United States
Securities and Exchange Commission
Washington, D.C. 20549
Amended
Form N-CSR
Certified Shareholder Report of Registered
Management Investment Companies
811-6165
(Investment Company Act File Number)
Federated Municipal Securities Income Trust
(Exact Name of Registrant as Specified in Charter)
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant’s Telephone Number)
John W. McGonigle, Esquire
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
(Notices should be sent to the Agent for Service)
Date of Fiscal Year End: 8/31/10
Date of Reporting Period: Six months ended 2/28/10
Item 1. | Reports to Stockholders |
Federated Ohio Municipal Income Fund
Established 1990
A Portfolio of Federated Municipal Securities Income Trust
SEMI-ANNUAL SHAREHOLDER REPORT
February 28, 2010
Class A Shares
Class F Shares
FINANCIAL HIGHLIGHTS
SHAREHOLDER EXPENSE EXAMPLE
PORTFOLIO OF INVESTMENTS SUMMARY TABLE
PORTFOLIO OF INVESTMENTS
STATEMENT OF ASSETS AND LIABILITIES
STATEMENT OF OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
NOTES TO FINANCIAL STATEMENTS
EVALUATION AND APPROVAL OF ADVISORY CONTRACT
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
QUARTERLY PORTFOLIO SCHEDULE
Financial Highlights - Class A Shares
(For a Share Outstanding Throughout Each Period)
Six Months Ended (unaudited) 2/28/2010 | Period Ended 8/31/20091 |
Net Asset Value, Beginning of Period | $10.68 | $10.22 |
Income From Investment Operations: |
Net investment income | 0.21 | 0.37 |
Net realized and unrealized gain on investments | 0.17 | 0.44 |
TOTAL FROM INVESTMENT OPERATIONS | 0.38 | 0.81 |
Less Distributions: |
Distributions from net investment income | (0.20) | (0.35) |
Net Asset Value, End of Period | $10.86 | $10.68 |
Total Return2 | 3.62% | 8.11% |
Ratios to Average Net Assets: |
Net expenses | 0.75%3 | 0.75%3,4 |
Net investment income | 3.84%3 | 4.09%3 |
Expense waiver/reimbursement5 | 0.16%3 | 0.17%3 |
Supplemental Data: |
Net assets, end of period (000 omitted) | $57,567 | $61,141 |
Portfolio turnover | 6% | 13%6 |
1 | Reflects operations for the period from November 18, 2008 (date of initial investment) to August 31, 2009. |
2 | Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized. |
3 | Computed on an annualized basis. |
4 | The net expense ratio is calculated without reduction for expense offset arrangements. The net expense ratio for the year ended August 31, 2009, is 0.75% after taking into account these expense reductions. |
5 | This expense decrease is reflected in both the net expense and net investment income ratios shown above. |
6 | Portfolio turnover is calculated at the Fund level. Percentage indicated was calculated for the fiscal year ended August 31, 2009. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportFinancial Highlights - Class F Shares
(For a Share Outstanding Throughout Each Period)
Six Months Ended (unaudited) 2/28/2010 | Year Ended August 31, | |||||
2009 | 2008 | 2007 | 20061 | 2005 | ||
Net Asset Value, Beginning of Period | $10.68 | $10.92 | $11.15 | $11.47 | $11.65 | $11.51 |
Income From Investment Operations: | ||||||
Net investment income | 0.20 | 0.43 | 0.46 | 0.46 | 0.48 | 0.49 |
Net realized and unrealized gain (loss) on investments, futures contracts and swap contracts | 0.18 | (0.25) | (0.23) | (0.32) | (0.18) | 0.15 |
TOTAL FROM INVESTMENT OPERATIONS | 0.38 | 0.18 | 0.23 | 0.14 | 0.30 | 0.64 |
Less Distributions: | ||||||
Distributions from net investment income | (0.20) | (0.42) | (0.46) | (0.46) | (0.48) | (0.50) |
Net Asset Value, End of Period | $10.86 | $10.68 | $10.92 | $11.15 | $11.47 | $11.65 |
Total Return2 | 3.54% | 1.81% | 2.06% | 1.22% | 2.63% | 5.66% |
Ratios to Average Net Assets: | ||||||
Net expenses | 0.90%3 | 0.90%4 | 0.90%4 | 0.92%5 | 0.90% | 0.90% |
Net investment income | 3.69%3 | 4.06% | 4.15% | 4.02% | 4.11% | 4.21% |
Expense waiver/reimbursement6 | 0.41%3 | 0.44% | 0.45% | 0.43% | 0.45% | 0.49% |
Supplemental Data: | ||||||
Net assets, end of period (000 omitted) | $130,475 | $124,090 | $117,080 | $120,409 | $118,063 | $100,753 |
Portfolio turnover | 6% | 13% | 13% | 14% | 32% | 16% |
1 | Beginning with the year ended August 31, 2006, the Fund was audited by KPMG LLP. The previous year was audited by another independent registered public accounting firm. |
2 | Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized. |
3 | Computed on an annualized basis. |
4 | The net expense ratio is calculated without reduction for expense offset arrangements. The net expense ratios for the years ended August 31, 2009 and 2008, are 0.90% and 0.90%, respectively, after taking into account these expense reductions. |
5 | Includes 0.02% of interest and trust expenses related to the Fund's participation in certain inverse floater structures. |
6 | This expense decrease is reflected in both the net expense and net investment income ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportShareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase or redemption payments; and (2) ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or shareholder services fees and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from September 1, 2009 to February 28, 2010.
