ----- 815,548
Revenue Bonds
(Series Q), 7.400%
(GNMA COL),
12/1/2022
- ----- 590,000 590,000 Allegheny County,
PA Sanitary ----- 632,456 632,456
Authority, (FGIC
INS), 7.250%,
12/1/2003
- ----- 500,000 500,000 Allentown, PA,
Allentown School ----- 542,510 542,510
District,
GO Bond, 6.500%,
(AMBAC INS),
11/1/2001
2,060,000 ----- 2,060,000 Allentown, PA Area
Hospital Authority,
Revenue Bonds 2,064,326 ----- 2,064,326
(Series B), 6.750%
(Sacred Heart
Hospital of
Allentown),
11/15/2015
- ----- 1,170,000 1,170,000 Bethlehem, PA, ----- 1,250,297 1,250,297
6.150%, (AMBAC
INS), 6/1/2002
- ----- 500,000 500,000 Bethlehem, PA, ----- 542,345 542,345
6.750%, (AMBAC
INS), 9/1/2002
- ----- 400,000 400,000 Berks County, PA
Municipal ----- 408,996 408,996
Authority, 6.300%,
9/1/2002
- ----- 3,000,000 3,000,000 Berks County, PA, ----- 689,040 689,040
11/15/2020
4,250,000 ----- 4,250,000 Bradford County, PA
IDA, Solid Waste
Disposal Revenue 4,394,713 ----- 4,394,713
Bonds (Series A),
6.600%
(International
Paper Co.),
3/1/2019
- ----- 705,000 705,000 Bucks County, PA
Water & Sewer 721,786 721,786
Authority, (FGIC
INS), 5.500%,
2/1/2008
$ 750,000 ----- $ 750,000 Butler County, PA
Hospital Authority,
Hospital Revenue $ 809,798 ----- $ 809,798
Bonds (Series A),
7.000% (North Hills
Passavant
Hospital)/(FSA
INS), 6/1/2022
- ----- $ 1,260,000 Butler, PA, Butler ----- $ 421,521 421,521
1,260,000 School District,
12/1/2014
- ----- 100,000 100,000 Canon, PA, Canon ----- 45,486 45,486
School District,
3/1/2010
- ----- 150,000 150,000 Center Township,
PA, Sewer ----- 40,561 40,561
Authority,
(Series A)/(MBIA
INS), 4/15/2018
- ----- 2,170,000 2,170,000 Chartiers Valley,
PA, Chartiers ----- 2,239,440 2,239,440
Valley School
District, 6.150%,
(ESCROW), 3/1/2007
- ----- 1,035,000 1,035,000 Chester County, ----- 1,112,366 1,112,366
6.400%, 12/15/2001
- ----- 745,000 745,000 Cocalico School
District, PA, ----- 799,921 799,921
6.400%, (MBIA INS),
3/1/2001
- ----- 1,575,000 1,575,000 Commonwealth of
Pennsylvania, ----- 1,668,870 1,668,870
6.000%, 7/1/2007
- ----- 1,105,000 1,105,000 Cornell, PA,
Cornell School ----- 1,162,858 1,162,858
District, 6.000%,
9/1/2002
- ----- 920,000 920,000 Dauphin, PA, GO ----- 241,942 241,942
Bonds, (MBIA INS),
10/1/2018
- ----- 425,000 425,000 Delaware County, PA ----- 443,224 443,224
IDA, 7.900%,
12/1/2005
1,750,000 ----- 1,750,000 Delaware County, PA
Authority, Hospital
Revenue Bonds,
5.300% (Crozer- 1,603,630 ----- 1,603,630
Chester Medical
Center)/(MBIA
INS)/(Original
Issue Yield:
5.550%), 12/15/2020
- ----- 200,000 200,000 Delaware County, PA
Delaware River ----- 214,554 214,554
Joint Toll
Authority, 7.400%,
7/1/2002
750,000 ----- 750,000 Derry Township, PA
School District, GO 832,110 ----- 832,110
Bonds, 7.00%
(United States
Treasury PRF),
9/15/2009
1,600,000 ----- 1,600,000 Dormont Borough,
PA, Allegheny
County, UT GO Bonds
(Series 1995), 1,719,872 ----- 1,719,872
7.000% (United
States Treasury
PRF)/(Original
Issue Yield:
7.125%), 3/1/2010
(@100)
- ----- 500,000 500,000 Easton, PA, ----- 203,840 203,840
Northampton County,
12/1/2011
- ----- 700,000 700,000 Easton, PA, ----- 274,995 274,995
Northampton County,
6/1/2012
- ----- 2,210,000 2,210,000 Elizabeth, PA,
Elizabeth School ----- 605,717 605,717
District,
(MBIA INS),
9/1/2018
- ----- 2,210,000 2,210,000 Elizabeth, PA,
Elizabeth School ----- 571,108 571,108
District,
(MBIA INS),
9/1/2019
- ----- 2,210,000 2,210,000 Elizabeth, PA,
Elizabeth School ----- 533,494 533,494
District,
(MBIA INS),
9/1/2020
- ----- 2,210,000 2,210,000 Elizabeth, PA,
Elizabeth School ----- 507,725 507,725
District,
(MBIA INS),
9/1/2021
- ----- 2,210,000 2,210,000 Elizabeth, PA,
Elizabeth School ----- 478,708 478,708
District,
(MBIA INS),
9/1/2022
- ----- 2,210,000 2,210,000 Elizabeth, PA,
Elizabeth School ----- 451,370 451,370
District,
(MBIA INS),
9/1/2023
- ----- 2,170,000 2,170,000 Elizabeth, PA,
Elizabeth School ----- 412,235 412,235
District,
(MBIA INS),
9/1/2024
- ----- 500,000 500,000 Erie, PA, Erie
Lease Revenue, ----- 543,525 543,525
(Erie Prison),
6.450%, (MBIA INS),
11/1/2001
- ----- 3,800,000 3,800,000 Exeter School ----- 1,079,618 1,079,618
District, PA, (FGIC
INS), 5/15/2017
- ----- 3,800,000 3,800,000 Exeter School ----- 1,015,968 1,015,968
District, PA, (FGIC
INS), 5/15/2018
- ----- 3,800,000 3,800,000 Exeter School ----- 956,080 956,080
District, PA, (FGIC
INS), 5/15/2019
2,000,000 ----- 2,000,000 Fayette County, PA
Hospital Authority,
Hospital Revenue
Bonds (Series 1,898,580 ----- 1,898,580
1996A), 5.750%
(Uniontown
Hospital)/(Connie
Lee INS)/(Original
Issue Yield:
6.050%), 6/15/2015