The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses attributable to your investment during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are required to be provided to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Semi-Annual Shareholder ReportBeginning Account Value 9/1/2009 | Ending Account Value 2/28/2010 | Expenses Paid During Period1 |
Actual: |
Class A Shares | $1,000 | $1,036.20 | $3.79 |
Class F Shares | $1,000 | $1,035.40 | $4.54 |
Hypothetical (assuming a 5% return before expenses): |
Class A Shares | $1,000 | $1,021.08 | $3.76 |
Class F Shares | $1,000 | $1,020.33 | $4.51 |
1 | Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half-year period). The annualized net expense ratios are as follows: |
Class A Shares | 0.75% |
Class F Shares | 0.90% |
Portfolio of Investments Summary Table (unaudited)
At February 28, 2010, the Fund's sector composition1 was as follows:
Sector Composition | Percentage of Total Net Assets |
General Obligation — Local | 19.6% |
Education | 15.8% |
Hospital | 14.2% |
Pre-refunded | 13.2% |
Senior Care | 6.2% |
Water and Sewer | 5.5% |
General Obligation — State | 5.2% |
Public Power | 3.2% |
Electric and Gas | 3.0% |
Transportation | 2.9% |
Other2 | 10.9% |
Other Assets and Liabilities — Net3 | 0.3% |
TOTAL | 100.0% |
1 | Sector classifications, and the assignment of holdings to such sectors, are based upon the economic sector and/or revenue source of the underlying obligor, as determined by the Fund's adviser. For securities that have been enhanced by a third-party (other than a bond insurer), such as a guarantor, sector classifications are based upon the economic sector and/or revenue source of the third-party as determined by the Fund's adviser. Securities that are insured by a bond insurer are assigned according to the economic sector and/or revenue source of the underlying obligor. Pre-refunded securities are those whose debt service is paid from escrowed assets, usually U.S. government securities. |
2 | For purposes of this table, sector classifications constitute 88.8% of the Fund's total net assets. Remaining sectors have been aggregated under the designation “Other.” |
3 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Portfolio of Investments
February 28, 2010 (unaudited)
Principal Amount | Value |
MUNICIPAL BONDS – 93.0% |
Ohio – 90.5% |
$1,000,000 | Akron, Bath & Copley, OH Joint Township, Hospital District Revenue Bonds (Series 2004A), 5.125% (Summa Health System)/(Radian Asset Assurance, Inc. INS)/(Original Issue Yield: 5.38%), 11/15/2024 | 962,410 |
1,000,000 | Akron, Bath & Copley, OH Joint Township, Hospital District Revenue Bonds (Series A), 5.25% (Summa Health System)/(Radian Asset Assurance, Inc. INS), 11/15/2016 | 1,037,960 |
1,750,000 | Akron, Bath & Copley, OH Joint Township, Hospital Facilities Revenue Bonds (Series 2004A), 5.25% (Summa Health System)/(Radian Asset Assurance, Inc. INS)/(Original Issue Yield: 5.47%), 11/15/2031 | 1,611,575 |
1,000,000 | Akron, OH, LT GO Bonds, 5.80% (United States Treasury PRF 11/1/2010@101)/(Original Issue Yield: 5.95%), 11/1/2020 | 1,048,210 |
2,000,000 | American Municipal Power-Ohio, Inc., Revenue Bonds (Series 2008A), 5.25% (American Municipal Power, Prairie State Energy Campus Project), 2/15/2028 | 2,111,840 |
1,825,000 | American Municipal Power-Ohio, Inc., Revenue Bonds, 5.25% (American Municipal Power, JV2)/(AMBAC Assurance Corporation INS), 1/1/2011 | 1,892,142 |
1,500,000 | Beavercreek, OH Local School District, UT GO Bonds, 6.60% (National Public Finance Guarantee Corporation INS), 12/1/2015 | 1,767,030 |
2,000,000 | Buckeye Tobacco Settlement Financing Authority, OH, Tobacco Settlement Asset-Backed Bonds (Series 2007A), 6.50%, 6/1/2047 | 1,644,840 |
2,735,000 | Butler County, OH, MFH Revenue Bonds (Series 2006), 5.10% (Trinity Manor Senior Housing)/(GNMA Collateralized Home Mortgage Program COL), 7/20/2036 | 2,743,205 |
1,000,000 | Centerville, OH, Health Care Fixed Rate Revenue Bonds (Series 2007A), 6.00% (Bethany Lutheran Village), 11/1/2038 | 856,200 |
1,000,000 | Cincinnati City School District, OH, COP, 5.00% (Assured Guaranty Municipal Corp. INS), 12/15/2024 | 1,073,210 |
1,000,000 | Cincinnati City School District, OH, UT GO Bonds, 5.00% (National Public Finance Guarantee Corporation INS), 12/1/2017 | 1,155,760 |
1,500,000 | Cincinnati City School District, OH, UT GO Bonds, 5.25% (United States Treasury PRF 12/1/2013@100), 12/1/2014 | 1,732,065 |
2,200,000 | Cleveland, OH Airport System, Revenue Bonds, 5.00% (Assured Guaranty Municipal Corp. INS), 1/1/2022 | 2,268,002 |
1,125,000 | Cleveland, OH IDA, LT GO Bonds, 5.25% (AMBAC Assurance Municipal Corp. INS), 12/1/2017 | 1,270,822 |
2,000,000 | Cleveland, OH IDA, LT GO Bonds, 5.50% (Assured Guaranty Municipal Corp. INS), 10/1/2019 | 2,373,480 |
2,350,000 | Cleveland, OH Waterworks, Revenue Bonds (Series 2007P), 5.00%, 1/1/2022 | 2,583,190 |
Principal Amount | Value |
$1,000,000 | Cleveland, OH Waterworks, Water Revenue Bonds (Series 2007O), 5.00% (National Public Finance Guarantee Corporation INS), 1/1/2032 | 1,027,350 |
3,000,000 | Cleveland, OH, Various Purpose LT GO Bonds (Series 2009A), 5.00% (Assured Guaranty Corp. INS), 12/1/2026 | 3,191,220 |
865,000 | Cleveland-Cuyahoga County, OH Port Authority, Special Assessment Tax-Increment Revenue Bonds, 7.00% (University Heights, OH Public Parking Garage)/(Original Issue Yield: 7.20%), 12/1/2018 | 876,245 |
1,000,000 | Columbus, OH City School District, School Facilities Construction & Improvement UT GO Bonds (Series 2009), 5.00%, 12/1/2027 | 1,075,920 |
1,225,000 | Columbus, OH Sewer System, Revenue Bonds (Series 2008A), 5.00%, 6/1/2031 | 1,295,928 |
1,000,000 | Columbus, OH Sewer System, Revenue Bonds (Series A), 5.00%, 6/1/2023 | 1,109,910 |
2,000,000 | Cuyahoga County, OH, LT GO Bonds, 5.25%, 12/1/2018 | 2,271,780 |
2,465,000 | Cuyahoga County, OH, UT GO Jail Facilities Bonds, 5.25% (National Public Finance Guarantee Corporation INS)/(Original Issue Yield: 5.50%), 10/1/2013 | 2,633,310 |
2,000,000 | Cuyahoga County, OH, Various Purpose LT GO Bonds (Series 2009A), 5.00%, 12/1/2022 | 2,282,100 |
265,000 | Dayton-Montgomery County, OH Port Authority, Revenue Bonds (Series A), 4.75% (Dayton Regional Bond Fund), 11/15/2015 | 283,084 |
750,000 | Dayton-Montgomery County, OH Port Authority, Revenue Bonds (Series A), 5.00% (Dayton Regional Bond Fund), 11/15/2017 | 670,290 |
1,000,000 | Delaware County, OH, Capital Facilities LT GO Bonds, 6.25% (United States Treasury PRF 12/1/2010@101), 12/1/2020 | 1,056,190 |
250,000 | Erie County, OH Hospital Facilities, Revenue Bonds, 5.50% (Firelands Regional Medical Center), 8/15/2012 | 260,273 |
1,000,000 | Erie County, OH, Hospital Facilities Revenue Bonds (Series 2002A), 5.50% (Firelands Regional Medical Center)/(Original Issue Yield: 5.66%), 8/15/2022 | 987,560 |
1,000,000 | Erie County, OH, Revenue Bonds (Series 2006A), 5.00% (Firelands Regional Medical Center), 8/15/2036 | 826,910 |
3,000,000 | Franklin County, OH Convention Facilities Authority, Revenue Bonds, 5.00% (AMBAC Assurance Corporation INS), 12/1/2026 | 3,207,030 |
2,270,000 | Franklin County, OH Development Revenue, Revenue Bonds, 5.50% (American Chemical Society)/(Original Issue Yield: 5.75%), 10/1/2012 | 2,299,351 |
1,535,000 | Franklin County, OH Hospital Facility Authority, Hospital Improvement Revenue Bonds (Series 2009), 5.00% (Nationwide Children's Hospital)/(Original Issue Yield: 5.11%), 11/1/2034 | 1,546,620 |
475,000 | Franklin County, OH Mortgage Revenue, Revenue Bonds, 5.00% (Trinity Healthcare Credit Group), 6/1/2013 | 522,799 |
2,270,000 | Franklin County, OH Revenue, Revenue Bonds, 5.00% (OCLC Online Computer Library Center, Inc.), 4/15/2010 | 2,280,351 |
Principal Amount | Value |
$1,000,000 | Gallipolis, OH City School District, School Facilities Construction & Improvement UT GO Bonds, 5.00% (National Public Finance Guarantee Corporation INS), 12/1/2030 | 1,022,580 |
1,000,000 | Greene County, OH, University Housing Revenue Bonds (Series 2002A), 5.375% (Marauder Development LLC at Central State University)/(Original Issue Yield: 5.55%), 9/1/2022 | 720,900 |
1,000,000 | Greene County, OH, University Housing Revenue Bonds (Series 2002A), 5.50% (Marauder Development LLC at Central State University)/(Original Issue Yield: 5.65%), 9/1/2027 | 675,830 |
1,530,000 | Hamilton County, OH Hospital Facilities Authority, Revenue Bonds (Series 2004J), 5.25% (Cincinnati Children's Hospital Medical Center)/(FGIC and National Public Finance Guarantee Corporation INS), 5/15/2023 | 1,568,219 |
1,510,000 | Hamilton County, OH Hospital Facilities Authority, Revenue Bonds, 4.50% (Convalescent Hospital Children)/(FGIC and National Public Finance Guarantee Corporation INS), 5/15/2014 | 1,617,527 |
1,000,000 | Hamilton County, OH, EDRBs (Series 2006A), 5.00% (King Highland Community Urban Redevelopment Corp.)/(National Public Finance Guarantee Corporation INS), 6/1/2033 | 1,012,250 |
1,595,000 | Hamilton County, OH, Subordinated Sales Tax Revenue Bonds (Series B), 5.25% (United States Treasury PRF 12/1/2010@100)/(Original Issue Yield: 5.62%), 12/1/2032 | 1,649,756 |
1,310,000 | Hamilton, OH City School District, School Facilities Construction & Improvement UT GO Bonds, 5.00% (Assured Guaranty Corp. INS), 12/1/2029 | 1,389,320 |
1,000,000 | Heath, OH City School District, School Improvement UT GO Bonds, (Series A), 5.50% (United States Treasury PRF 12/1/2010@100)/(Original Issue Yield: 5.635%), 12/1/2027 | 1,040,480 |
2,000,000 | Hilliard, OH School District, UT GO Bonds (Series 2006A), 5.00% (National Public Finance Guarantee Corporation INS), 12/1/2027 | 2,116,160 |
2,000,000 | Kent State University, OH, General Receipts Bonds (Series 2009B), 5.00% (Assured Guaranty Corp. INS), 5/1/2028 | 2,106,700 |
1,010,000 | Kent State University, OH, General Receipts Revenue Bonds, 6.00% (United States Treasury PRF 5/1/2010@101)/(Original Issue Yield: 6.09%), 5/1/2024 | 1,030,513 |
1,860,000 | Kettering, OH City School District, UT GO Bonds, 4.75% (Assured Guaranty Municipal Corp. INS), 12/1/2020 | 2,028,330 |
1,500,000 | Lake, OH Local School District, Stark County, UT GO Bonds, 5.75% (United States Treasury PRF 12/1/2010@100)/(Original Issue Yield: 5.90%), 12/1/2021 | 1,562,505 |
2,000,000 | Licking Heights, OH Local School District, School Facilities Construction & Improvement UT GO Bonds (Series 2000A), 5.50% (United States Treasury PRF 12/1/2010@100)/(Original Issue Yield: 5.58%), 12/1/2024 | 2,080,960 |
Principal Amount | Value |
$1,500,000 | Lorain County, OH, Health Care Facilities Revenue Refunding Bonds (Series 1998A), 5.25% (Kendal at Oberlin)/(Original Issue Yield: 5.53%), 2/1/2021 | 1,480,320 |
1,000,000 | Lorain County, OH, Hospital Revenue Bonds (Series 2006H), 5.00% (Catholic Healthcare Partners)/(Assured Guaranty Corp. INS), 2/1/2024 | 1,040,220 |
1,000,000 | Lorain County, OH, Hospital Revenue Refunding & Improvement Bonds, 5.25% (Catholic Healthcare Partners)/(Original Issue Yield: 5.52%), 10/1/2033 | 1,003,520 |