1,000,000 ----- 1,000,000 Geisinger
Authority, PA
Health System,
Revenue Bonds, 1,101,990 ----- 1,101,990
7.625% (United
States Treasury
PRF)/(Original
Issue Yield:
7.697%), 7/1/2009
(@102)
- ----- 750,000 750,000 Harrisburg, PA,
Harrisburg Water ----- 816,067 816,067
Authority, 6.650%,
(FGIC INS),
7/15/2001
- ----- 175,000 175,000 Harrisburg, PA,
Harrisburg Water ----- 190,913 190,913
Authority, 6.800%,
7/15/2002
- ----- 1,000,000 1,000,000 Harrisburg, PA,
Harrisburg Water ----- 1,099,550 1,099,550
Authority, 7.000%,
(FGIC INS),
7/15/2015
- ----- $ 500,000 $ 500,000 Harrisburg, PA,
Public School ----- $ 543,995 $ 543,995
Authority, 6.500%,
(MBIA INS),
4/1/2002
- ----- 710,000 710,000 Hatboro, PA,
Hatboro School ----- 746,728 746,728
District, 6.650%,
9/1/2002
- ----- 2,000,000 2,000,000 Hempfield, PA,
Hempfield Area ----- 1,950,920 1,950,920
School District,
4.600%, 10/15/2004
- ----- 955,000 955,000 Johnstown, PA,
Johnstown School ----- 975,284 975,284
District Pre 1987,
7.250%, 5/1/2003
$ 1,000,000 ----- 1,000,000 Lackawanna Trail
School District,
PA, UT GO Refunding $ 1,089,060 ----- 1,089,060
Bonds, 6.900%
(AMBAC INS),
3/15/2010
1,380,000 ----- 1,380,000 Latrobe, PA
Industrial
Development
Authority, College 1,389,067 ----- 1,389,067
Revenue Bonds,
6.750% (St. Vincent
College,
PA)/(Original Issue
Yield: 7.000%),
5/1/2024
1,500,000 ----- 1,500,000 Lebanon County, PA
Good Samaritan
Hospital Authority,
Hospital Revenue 1,395,705 ----- 1,395,705
Bonds, 6.000% (Good
Samaritan
Hospital)/(Original
Issue Yield:
6.100%), 11/15/2018
1,000,000 ----- 1,000,000 Lehigh County, PA
General Purpose
Authority, Hospital
Refunding Revenue 975,680 ----- 975,680
Bonds (Series
1996A), 5.750%
(Muhlenberg
Hospital
Center)/(Original
Issue Yield:
5.850%), 7/15/2010
- ----- 750,000 750,000 Lehigh County, PA
Higher Education,
(Lehigh ----- 766,478 766,478
University)/(North
Hampton County),
6.400%, 9/1/1997
2,500,000 ----- 2,500,000 Luzerne County, PA
IDA, Revenue
Refunding Bonds 2,747,100 ----- 2,747,100
(Series A), 7.000%
(Pennsylvania Gas &
Water
Company)/(AMBAC
INS), 12/1/2017
4,000,000 ----- 4,000,000 Lycoming County PA
Authority, Hospital
Lease Revenue Bonds
(Series B), 6.500% 4,275,440 ----- 4,275,440
(Divine Providence
Hospital,
PA)/(Original Issue
Yield: 6.700%),
7/1/2022
- ----- 1,000,000 1,000,000 Mannheim, PA,
Mannheim Central ----- 1,069,520 1,069,520
School District,
6.400%, (FGIC INS),
3/1/2001
- ----- 1,010,000 1,010,000 Mars, PA, Mars
School District, ----- 222,119 222,119
(FGIC INS),
9/1/2021
- ----- 435,000 435,000 Mars, PA, Mars
School District, ----- 89,588 89,588
(FGIC INS),
9/1/2022
- ----- 2,210,000 2,210,000 Mars, PA, Mars
School District, ----- 428,320 428,320
(FGIC INS),
9/1/2023
- ----- 2,210,000 2,210,000 Mars, PA, Mars
School District, ----- 403,060 403,060
(FGIC INS),
9/1/2024
- ----- 2,210,000 2,210,000 Mars, PA, Mars
School District, ----- 379,302 379,302
(FGIC INS),
9/1/2025
- ----- 1,880,000 1,880,000 Mars, PA, Mars
School District, ----- 303,639 303,639
(FGIC INS),
9/1/2026
- ----- 390,000 390,000 McKean, PA, McKean
IDA, (Kmart), ----- 381,213 381,213
6.375%, 4/1/2004
- ----- 1,000,000 1,000,000 McKeesport, PA,
McKeesport School ----- 296,790 296,790
District, (FSA
INS), 10/1/2016
- ----- 1,200,000 1,200,000 McKeesport, PA,
McKeesport School ----- 333,192 333,192
District, (FSA
INS), 10/1/2017
- ----- 1,440,000 1,440,000 McKeesport, PA,
McKeesport School ----- 376,258 376,258
District, (FSA
INS), 10/1/2018
- ----- 2,000,000 2,000,000 McKeesport, PA,
McKeesport School ----- 491,780 491,780
District, (FSA
INS), 10/1/2019
- ----- 1,000,000 1,000,000 McKeesport, PA,
McKeesport School ----- 229,240 229,240
District, (FSA
INS), 10/1/2020
- ----- 1,375,000 1,375,000 McKeesport, PA,
McKeesport School ----- 296,505 296,505
District, (FSA
INS), 10/1/2021
- ----- 800,000 800,000 Mill Creek Township
School District, ----- 590,208 590,208
PA, (FGIC INS),
8/15/2002
1,000,000 ----- 1,000,000 Monroeville, PA
Hospital Authority,
Hospital Refunding
Revenue Bonds 983,530 ----- 983,530
(Series 1995),
6.250% (Forbes
Health System,
PA)/(Original Issue
Yield: 6.600%),
10/1/2015
- ----- $ 500,000 $ 500,000 Montour, PA, ----- $ 136,740 $ 136,740
Montour School
District, 7/1/2018
- ----- 445,000 445,000 Montour, PA, ----- 191,470 191,470
Montour School
District, 1/1/2011
- ----- 500,000 500,000 North Cambria, PA,
Northern Cambria ----- 538,790 538,790
School District,
7.100%, (AMBAC
INS), 1/15/2007
- ----- 1,080,000 1,080,000 Northeastern York
County School ----- 418,036 418,036
District, 9/1/2012
- ----- 400,000 400,000 North Hills School ----- 267,600 267,600