1,500,000 | Lucas County, OH, Health Care Facilities Refunding & Improvement Revenue Bonds (Series 2000A), 6.625% (Sunset Retirement Community, Inc.)/(Original Issue Yield: 6.75%), 8/15/2030 | 1,512,540 |
1,000,000 | Marysville, OH Wastewater Treatment System, Revenue Bonds (Series 2007), 4.75% (Syncora Guarantee, Inc. INS), 12/1/2047 | 912,960 |
1,000,000 | Miami County, OH, Hospital Facilities Revenue & Refunding Bonds (Series 2006), 5.25% (Upper Valley Medical Center, OH), 5/15/2021 | 1,032,560 |
1,600,000 | Miamisburg, OH City School District, School Facilities Construction & Improvement UT GO Bonds, 5.00%, 12/1/2024 | 1,781,248 |
1,000,000 | Montgomery County, OH, MFH Revenue Bonds (Series 2005), 4.95% (Chevy Chase Apartments)/(Federal Home Loan Mortgage Corp. GTD), 11/1/2035 | 1,020,510 |
1,000,000 | Montgomery County, OH, Revenue Bonds (Series 2008D), 6.125% (Catholic Health Initiatives)/(Original Issue Yield: 6.30%), 10/1/2028 | 1,102,750 |
1,555,000 | North Olmsted, OH, LT GO Bonds, 6.20% (AMBAC Assurance Corporation INS), 12/1/2011 | 1,632,455 |
1,415,000 | Oak Hills, OH Local School District, UT GO Bonds, 5.00% (Assured Guaranty Municipal Corp. INS), 12/1/2025 | 1,519,569 |
2,000,000 | Ohio Air Quality Development Authority, PCR Refunding Bonds (Series 2009-C), 5.625% (FirstEnergy Solutions Corp.), 6/1/2018 | 2,132,940 |
800,000 | Ohio HFA, Residential Mortgage Revenue Bonds (Series 2002 A-1), 5.30% (GNMA COL), 9/1/2022 | 802,880 |
915,000 | Ohio HFA, Residential Mortgage Revenue Bonds (Series 2008F), 5.25% (GNMA COL Home Mortgage Program GTD), 9/1/2028 | 953,421 |
105,000 | Ohio HFA, SFM Revenue Bonds (Series A3), 4.35% (GNMA COL), 9/1/2010 | 106,209 |
110,000 | Ohio HFA, SFM Revenue Bonds (Series A3), 4.55% (GNMA COL), 9/1/2011 | 113,243 |
235,000 | Ohio HFA, SFM Revenue Bonds, 3.30% (GNMA COL), 9/1/2030 | 235,783 |
435,000 | Ohio HFA, SFM Revenue Bonds, 3.65% (GNMA COL), 9/1/2011 | 442,060 |
940,000 | Ohio HFA, SFM Revenue Bonds, 3.90% (GNMA COL), 3/1/2013 | 953,592 |
1,885,000 | Ohio Municipal Electric Generation Agency, Revenue Bonds, 5.00% (American Municipal Power, JV5)/(AMBAC Assurance Corporation INS), 2/15/2014 | 2,063,208 |
Principal Amount | Value |
$1,455,000 | Ohio State Air Quality Development Authority, 5.70% (FirstEnergy Solutions Corp.), 8/1/2020 | 1,540,583 |
1,000,000 | Ohio State Air Quality Development Authority, Air Quality Revenue Refunding Bonds (Series 2009B), 5.80% (Columbus Southern Power Company), 12/1/2038 | 1,039,490 |
510,000 | Ohio State Economic Development, Enterprise Bond Fund Revenue Bonds, 4.40% (Farber Development I LLC), 12/1/2012 | 516,074 |
2,000,000 | Ohio State Higher Educational Facility Commission, Higher Education Facility Revenue Bonds (Series 2006), 5.00% (Kenyon College, OH), 7/1/2041 | 1,990,460 |
1,875,000 | Ohio State Higher Educational Facility Commission, Hospital Revenue Bonds (Series 2007A), 5.25% (University Hospitals Health System, Inc.), 1/15/2046 | 1,827,600 |
1,000,000 | Ohio State Higher Educational Facility Commission, Revenue Bonds (Series 2002B), 5.50% (Case Western Reserve University, OH)/(United States Treasury PRF 10/1/2012@100), 10/1/2022 | 1,120,560 |
2,000,000 | Ohio State Higher Educational Facility Commission, Revenue Bonds (Series 2010), 5.00% (Xavier University)/(Original Issue Yield: 5.08%), 5/1/2040 | 1,981,380 |
300,000 | Ohio State Higher Educational Facility Commission, Revenue Bonds, 4.75% (Mount Union College), 10/1/2016 | 329,319 |
2,000,000 | Ohio State Higher Educational Facility Commission, Revenue Bonds, 5.00% (College of Wooster), 9/1/2020 | 2,106,460 |
750,000 | Ohio State Higher Educational Facility Commission, Revenue Bonds, 5.00% (Mount Union College), 10/1/2031 | 753,727 |
1,000,000 | Ohio State Higher Educational Facility Commission, Revenue Bonds, 5.00% (Otterbein College)/(CIFG Assurance NA INS), 12/1/2035 | 998,480 |
1,000,000 | Ohio State Higher Educational Facility Commission, Revenue Bonds, 5.00% (University of Dayton)/(AMBAC Assurance Corporation INS), 12/1/2027 | 1,023,830 |
2,010,000 | Ohio State Higher Educational Facility Commission, Revenue Bonds, 5.00% (Xavier University)/(Escrowed In Treasuries COL), 5/1/2016 | 2,327,721 |
3,115,000 | Ohio State Higher Educational Facility Commission, Revenue Bonds, 5.00% (Xavier University)/(United States Treasury PRF 5/1/2016@100), 5/1/2019 | 3,607,388 |
980,000 | Ohio State Higher Educational Facility Commission, Revenue Bonds, 5.25% (Mount Union College), 10/1/2021 | 1,044,533 |
1,000,000 | Ohio State Higher Educational Facility Commission, Revenue Bonds, 5.50% (Denison University), 11/1/2012 | 1,074,120 |
6,500,000 | Ohio State Higher Educational Facility Commission, Revenue Bonds, 6.25% (Case Western Reserve University, OH), 7/1/2014 | 7,283,250 |
1,000,000 | Ohio State Higher Educational Facility Commission, Revenue Refunding Bonds (Series 2008C), 5.00% (Case Western Reserve University, OH), 12/1/2029 | 1,045,730 |
Principal Amount | Value |
$2,000,000 | Ohio State University, General Receipts Revenue Bonds (Series 2003B), 5.25%, 6/1/2023 | 2,182,320 |
2,000,000 | Ohio State Water Development Authority, PCRBs, 5.10% (United States Treasury PRF 6/1/2012@100), 12/1/2022 | 2,197,900 |
1,000,000 | Ohio State Water Development Authority, Revenue Refunding Bonds (Series 2008), 5.00%, 6/1/2028 | 1,082,150 |
1,200,000 | Ohio State, Hospital Revenue Refunding Bonds (Series 2008A), 5.25% (Cleveland Clinic)/(Original Issue Yield: 98.376%), 1/1/2033 | 1,234,092 |
2,585,000 | Ohio State, Infrastructure Improvement GO Bonds (Series 2008A), 5.375% (Original Issue Yield: 5.50%), 9/1/2028 | 2,860,225 |
1,000,000 | Ohio State, Major New State Infrastructure Project Revenue Bonds (Series 2008-1), 5.75%, 6/15/2019 | 1,186,030 |
2,310,000 | Ohio State, UT GO Bonds, 4.25%, 5/1/2016 | 2,585,029 |
1,000,000 | Ohio State, UT GO Bonds, 5.00%, 6/15/2013 | 1,129,310 |
2,000,000 | Ohio Water Development Authority, Drinking Water Assistance Fund Refunding Revenue Bonds (Series 2008), 5.00% (Ohio State Water Development Authority), 12/1/2021 | 2,267,580 |
2,000,000 | Olentangy, OH Local School District, UT GO Bonds, 5.00% (Assured Guaranty Municipal Corp. INS), 12/1/2022 | 2,188,760 |
415,000 | Orrville, OH CSD, UT GO Bonds, 4.50% (AMBAC Assurance Corporation INS), 12/1/2018 | 454,350 |
350,000 | Orrville, OH CSD, UT GO Refunding Bonds, 5.00% (AMBAC Assurance Corporation INS), 12/1/2020 | 388,265 |
500,000 | Port Authority for Columbiana County, OH, Solid Waste Facility Revenue Bonds (Series 2004A), 7.25% (Apex Environmental LLC)/(Original Issue Yield: 7.30%), 8/1/2034 | 368,065 |
1,000,000 | Portage County, OH Board of County Hospital Trustees, Hospital Revenue Bonds (Series 1999), 5.75% (Robinson Memorial Hospital)/(AMBAC Assurance Corporation INS)/(Original Issue Yield: 5.90%), 11/15/2019 | 1,010,140 |
1,000,000 | Ravenna, OH City School District, UT GO Bonds (Series 2006), 5.00% (Assured Guaranty Corp. INS), 1/15/2031 | 1,029,120 |
770,000 | Richland County, OH Hospital Facilities, Revenue Bond, 5.00% (Medcentral Health System), 11/15/2015 | 826,472 |
1,500,000 | Rickenbacker, OH Port Authority, Capital Funding Revenue Bonds (Series 2002A), 5.375% (OASBO Expanded Asset Pooled Financing Program)/(Original Issue Yield: 5.60%), 1/1/2032 | 1,551,855 |
1,000,000 | Steubenville, OH, Hospital Facilities Revenue Refunding & Improvement Bonds, 6.375% (Trinity Health System Obligated Group)/(United States Treasury PRF 10/1/2010@100)/(Original Issue Yield: 6.55%), 10/1/2020 | 1,036,900 |
1,500,000 | Toledo-Lucas County, OH Port Authority, Revenue Bonds, 6.45% (CSX Corp.), 12/15/2021 | 1,707,825 |
Principal Amount | Value |
$1,375,000 | Toledo-Lucas County, OH Port Authority, Special Assessment Revenue Bonds, 5.25% (Crocker Park Public Improvement Project)/(Original Issue Yield: 5.37%), 12/1/2023 | 1,251,539 |
2,000,000 | Tuscarawas County, OH, Hospital Facilities Revenue Bonds, 5.75% (Radian Asset Assurance, Inc. INS)(Union Hospital)/(United States Treasury PRF 10/1/2011@101), 10/1/2026 | 2,167,140 |
2,000,000 | University of Akron, OH, General Receipts Bonds (Series 2008B), 5.25% (Assured Guaranty Municipal Corp. INS), 1/1/2027 | 2,143,180 |
300,000 | University of Cincinnati, OH, COP, 5.00% (National Public Finance Guarantee Corporation INS)/(Original Issue Yield: 5.15%), 6/1/2010 | 302,865 |
1,025,000 | University of Cincinnati, OH, General Receipts Revenue Bonds (Series 2004D), 5.00% (AMBAC Assurance Corporation INS), 6/1/2026 | 1,055,832 |
1,000,000 | Warrensville Heights, OH School District, UT GO Bonds, 5.75% (United States Treasury PRF 12/1/2010@101)/(Original Issue Yield: 5.83%), 12/1/2024 | 1,052,370 |
1,995,000 | Waynesville, OH Health Care Facilities, Revenue Bonds (Series 2001A), 5.70% (Quaker Heights Project)/(GNMA Collateralized Home Mortgage Program GTD), 2/20/2043 | 2,032,187 |
TOTAL | 170,202,386 |
Guam – 0.3% |
560,000 | Guam Government Limited Obligation (Section 30), Bonds (Series 2009A), 5.625% (Original Issue Yield: 5.875%), 12/1/2029 | 566,871 |
Puerto Rico – 2.2% |
2,000,000 | Commonwealth of Puerto Rico, UT GO Refunding Bonds (Series A), 5.00% TOBs, Mandatory Tender 7/1/2012 | 2,084,840 |
1,000,000 | Puerto Rico Government Development Bank (GDB), Senior Notes (Series 2006B), 5.00%, 12/1/2017 | 1,032,230 |
990,000 | Puerto Rico Industrial, Tourist, Educational, Medical & Environmental Control Facilities Financing Authority, Cogeneration Facility Revenue Bonds (Series 2000A), 6.625% (AES Puerto Rico Project)/(Original Issue Yield: 6.65%), 6/1/2026 | 998,752 |
TOTAL | 4,115,822 |
TOTAL MUNICIPAL BONDS (IDENTIFIED COST $169,352,909) | 174,885,079 |
SHORT-TERM MUNICIPALS – 6.7%;1 |
Ohio – 6.7% |
1,715,000 | Franklin County, OH Hospital Facility Authority, (Series 2008E) Weekly VRDNs (Nationwide Children's Hospital)/(JPMorgan Chase Bank, N.A. LIQ), 0.160%, 3/4/2010 | 1,715,000 |
5,850,000 | Geauga County, OH, Revenue Bonds (Series 2007A) Daily VRDNs (South Franklin Circle)/(Key Bank, N.A. LOC), 0.220%, 3/1/2010 | 5,850,000 |
Principal Amount | Value |
$5,000,000 | Montgomery County, OH, (Series 1998B) Daily VRDNs (Miami Valley Hospital)/(JPMorgan Chase Bank, N.A. LIQ), 0.180%, 3/1/2010 | 5,000,000 |
TOTAL SHORT-TERM MUNICIPALS (AT AMORTIZED COST) | 12,565,000 |
TOTAL INVESTMENTS — 99.7% (IDENTIFIED COST $181,917,909)2 | 187,450,079 |
OTHER ASSETS AND LIABILITIES - NET — 0.3%3 | 592,539 |
TOTAL NET ASSETS — 100% | $188,042,618 |
Securities that are subject to the federal alternative minimum tax (AMT) represent 4.6% of the Fund's portfolio as calculated based upon total market value.
1 | Current rate and next reset date shown on Variable Rate Demand Notes. |
2 | The cost of investments for federal tax purposes amounts to $181,904,853. |
3 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Note: The categories of investments are shown as a percentage of total net assets at February 28, 2010.