District, PA,
7/15/2004
- ----- 1,250,000 1,250,000 North Penn, PA,
North Penn School ----- 1,319,600 1,319,600
District, 6.200%,
(ESCROW), 3/1/2007
- ----- 2,650,000 2,650,000 Penn Hills, PA, ----- 875,693 875,693
(AMBAC INS)
6/1/2013
- ----- 945,000 945,000 Penn Hills, PA, ----- 302,126 302,126
(AMBAC INS)
12/1/2013
- ----- 490,000 490,000 Penn Hills, PA, ----- 288,110 288,110
(AMBAC INS)
6/1/2006
- ----- 500,000 500,000 Penn Hills, PA, ----- 286,095 286,095
(AMBAC INS)
12/1/2006
- ----- 560,000 560,000 Penn Hills, PA, ----- 309,546 309,546
(AMBAC INS)
6/1/2007
- ----- 1,465,000 1,465,000 Penn Hills, PA, ----- 637,846 637,846
(AMBAC INS)
12/1/2010
- ----- 480,000 480,000 Penn Manor, PA,
Penn Manor School ----- 479,554 479,554
District, 3.650%,
(FGIC INS),
6/1/1997
- ----- 500,000 500,000 Pennsylvania
Convention Center, ----- 519,100 519,100
6.250%,
(FGIC INS),
9/1/2004
- ----- 1,000,000 1,000,000 Pennsylvania
Convention Center, ----- 1,112,050 1,112,050
6.700%,
(FGIC INS),
9/1/2016
- ----- 1,000,000 1,000,000 Pennsylvania COPs,
5.000%, (AMBAC ----- 1,004,530 1,004,530
INS), 7/1/2003
$ 4,000,000 ----- 4,000,000 Pennsylvania EDFA,
Revenue Bonds,
7.600% (Macmillan $ 4,398,080 ----- 4,398,080
Bloedel LTD
Partnership)/(Origi
nal Issue Yield:
7.650%), 12/1/2020
8,000,000 ----- 8,000,000 Pennsylvania EDFA,
Wastewater
Treatment Revenue 8,807,840 ----- 8,807,840
Bonds (Series A),
7.600% (Sun Co.,
Inc.)/(Original
Issue Yield:
7.653%), 12/1/2024
- ----- 2,000,000 2,000,000 Pennsylvania GO ----- 2,003,840 2,003,840
Bonds, 4.100%,
5/1/1997
- ----- 7,000,000 7,000,000 Pennsylvania GO
Bonds, 5.375%, ----- 7,078,610 7,078,610
(FGIC INS),
5/15/2006
- ----- 500,000 500,000 Pennsylvania GO ----- 542,660 542,660
Bonds, 6.875%,
11/1/2001
- ----- 1,750,000 1,750,000 Pennsylvania
Housing Finance ----- 1,763,440 1,763,440
Authority, 5.350%,
10/1/2008
- ----- 1,000,000 1,000,000 Pennsylvania
Housing Finance ----- 1,007,680 1,007,680
Authority, 5.375%,
10/1/2016
- ----- 580,000 580,000 Pennsylvania
Housing Finance ----- 546,998 546,998
Authority, (Series
96), 5.550%,
10/1/2012
- ----- 1,000,000 1,000,000 Pennsylvania
Housing Finance ----- 1,001,240 1,001,240
Authority, 5.650%,
4/1/2020
2,290,000 ----- 2,290,000 Pennsylvania
Housing Finance
Authority, SFM 2,380,157 ----- 2,380,157
Revenue Bond Bonds
(Series 39B),
6.875%, 10/1/2024
750,000 ----- 750,000 Pennsylvania
Housing Finance 785,490 ----- 785,490
Authority, SFM
Revenue Bonds
(Series 33),
6.900%, 4/1/2017
1,000,000 ----- 1,000,000 Pennsylvania
Housing Finance
Authority, SFM 1,040,410 ----- 1,040,410
Revenue Bonds
(Series 34-B),
7.000%
(FHA GTD), 4/1/2024
4,540,000 ----- 4,540,000 Pennsylvania
Housing Finance
Authority, SFM 4,774,673 ----- 4,774,673
Revenue Bonds
(Series28), 7.650%
(FHA GTD),
10/1/2023
- ----- 450,000 450,000 Pennsylvania
Housing Finance ----- 464,477 464,477
Authority, 7.900%,
(FHA GTD),
10/1/2007
- ----- 500,000 500,000 Pennsylvania IDA, ----- 546,450 546,450
6.800%, 1/1/2001
- ----- 2,500,000 2,500,000 Pennsylvania
Intergovernmental ----- 2,504,325 2,504,325
Co-op Authority,
4.000%, 6/15/1997
- ---- 750,000 750,000 Pennsylvania
Intergovernmental ----- 798,870 798,870
Co-op Authority,
6.000%, 6/15/2002
2,500,000 ----- 2,500,000 Pennsylvania
Intergovernmental
Co-op Authority,
Special Tax Revenue
Bond, Philadelphia 2,803,200 ----- 2,803,200
Funding Program,
6.750% (FGIC
INS)/(United States
Treasury
PRF)/(Original
Issue Yield:
7.130%), 6/15/2021
- ----- 350,000 350,000 Pennsylvania
Intergovernmental ----- 964,478 964,478
Coop Authority,
7.000%, (FGIC INS),
6/15/2005
- ----- $ 840,000 $ 840,000 Pennsylvania
Montgomery County ----- $ 802,813 $ 802,813
Hospital, 4.500%,
(AMBAC INS),
6/1/2004
$ 2,000,000 ----- 2,000,000 Pennsylvania State
Higher Education
Facilities
Authority, Health
Services Revenue $ 1,949,080 ----- 1,949,080
Bonds (Series A of
1996), 5.750%
(University of
Pennsylvania)/(Orig
inal Issue Yield:
6.035%), 1/1/2022
1,000,000 ----- 1,000,000 Pennsylvania State
Higher Education
Facilities
Authority, Hospital 1,065,760 ----- 1,065,760
Revenue Bonds
(Series A), 7.250%
(Allegheny General
Hospital)/(Original
Issue Yield:
7.400%), 9/1/2017
- ----- 750,000 750,000 Pennsylvania State
Higher Education
Facilities ----- 807,015 807,015
Authority, Revenue
Bonds, 6.800%,
(MBIA INS),
6/15/2001
2,000,000 ----- 2,000,000 Pennsylvania State
Higher Education
Facilities 2,000,480 ----- 2,000,480
Authority, Revenue
Bonds (Series
1996), 7.200%
(Thiel College ),
5/15/2026
4,000,000 ---- 4,000,000 Pennsylvania State
Higher Education
Facilities
Authority, Revenue