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
Level 1 — quoted prices in active markets for identical securitiesLevel 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
As of February 28, 2010, all investments of the Fund utilized Level 2 inputs in valuing the Fund's assets carried at fair value.
Semi-Annual Shareholder ReportAMBAC | — American Municipal Bond Assurance Corporation |
COL | — Collateralized |
COP | — Certificate of Participation |
CSD | — Central School District |
EDRBs | — Economic Development Revenue Bonds |
FGIC | — Financial Guaranty Insurance Company |
GNMA | — Government National Mortgage Association |
GO | — General Obligation |
GTD | — Guaranteed |
HFA | — Housing Finance Authority |
IDA | — Industrial Development Authority |
INS | — Insured |
LIQ | — Liquidity Agreement |
LLC | — Limited Liability Corporation |
LOC | — Letter of Credit |
LT | — Limited Tax |
MFH | — Multi-Family Housing |
PCR | — Pollution Control Revenue |
PCRBs | — Pollution Control Revenue Bonds |
PRF | — Pre-refunded |
SFM | — Single Family Mortgage |
TOBs | — Tender Option Bonds |
UT | — Unlimited Tax |
VRDNs | — Variable Rate Demand Notes |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportStatement of Assets and Liabilities
February 28, 2010 (unaudited)
Assets: |
Total investments in securities, at value (identified cost $181,917,909) | $187,450,079 |
Cash | 3,922 |
Income receivable | 2,232,614 |
Receivable for shares sold | 399,090 |
Receivable for investments sold | 395,000 |
TOTAL ASSETS | 190,480,705 |
Liabilities: |
Payable for investments purchased | $2,300,547 |
Payable for shares redeemed | 39,603 |
Payable for shareholder services fee (Note 5) | 31,952 |
Payable for distribution services fee (Note 5) | 14,920 |
Accrued expenses | 51,065 |
TOTAL LIABILITIES | 2,438,087 |
Net assets for 17,318,861 shares outstanding | $188,042,618 |
Net Assets Consist of: |
Paid-in capital | $185,923,079 |
Net unrealized appreciation of investments | 5,532,170 |
Accumulated net realized loss on investments, futures contracts and swap contracts | (3,506,846) |
Undistributed net investment income | 94,215 |
TOTAL NET ASSETS | $188,042,618 |
Net Asset Value, Offering Price and Redemption Proceeds Per Share |
Class A Shares: |
Net asset value per share ($57,567,165÷5,302,208 shares outstanding), no par value, unlimited shares authorized | $10.86 |
Offering price per share (100/95.50 of $10.86) | $11.37 |
Redemption proceeds per share | $10.86 |
Class F Shares: |
Net asset value per share ($130,475,453÷12,016,653 shares outstanding), no par value, unlimited shares authorized | $10.86 |
Offering price per share (100/99.00 of $10.86) | $10.97 |
Redemption proceeds per share (99.00/100 of $10.86) | $10.75 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportStatement of Operations
Six Months Ended February 28, 2010 (unaudited)
Investment Income: |
Interest | $4,233,317 |
Expenses: |
Investment adviser fee (Note 5) | $368,639 |
Administrative personnel and services fee (Note 5) | 94,220 |
Custodian fees | 6,347 |
Transfer and dividend disbursing agent fees and expenses | 42,719 |
Directors'/Trustees' fees | 1,141 |
Auditing fees | 10,166 |
Legal fees | 2,903 |
Portfolio accounting fees | 54,535 |
Distribution services fee — Class F Shares (Note 5) | 251,338 |
Shareholder services fee — Class A Shares (Note 5) | 73,313 |
Shareholder services fee — Class F Shares (Note 5) | 156,065 |
Account administration fee — Class F Shares | 141 |
Share registration costs | 16,679 |
Printing and postage | 14,067 |
Insurance premiums | 2,284 |
Miscellaneous | 1,184 |
TOTAL EXPENSES | 1,095,741 |
Waivers (Note 5): |
Waiver of investment adviser fee | $(133,135) |
Waiver of administrative personnel and services fee | (16,435) |
Waiver of distribution services fee — Class F Shares | (157,086) |
TOTAL WAIVERS | (306,656) |
Net expenses | 789,085 |
Net investment income | 3,444,232 |
Realized and Unrealized Gain on Investments: |
Net realized gain on investments | 441,718 |
Net change in unrealized appreciation of investments | 2,531,865 |
Net realized and unrealized gain on investments | 2,973,583 |
Change in net assets resulting from operations | $6,417,815 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportStatement of Changes in Net Assets
Six Months Ended (unaudited) 2/28/2010 | Year Ended 8/31/2009 |
Increase (Decrease) in Net Assets |
Operations: |
Net investment income | $3,444,232 | $6,903,414 |
Net realized gain (loss) on investments | 441,718 | (1,746,226) |
Net change in unrealized appreciation/depreciation of investments | 2,531,865 | 2,876,514 |
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 6,417,815 | 8,033,702 |
Distributions to Shareholders: |
Distributions from net investment income |
Class A Shares | (1,113,027) | (1,991,224) |
Class F Shares | (2,295,787) | (4,728,273) |
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | (3,408,814) | (6,719,497) |
Share Transactions: |
Proceeds from sale of shares | 15,343,627 | 20,522,273 |
Proceeds from shares issued in connection with the tax-free transfer of assets from Fifth Third Ohio Municipal Bond Fund | — | 86,350,459 |
Net asset value of shares issued to shareholders in payment of distributions declared | 1,556,232 | 2,899,634 |
Cost of shares redeemed | (17,096,566) | (42,936,723) |
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | (196,707) | 66,835,643 |
Change in net assets | 2,812,294 | 68,149,848 |
Net Assets: |
Beginning of period | 185,230,324 | 117,080,476 |
End of period (including undistributed net investment income of $94,215 and $58,797, respectively) | $188,042,618 | $185,230,324 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportNotes to Financial Statements
February 28, 2010 (unaudited)
Federated Municipal Securities Income Trust (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust consists of five portfolios. The financial statements included herein are only those of the Federated Ohio Municipal Income Fund (the “Fund”), a non-diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. Each portfolio pays its own expenses. The Fund offers two classes of shares: Class A Shares and Class F Shares. All shares of the Fund have equal rights with respect to voting, except on class-specific matters. The investment objective of the Fund is to provide current income exempt from federal regular income tax (federal regular income tax does not include the federal AMT) and the personal income taxes imposed by the state of Ohio and Ohio municipalities. Interest income from the Fund's investments may be subject to the federal AMT for individuals and corporations.
Effective November 18, 2008, the Fund began offering Class A Shares.
On November 21, 2008 the Fund received assets from Fifth Third Ohio Municipal Bond Fund as the result of a tax-free reorganization, as follows:
Shares of the Fund Issued | Fifth Third Ohio Municipal Bond Fund Net Assets Received | Unrealized Depreciation1 | Net Assets of the Fund Immediately Prior to Combination | Net Assets of the Fund Immediately After Combination |
8,507,423 | $86,350,459 | $132,804 | $106,903,124 | $193,253,583 |
1 | Unrealized depreciation is included in the Fifth Third Ohio Municipal Bond Fund Net Assets Received amount shown above. |
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with U.S. generally accepted accounting principles (GAAP).
Investment Valuation
In calculating its net asset value (NAV), the Fund generally values investments as follows:
- Fixed-income securities acquired with maturities greater than 60 days are fair valued using price evaluations provided by a pricing service approved by the Board of Trustees
(the “Trustees”). - Fixed-income securities acquired with remaining maturities of 60 days or less are valued at their cost (adjusted for the accretion of any discount or amortization of any premium).
- Derivative contracts listed on exchanges are valued at their reported settlement or closing price.
- Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Trustees.
- Shares of other mutual funds are valued based upon their reported NAVs.
Fair Valuation and Significant Events Procedures
The Trustees have authorized the use of pricing services to provide evaluations of the current fair value of certain investments for purposes of calculating the NAV. Factors considered by pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and asked for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for other types of fixed-income securities and OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Trustees.
The Trustees also have adopted procedures requiring an investment to be priced at its fair value whenever the Adviser determines that a significant event affecting the value of the investment has occurred between the time as of which the price of the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both an affirmative expectation that the investment's value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security is traded, or after the time of a price evaluation provided by a pricing service or a dealer, include:
- With respect to price evaluations of fixed-income securities determined before the close of regular trading on the NYSE, actions by the Federal Reserve Open Market Committee and other significant trends in U.S. fixed-income markets;
- Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded; and
- Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, a natural disaster affecting the issuer's operations or regulatory changes or market developments affecting the issuer's industry.
The Fund may seek to obtain more current quotations or price evaluations from alternative pricing sources. If a reliable alternative pricing source is not available, the Fund will determine the fair value of the investment using another method approved by the Trustees.
Investment Income, Gains and Losses, Expenses and Distributions
Investment transactions are accounted for on a trade date basis. Realized gains and losses from investment transactions are recorded on an identified cost basis. Interest income and expenses are accrued daily. Distributions to shareholders are recorded on the ex-dividend date. Distributions of net investment income are declared and paid monthly. Non-cash Semi-Annual Shareholder ReportPremium and Discount Amortization
All premiums and discounts on fixed-income securities are amortized/accreted for financial statement purposes.
Federal Taxes
It is the Fund's policy to comply with the Subchapter M provision of the Internal Revenue Code and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary. As of and during the six months ended February 28, 2010, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of February 28, 2010, tax years 2006 through 2009 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts.
When-Issued and Delayed Delivery Transactions
The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.