Bonds (Series A), 4,475,720 ----- 4,475,720
7.375% (Medical
College of
Pennsylvania)/(Unit
ed States Treasury
PRF)/(Original
Issue Yield:
7.450%), 3/1/2021
2,000,000 ----- 2,000,000 Pennsylvania State
Higher Education
Facilities
Authority, Revenue 1,993,320 ----- 1,993,320
Bonds (Series N),
5.875% (MBIA
Insurance
Corporation
INS)/(Original
Issue Yield:
5.913%), 6/15/2021
2,000,000 ---- 2,000,000 Pennsylvania State
Higher Education
Facilities
Authority, Revenue 2,019,640 ----- 2,019,640
Bonds, 6.375%
(Drexel
University)/(Origin
al Issue Yield:
6.415%), 5/1/2017
- ----- 1,000,000 1,000,000 Pennsylvania State
Turnpike ----- 1,034,130 1,034,130
Commission, 5.450%,
(MBIA INS),
12/1/2002
- ----- 1,000,000 1,000,000 Pennsylvania State
Turnpike ----- 1,018,200 1,018,200
Commission, 6.000%,
(MBIA INS),
6/1/2015
- ----- 500,000 500,000 Pennsylvania State
University, (Series ----- 499,280 499,280
1993A), 4.700%,
3/1/2002
- ----- 460,000 460,000 Pennsylvania State
University, (Series ----- 459,236 459,236
1993A), 4.800%,
3/1/2003
- ----- 1,505,000 1,505,000 Pennsylvania State
University, (Series ----- 1,544,461 1,544,461
1992A), 5.200%,
8/15/2002
- ----- 500,000 500,000 Pennsylvania State
University, 6.300%, ----- 525,715 525,715
(ETM), 7/1/1999
- ----- 250,000 250,000 Pennsylvania State
University, GO ----- 269,765 269,765
Bonds, 6.750%,
7/1/2002
- ----- 1,700,000 1,700,000 Pennsylvania State
University, PRF, ----- 1,895,177 1,895,177
7.000%, 7/1/2016
- ----- 500,000 500,000 Pennsylvania
University Health ----- 530,005 530,005
Services, 6.000%,
1/1/2006
- ----- 800,000 800,000 Philadelphia GO
Bonds, 5.125%, ----- 808,984 808,984
(FGIC INS),
5/15/2003
- ----- 1,860,000 1,860,000 Philadelphia GO
Bonds, 5.400%, ----- 1,913,494 1,913,494
(FGIC INS),
11/15/2003
- ----- 300,000 300,000 Philadelphia GO
Bonds, 6.250%, ----- 325,599 325,599
(FGIC INS),
11/15/2004
- ----- 1,375,000 1,375,000 Philadelphia
Hospital Authority, ----- 1,338,466 1,338,466
5.000%,
(MBIA INS),
7/1/2006
- ----- 325,000 325,000 Philadelphia ----- 326,505 326,505
Hospital Authority,
6.150%, 7/1/2005
- ----- 250,000 250,000 Philadelphia
Hospital Authority, ----- 278,290 278,290
(AMBAC INS),
7.750%, 8/15/2008
- ----- 1,000,000 1,000,000 Philadelphia
Hospital Authority, ----- 1,309,960 1,309,960
10.875%, 7/1/2008
4,000,000 ----- 4,000,000 Philadelphia, PA,
(Series 1995A)
Airport Revenue
Bonds, 6.100% 3,991,480 ----- 3,991,480
(Philadelphia
Airport
System)/(AMBAC
INS)/(Original
Issue Yield:
6.400%), 6/15/2025
- ----- 150,000 150,000 Philadelphia, PA,
Philadelphia ----- 160,104 160,104
Municipal
Authority, 7.500%,
(FGIC INS),
4/1/2003
- ----- $ 905,000 $ 905,000 Philadelphia, PA,
Philadelphia ----- $ 999,998 $ 999,998
Municipal Authority
PRF, 7.800%,
4/1/2013
- ----- 95,000 95,000 Philadelphia, PA,
Philadelphia ----- 101,831 101,831
Municipal Authority
PRF, 7.800%,
4/1/2018
- ----- 2,550,000 2,550,000 Philadelphia, PA,
Philadelphia ----- 2,683,340 2,683,340
Municipal
Authority, 7.875%,
7/15/2017
- ----- 500,000 500,000 Philadelphia, PA,
(Philadelphia Gas ----- 540,390 540,390
Works), 7.400%,
6/15/2000
- ----- 1,500,000 1,500,000 Philadelphia, PA,
(Philadelphia Gas ----- 1,539,210 1,539,210
Works), 5.800%,
7/1/2001
- ----- 1,000,000 1,000,000 Philadelphia, PA,
(Philadelphia Gas ----- 812,030 812,030
Works), 1/1/2001
- ----- 245,000 245,000 Philadelphia, PA,
(Philadelphia ----- 251,889 251,889
Justice Lease),
6.250%, (MBIA INS),
11/15/1997
- ----- 1,300,000 1,300,000 Philadelphia School
District, 5.200%, ----- 1,320,826 1,320,826
(MBIA INS),
7/1/2003
- ----- 500,000 500,000 Philadelphia School
District, 6.700%, ----- 530,035 530,035
(AMBAC INS),
7/1/1999
- ----- 1,500,000 1,500,000 Philadelphia Waste,
5.200%, (FGIC INS), ----- 1,490,475 1,490,475
6/15/2005
- ----- 1,000,000 1,000,000 Philadelphia Water
& Sewer Authority, ----- 1,069,140 1,069,140
7.400%, 8/1/1999
- ----- 650,000 650,000 Philadelphia Water
& Sewer Authority, ----- 369,831 369,831
(MBIA INS),
10/1/2006
- ----- 1,000,000 1,000,000 Philadelphia Water
& Sewer Authority, ----- 505,790 505,790
(MBIA INS),
10/1/2008
- ----- 280,000 280,000 Pittsburgh, PA,
Stadium Authority, ----- 292,076 292,076
6.500%, (ESCROW),
4/1/2011
- ----- 1,000,000 1,000,000 Pittsburgh, PA,
University of ----- 1,061,210 1,061,210
Pittsburgh, 6.400%,
(MBIA INS),
4/1/2000
- ----- 1,000,000 1,000,000 Pittsburgh, PA,
University of ----- 1,051,790 1,051,790
Pittsburgh, 8.375%,
6/1/2005
- ----- 1,000,000 1,000,000 Pittsburgh, PA,
Water & Sewer ----- 1,086,840 1,086,840
Authority, 6.500%,
(FGIC INS),
9/1/2001
- ----- 3,500,000 3,500,000 Reading, PA,
Reading Hospital, ----- 3,481,520 3,481,520
5.500%,
(MBIA INS),
10/1/2008
- ----- 1,115,000 1,115,000 Reading, PA,
Reading School ----- 507,169 507,169
District, (MBIA
INS), 3/1/2010
- ----- 1,000,000 1,000,000 Reading, PA,
Reading School ----- 550,210 550,210
District, (MBIA
INS), 7/15/2007
- ----- 500,000 500,000 Reading, PA,
Reading School ----- 255,335 255,335
District, (MBIA
INS), 7/15/2008
- ----- 80,000 80,000 Ringgold, PA,
Ringgold School ----- 80,000 80,000
District, 7.200%,
(MBIA INS),
8/1/2006
- ----- 500,000 500,000 Schuylkill, PA,
Schuylkill County ----- 540,165 540,165
Redevelopment
Authority, 6.650%,
6/1/2001
- ----- 1,000,000 1,000,000 Schuylkill County,
PA, 6.750%, (FGIC ----- 1,102,800 1,102,800
INS), 6/1/2002
- ----- 120,000 120,000 Scranton-
Lackawanna, PA -----
Health & Welfare 126,927 126,927
Authority, Revenue
Bonds, 7.250%,
(MBIA INS),
7/1/1999
$ 2,500,000 ----- 2,500,000 Scranton-
Lackawanna, PA
Health & Welfare
Authority, Revenue $ 2,562,923 ----- 2,562,923
Bonds (Series 1994-
A), 7.600% (Allied
Services
Rehabilitation
Hospitals, PA),
7/15/2020
- ----- 500,000 500,000 Seneca Valley, PA,
Seneca Valley ----- 521,260 521,260
School District,
6.250%, (MBIA INS),
7/1/2001
- ----- 2,245,000 2,245,000 Shaler, PA, Shaler
School District, ----- 2,315,964 2,315,964
6.250%, (ETM),
4/15/2003
2,650,000 ----- 2,650,000 Sharon, PA General
Hospital Authority,
Hospital Revenue 2,659,196 ----- 2,659,196
Bonds, 6.875%
(Sharon Regional
Health System),
12/1/2022
- ----- 495,000 495,000 Shenandoah Valley ----- 164,880 164,880
School District,
PA, 8/1/2014
- ----- 555,000 555,000 Shenandoah Valley ----- 173,865 173,865
School District,
PA, 8/1/2015
- ----- 590,000 590,000 Shenandoah Valley ----- 173,832 173,832
School District,
PA, 8/1/2016
- ----- $ 425,000 $ 425,000 St. Agnes, PA,
(Saint Agnes -----
Medical $ 464,895 $ 464,895
Center)\(Philadelph
ia Hospital
Authority), 6.750%,
3/15/2001
- ----- 1,220,000 1,220,000 Steel Valley School ----- 393,889 393,889
District, PA,
11/1/2014
- ----- 750,000 750,000 Valley View School
District, PA, (FGIC ----- 234,728 234,728
INS), 11/15/2015
- ----- 750,000 750,000 Valley View School
District, PA, (FGIC ----- 220,950 220,950
INS), 11/15/2016
- ----- 1,500,000 1,500,000 Valley View School
District, PA, (FGIC ----- 413,415 413,415
INS), 11/15/2017
- ----- 1,500,000 1,500,000 Valley View School
District, PA, (FGIC ----- 389,040 389,040
INS), 11/15/2018
- ----- 1,500,000 1,500,000 Valley View School
District, PA, (FGIC ----- 366,105 366,105
INS), 11/15/2019
$ 1,000,000 ----- 1,000,000 Warren County, PA
Hospital Authority,
Revenue Bonds $ 1,008,450 ----- 1,008,450
(Series A), 7.00%
(Warren General
Hospital,
PA)/(Original Issue
Yield: 7.101%),
4/1/2019
- ----- 400,000 400,000 Washington County,
PA, (Washington ----- 485,604 485,604
County
Lease)/(ETM),
7.875%, 12/15/2018
- ----- 680,000 680,000 Washington County,
PA, (Shadyside ----- 747,007 747,007
Hospital), 7.000%,
(AMBAC INS),
12/15/2000
- ----- 2,850,000 2,850,000 Washington County,
PA, West Penn Power ----- 2,777,411 2,777,411
Company, 4.950%,
3/1/2003
- ----- 1,000,000 1,000,000 West View, PA, West
View Municipal ----- 1,438,570 1,438,570
Special Obligation
Bond, 9.500%,
(ETM), 11/15/2014
- ----- 1,000,000 1,000,000 Westmoreland
County, PA, ----- 717,090 717,090
Westmoreland County
Special
Obligations,
2.000%, (ETM),
7/1/2007
- ----- 305,000 305,000 Westmoreland
County, PA, -----
Westmoreland County 333,563 333,563
Municipal
Authority, 6.800%,
(MBIA INS),
7/1/2001
- ----- 1,000,000 1,000,000 Westmoreland
County, PA, ----- 1,212,870 1,212,870
Westmoreland County
Special
Obligations,
9.125%, (ETM),
7/1/2010
- ----- 2,500,000 2,500,000 Westmoreland
County, PA, ----- 973,225 973,225
Westmoreland County
Special
Obligations, (ETM),
8/15/2012
- ----- 900,000 900,000 Wyoming Valley, PA,
Valley Sanitation ----- 896,382 896,382
Authority, 3.500%,
(FSA), 11/15/1997
- ----- 2,000,000 2,000,000 York, PA, York City ----- 2,000,000 2,000,000
Savers, 3.900%,
7/1/2021
- ----- TOTAL LONG-TERM
MUNICIPALS 81,795,572 123,695,467 205,491,039
(IDENTIFIED
COST $198,815,017)
SHORT-TERM OBLIGATIONS--2.2%
MUTUAL FUND--2.0%
4,337,817 4,337,817 CoreFund Tax-Free ----- 4,337,817 4,337,817
Reserve
- ----- PENNSYLVANIA--0.2%
500,000 ----- 500,000 Geisinger
Authority, PA 500,000 ----- 500,000
Health System,
(Series 1992B)
Daily VRDNs
TOTAL SHORT-
TERM OBLIGATIONS 500,000 ,337,817 4,837,817
(AT AMORTIZED
COST)
TOTAL
INVESTMENTS $ 82,295,572 $ $ 210,328,856
(IDENTIFIED 128,033,284
COST
$203,652,834)(A)
</TABLE>
(a) The cost of investments for federal tax purposes amounts to $203,652,834.
The net unrealized appreciation of investments on a federal tax basis amounts to
$6,676,022 which is comprised of $8,521,824 appreciation and $1,845,802
depreciation at August 31, 1996.
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings.
Note: The categories of investments are shown as a percentage of net assets
($213,769,561) at August 31, 1996.
The following acronyms are used throughout this portfolio:
AMBAC --American Municipal Bond Assurance Corporation
COL --Collateralized
COPs --Certificates of Participation
EDFA --Economic Development Financing Authority
ESCROW --Defined
ETM --Escrowed to Maturity
FGIC --Financial Guaranty Insurance Company
FHA --Federal Housing Administration
FSA --Financial Security Assurance
GNMA --Government National Mortgage Association
GO --General Obligation
GTD --Guaranty
HDA --Hospital Development Authority
IDA --Industrial Development Authority
INS --Insured
LTD --Defined
MBIA --Municipal Bond Investors Assurance
PRF --Prerefunded
SFM --Single Family Mortgage
UT --Unlimited Tax
VRDNs --Variable Rate Demand Notes
<TABLE>
<CAPTION>
FEDERATED PENNSYLVANIA MUNICIPAL INCOME FUND
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1996 (UNAUDITED)
<S> <C> <C> <C> <C><C>
FEDERATED PENNSYLVANIA
PENNSYLVANIA TAX-FREE
MUNICIPAL INCOME PRO FORMA PRO FORMA
INCOME FUND PORTFOLIO ADJUSTMENT COMBINED
ASSETS:
Investments in $ 82,295,572 $28,033,284 ---- $ 210,328,856
securities, at value
Cash 84,381 528,442 ---- 612,823
Receivables for: ----
Shares of beneficial 168,137 91,900 ---- 260,037
interest sold
Income 1,798,545 1,675,138 ---- 3,473,683
Total assets 84,346,635 130,328,764 ---- 214,675,399
LIABILITIES:
Payables for/to:
Shares of beneficial
interest
redeemed ---- 45,784 ---- 45,784
Income distributions 176,401 ---- ---- 176,401
Investments purchased ---- 584,739 ---- 584,739
Accrued expenses and other
liabilities 54,704 44,210 ---- 98,914
Total liabilities 231,105 674,733 ---- 905,838
TOTAL NET ASSETS $ 84,115,530 $29,654,031 ---- $ 213,769,561
NET ASSETS CONSIST OF:
Paid in capital $ 81,237,429 $27,729,412 ---- $ 208,966,841
Net unrealized
appreciation of
investments 4,611,761 2,064,261 ---- 6,676,022
Accumulated net realized gain (loss)
on investments (1,930,489) (139,642) ---- (2,070,131)
Undistributed
net investment income 196,829 ---- 196,829
TOTAL NET ASSETS $ 84,115,530 $29,654,031 $--- $ 213,769,561
Class A Shares $ 84,115,530 $28,407,143 $,246,888 (a)$213,769,561
Class C Shares $ N/A $,246,888 $1,246,888) (a)$----
SHARES OUTSTANDING
Class A Shares 7,408,593 11,771,489 (352,021) 18,828,061
(b)
Class C Shares N/A 114,291 (114,291) ----
(b)
TOTAL SHARES OUTSTANDING 7,408,593 11,885,780 (466,312) 18,828,061
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net asset value per share$ 11.35 $0.91 11.35
Offering price per share $ 11.70 11.45 * 11.70 *
*
$
Redemption proceeds per $ 11.35 10.91 $1.35
share
CLASS C SHARES:
Net asset value per share$ N/A $0.91 $/A
Offering price per share $ N/A $0.91 $/A
Redemption proceeds per $ N/A 10.80 * $/A
share $ *
*
TOTAL INVESTMENTS, AT
IDENTIFIED COST $ 77,683,811 $25,969,023 $03,652,834
</TABLE>
(a) Adjustment to reflect Class C shares combined with Class A shares
(b) Adjustment to reflect share balance as a result of the combination, based on
the exchange ratio of 0.9607672361.
* See "What Shares Cost" in the Federated Pennsylvania Municipal Income Fund
Prospectus, as of October 31, 1996.
** See ``How to Buy Shares'' in the Pennsylvania Tax-Free Income Portfolio
Prospectus, as of March 15, 1996.
*** See ``How to Redeem Shares'' in the Pennsylvania Tax-Free Income Portfolio
Prospectus, as of March 15, 1996.
<TABLE>
<CAPTION>
FEDERATED PENNSYLVANIA MUNICIPAL INCOME FUND
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
PRO FORMA COMBINING STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED AUGUST 31, 1996 (UNAUDITED)
FEDERATED
PENNSYLVANIA PENNSYLVANIA
MUNICIPAL TAX-FREE
INCOME INCOME PRO FORMA PRO FORMA
FUND PORTFOLIO ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $5,530,462 $7,789,111 $----- $13,319,573
EXPENSES:
Investment advisory fee 341,175 806,454 (310,174) (a) 837,455
Administrative personnel and
services fee 125,000 ---- 33,070 (b) 158,070
Custodian fees 20,600 74,142 (61,807) (c) 32,935
Transfer and dividend
disbursing agent fees and
expenses 37,388 185,283 (149,563) (d) 73,108
Directors'/Trustees' fees 3,302 14,351 (13,653) (e) 4,000
Legal and auditing fees 18,833 27,579 (26,640) (f) 19,772
Portfolio accounting fees 50,654 ---- 17,713 (g) 68,367
Distribution services fee
- Class A Shares ---- 410,341 (410,341) (h) ----
Distribution services fee
- Class C Shares ---- 6,532 (6,532) (h) ----
Shareholder services fee
-Class A Shares 213,235 ---- 310,174 (i) 523,409
Shareholder services fee
-Class C Shares 2,178 (2,178) (i) ----
Share registration costs 14,447 17,248 (15,635) (j) 16,060
Printing and postage 18,838 33,630 (28,468) (k) 24,000
Insurance premiums and
miscellaneous 12,478 8,620 (7,098) (l) 14,000
Total expenses 855,950 1,586,358 (671,132) 1,771,176
Deduct-
Waiver of investment
advisory fee (195,433) (299,281) 302,978 (a) (191,736)
Waiver of shareholder
services fee -
Class A Shares (17,059) ---- 17,059 (i) ----
Waiver of distribution
services fee ---- (228,532) 228,532 (h) ----
Net expenses 643,458 1,058,545 (122,563) 1,579,440
Net investment income 4,887,004 6,730,566 122,563 11,740,133
Realized and Unrealized Gain
(Loss) on Investments:
Net realized gain on investments 556,055 385,072 ---- 941,127
Net change in unrealized
appreciation of investments 353,374 (1,820,950) ---- (1,467,576)
Net realized and
unrealized gain on
investments 909,429 (1,435,878) ---- (526,449)
Change in net
assets resulting
from operations $5,796,433 $5,294,688 $122,563 $11,213,684
(See Notes to Pro Forma Combining Statement of Operations)
(See Notes to Pro Forma Financial Statements)
</TABLE>
Federated Pennsylvania Municipal Income Fund
Pennsylvania Tax-Free Income Portfolio
Notes to Pro Forma Combining Statement of Operations
For the Twelve Months Ended August 31, 1996 (unaudited)
(a) Federated Advisers receives for its services an annual investment advisory
fee equal to 0.40% of the Federated Pennsylvania Municipal Income Fund's (the
`Federated Fund'') average daily net assets. Penn Square Management
Corporation receives for its services an annual investment advisory fee equal to
0.65% of the Pennsylvania Tax-Free Income Portfolio's average daily net assets.
Either adviser may voluntarily choose to waive any portion of its fee.
(b) Federated Services Company (`FServ'') provides the Federated Fund with
certain administrative personnel and services. The fee paid to FServ is based on
the level of average aggregate daily net assets of all funds advised by
subsidiaries of Federated Investors for the period. The administrative fee
received during the period of the Administrative Services Agreement shall be at
least $125,000 per portfolio and $30,000 per each additional class of shares.
(c) State Street Bank and Trust Company is custodian for the securities and
cash of the Federated Fund. The custodian fee is based upon the level of the
Federated Fund's average daily net assets for the period
plus out-of-pocket expenses.
(d) FServ serves as transfer and dividend disbursing agent for the Federated
Fund. The fee paid to FServ is based on the size, type and number of accounts
and transactions made by shareholders.
(e) Adjustment to reflect the elimination of the Trustees' fees paid for
Pennsylvania Tax-Free Income Portfolio.
(f) Adjustment to reflect the audit and legal fee reductions due to the
combining of two portfolios into a single portfolio.
(g) FServ maintains the Federated Fund's accounting records. The fee paid to
FServ is based on the level of the Federated Fund's average daily net assets for
the period, plus out-of-pocket expenses.
(h) Adjustment to reflect the elimination of the distribution services fee
charged to the shareholders of Pennsylvania Tax-Free Income Portfolio.
(i)The Federated Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services (`FSS''). The Federated Fund will pay FSS up to
0.25% of the average daily net assets of the Federated Fund for the period.
Penn Square Management Corporation receives as a shareholder services fee up to
0.50% and 0.25% of average daily net asset of Pennsylvania Tax-Free Income
Portfolio's Class A Shares and Class C Shares, respectively. Either shareholder
services provider may voluntarily choose to waive any portion of their fee.
(j) Adjustment to reflect the registration costs for the Federated Fund only.
(k) Printing and postage expenses are adjusted to reflect estimated savings to
be realized by combining two portfolios into a single portfolio.
(l) Adjustment to reflect the decrease in insurance fees due to the reduction in
the coverage requirement of a single portfolio.
(See Notes to Pro Forma Financial Statements)
FEDERATED PENNSYLVANIA MUNICIPAL INCOME FUND
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
NOTES TO PRO FORMA FINANCIAL STATEMENTS
AUGUST 31, 1996 (UNAUDITED)
1. BASIS OF COMBINATION
The accompanying unaudited Pro Forma Combining Portfolio of Investments and
Statement of Assets and Liabilities reflect the accounts of Federated
Pennsylvania Municipal Income Fund and Pennsylvania Tax-Free Income
Portfolio, collectively (`the Funds''), as of August 31, 1996. These
statements have been derived from the books and records utilized in
calculating daily net asset values at August 31, 1996. The accompanying
unaudited Pro Forma Combining Statement of Operations reflects the accounts
of Federated Pennsylvania Municipal Income Fund's most recent fiscal year
ended August 31, 1996, and the twelve month period ended August 31, 1996,
for Pennsylvania Tax-Free Income Portfolio.
The Pro Forma Financial Statements should be read in conjunction with
historical financial statements of the Funds which are incorporated by
reference in the Statement of Additional Information. The Funds follow
generally accepted accounting principles applicable to management
investment companies which are disclosed in the historical financial
statements of each fund.
The Pro Forma Financial Statements give effect to the proposed transfer of
assets of Pennsylvania Tax-Free Income Portfolio in exchange for Class A
Shares of Federated Pennsylvania Municipal Income Fund. Under generally
accepted accounting principles, Federated Pennsylvania Municipal Income
Fund will be the surviving entity for accounting purposes with its
historical cost of investment securities and results of operations being
carried forward.
The Pro Forma Financial Statements have been adjusted to reflect the
anticipated advisory and administrative fee arrangements for the surviving
entity. Certain other operating costs have also been adjusted to reflect
anticipated expenses of the combined entity. Other costs which may change
as a result of the reorganization are currently undeterminable.
For the twelve months ended August 31, 1996, Federated Pennsylvania
Municipal Income Fund and Pennsylvania Tax-Free Income Portfolio, paid
investment advisory fees computed at the annual rate of each Fund's average
net assets as follows:
FUND PERCENT OF EACH FUND'S
AVERAGE NET ASSETS
Federated Pennsylvania 0.40%
Municipal Income Fund
Pennsylvania Tax-Free 0.65%
Income Portfolio
The adviser may voluntarily choose to waive a portion of their fees and
reimburse certain operating expenses.
2. SHARES OF BENEFICIAL INTEREST
The Pro Forma net asset value per share assumes the issuance of 11,419,468
shares of Federated Pennsylvania Municipal Income Fund shares in exchange
for 11,771,489 Class A Shares and 114,291 Class C Shares of Pennsylvania
Tax-Free Income Portfolio at August 31, 1996, in conjunction with the
proposed reorganization.
Sheraton Berkshire Motor Inn
1741 Paper Mill Road
Wyomissing, PA 19610
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO,
a Portfolio of
WILLIAM PENN INTEREST INCOME FUND,
SPECIAL MEETING OF SHAREHOLDERS
May 29, 1997
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO,
a Portfolio of
WILLIAM PENN INTEREST INCOME FUND
The undersigned shareholder(s) of Pennsylvania 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 10:45 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.
PENNSYLVANIA 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, PENNSYLVANIA TAX-FREE INCOME
PORTFOLIO AND THE FEDERATED PENNSYLVANIA 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 24, 1997,
between William Penn Interest Income Fund, a Pennsylvania common law trust,
on behalf of its portfolio, Pennsylvania Tax-Free Income Portfolio, and
Municipal Securities Income Trust, a Massachusetts business trust, on
behalf of its portfolio Federated Pennsylvania 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
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 Pennsylvania 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 Pennsylvania 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 24, 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 24, 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 PENNSYLVANIA MUNICIPAL INCOME FUND
A Portfolio of Municipal Securities Income Trust
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
March 24, 1997
The Trustees of
Municipal Securities Income Trust
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
Federated Pennsylvania 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 Pennsylvania 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 24, 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 PENNSYLVANIA 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 PENNSYLVANIA MUNICIPAL INCOME FUND:
We consent to the incorporation by reference in this Registration Statement
on Form N-14 of Federated Pennsylvania 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 Pennsylvania Municipal
Income Fund for the year ended August 31, 1996, included in the Prospectus
of Federated Pennsylvania Municipal Income Fund for the year ended
August 31, 1996, dated March 4, 1997, and to the references to us within
this Registration Statement.
By: /s/ Deloitte & Touche LLP
Deloitte & Touche LLP
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 Pennsylvania Municipal
Income Fund, a portfolio of Municipal Securities Income Trust, of our
report dated January 19, 1996, appearing in the Annual Report of
Pennsylvania Tax-Free Income Portfolio, a portfolio of William Penn
Interest Income Fund, for the year ended December 31, 1995, and to the
incorporation by reference of such report in the Prospectus and Statement
of Additional Information of Pennsylvania Tax-Free Income Portfolio, a
portfolio of William Penn Interest Income Fund, dated March 15, 1996, and
the incorporation by reference in the Registration Statement of Federated
Pennsylvania Municipal Income Fund, a portfolio of Municipal Securities
Income Trust, of our report dated January 22, 1997, appearing in the Annual
Report of Pennsylvania 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 4
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 PENNSYLVANIA 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 PENNSYLVANIA 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 A 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 Federated Trust 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
directors who are not "interested persons" (as defined under the Investment
Company Act of 1940, as amended (the "1940 Act")), of the Acquiring Fund
has determined that the 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
trustees 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 shareholders
of 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 Penn Square 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 Acquiring Fund 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 Federated Trust 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 Federated Trust, 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 Acquiring Fund shall have delivered to the Acquired Fund on
the Closing Date a certificate executed in its name by its President or
Vice President and its Treasurer, in form and substance satisfactory to the
Acquired Fund, to the effect that the representations and warranties of the
Acquiring Fund made in this Agreement are true and correct 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. Penn Square
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: PENNSYLVANIA TAX-FREE
INCOME PORTFOLIO
By:
Name: Name:
Title: Title:
Acquiring Fund:
Attest: MUNICIPAL SECURITIES INCOME TRUST
on behalf of its portfolio,
FEDERATED PENNSYLVANIA MUNICIPAL
INCOME FUND
By:
Name: S. Elliott Cohan Name: Richard B. Fisher
Title: Assistant Secretary Title: President
EXHIBIT 17.2
Sheraton Berkshire Motor Inn
1741 Paper Mill Road
Wyomissing, PA 19610
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO,
a Portfolio of
WILLIAM PENN INTEREST INCOME FUND,
SPECIAL MEETING OF SHAREHOLDERS
May 29, 1997
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO,
a Portfolio of
WILLIAM PENN INTEREST INCOME FUND
The undersigned shareholder(s) of Pennsylvania 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 10:45 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.
PENNSYLVANIA 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, PENNSYLVANIA TAX-FREE INCOME
PORTFOLIO AND THE FEDERATED PENNSYLVANIA MUNICIPAL INCOME FUND, A PORTFOLIO
OF MUNICIPAL SECURITIES INCOME TRUST.
FOR AGAINST ABSTAIN
- -----------------------------------
Signature
Signature (Joint Owners)
Date:_____________________________