Restricted Securities
The Fund may purchase securities which are considered restricted. Restricted securities are securities that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) are subject to contractual restrictions on public sales. In some cases, when a security cannot be offered for public sale without first being registered, the issuer of the restricted security has agreed to register such securities for resale, at the issuer's expense, either upon demand by the Fund or in connection with another registered offering of the securities. Many such restricted securities may be resold in the secondary market in transactions exempt from registration. Restricted securities may be determined to be liquid under criteria established by the Trustees. The Fund will not incur any registration costs upon such resales. The Fund's restricted securities are valued at the price provided by dealers in the secondary market or, if no market prices are available, at the fair value as determined in accordance with procedures established by and under the general supervision of the Trustees.
Other
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated.
Semi-Annual Shareholder ReportThe following table summarizes share activity:
Six Months Ended 2/28/2010 | Period Ended 8/31/20091 | ||
Class A Shares: | Shares | Amount | Shares | Amount |
Shares sold | 303,596 | $3,291,330 | 382,635 | $7,287,254 |
Shares issued in connection with the tax-free transfer of assets from Fifth Third Ohio Municipal Bond Fund | — | — | 7,005,890 | 71,109,888 |
Shares issued to shareholders in payment of distributions declared | 9,699 | 104,928 | 7,161 | 75,005 |
Shares redeemed | (734,841) | (7,937,218) | (1,671,932) | (17,392,765) |
NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS | (421,546) | $(4,540,960) | 5,723,754 | $61,079,382 |
Six Months Ended 2/28/2010 | Year Ended 8/31/2009 | ||
Class F Shares: | Shares | Amount | Shares | Amount |
Shares sold | 1,112,632 | $12,052,297 | 1,582,892 | $13,235,019 |
Shares issued in connection with the tax-free transfer of assets from Fifth Third Ohio Municipal Bond Fund | — | — | 1,501,533 | 15,240,571 |
Shares issued to shareholders in payment of distributions declared | 134,086 | 1,451,304 | 271,604 | 2,824,629 |
Shares redeemed | (846,097) | (9,159,348) | (2,462,680) | (25,543,958) |
NET CHANGE RESULTING FROM CLASS F SHARE TRANSACTIONS | 400,621 | $4,344,253 | 893,349 | $5,756,261 |
NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS | (20,925) | $(196,707) | 6,617,103 | $66,835,643 |
1 | Reflects operations for the period from November 18, 2008 (date of initial investment) to August 31, 2009. |
At February 28, 2010, the cost of investments for federal tax purposes was $181,904,853. The net unrealized appreciation of investments for federal tax purposes was $5,545,226. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $7,440,406 and net unrealized depreciation from investments for those securities having an excess of cost over value of $1,895,180.
Semi-Annual Shareholder ReportExpiration Year | Expiration Amount |
2010 | $ 69,375 |
2011 | $ 87,412 |
2012 | $176,880 |
2013 | $621,142 |
2015 | $180,029 |
2016 | $641,658 |
2017 | $626,069 |
5. Investment Adviser Fee and Other Transactions with Affiliates
Investment Adviser Fee
Federated Investment Management Company is the Fund's investment adviser (the “Adviser”). The advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.40% of the Fund's average daily net assets. Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee. For the six months ended February 28, 2010, the Adviser voluntarily waived $133,135 of its fee.
Administrative Fee
Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FAS is based on the average aggregate daily net assets of certain Federated funds as specified below:
Administrative Fee | Average Aggregate Daily Net Assets of the Federated Funds |
0.150% | on the first $5 billion |
0.125% | on the next $5 billion |
0.100% | on the next $10 billion |
0.075% | on assets in excess of $20 billion |
The administrative fee received during any fiscal year shall be at least $150,000 per portfolio and $40,000 per each additional class of Shares. Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the six months ended February 28, 2010, the net fee paid to FAS was 0.084% of average daily net assets of the Fund. FAS waived $16,435 of its fee.
Semi-Annual Shareholder ReportThe Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the Fund's Class A Shares and Class F Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses at the following percentage of average daily net assets, annually, to compensate FSC.
Share Class Name | Percentage of Average Daily Net Assets of Class |
Class A Shares | 0.05% |
Class F Shares | 0.40% |
Subject to the terms described in the Expense Limitation note, FSC may voluntarily choose to waive any portion of its fee. For the six months ended February 28, 2010, FSC voluntarily waived $157,086 of its fee. When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares. For the six months ended February 28, 2010, FSC retained $94,252 of fees paid by the Fund. For the six months ended February 28, 2010, the Fund's Class A Shares did not incur a distribution services fee; however it may begin to incur this fee upon approval of the Trustees.
Sales Charges
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. For the six months ended February 28, 2010, FSC retained $7,798 in sales charges from the sale of
Class A Shares.
Shareholder Services Fee
The Fund may pay fees (Service Fees) up to 0.25% of the average daily net assets of the Fund's Class A Shares and Class F Shares to financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for shareholder services fees. For the six months ended February 28, 2010, FSSC received $769 of fees paid by the Fund.
Interfund Transactions
During the six months ended February 28, 2010, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions complied with Rule 17a-7 under the Act and amounted to $37,340,000 and $25,480,000, respectively.
Expense Limitation
The Adviser and its affiliates (which may include FSC, FAS and FSSC) have voluntarily agreed to waive their fees and/or reimburse expenses so that the total annual fund operating expenses (as shown in the financial highlights) paid by the Fund's Class A Shares and Class F Shares (after the voluntary waivers and reimbursements) will not exceed 0.75% and 0.90%, respectively (the “Fee Limit”), through the later of (the “Termination Date”): (a) October 31, Semi-Annual Shareholder ReportGeneral
Certain Officers and Trustees of the Fund are Officers and Directors or Trustees of the above companies.
Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations, for the six months ended February 28, 2010, were as follows:
Purchases | $10,748,639 |
Sales | $20,382,807 |
Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at February 28, 2010, 34.2% of the securities in the portfolio of investments is backed by letters of credit or bond insurance of various financial institutions and financial guaranty assurance agencies. The largest percentage of investments insured by or supported (backed) by a letter of credit from any one institution or agency was 11.9% of total investments.
The Fund participates in a $100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement with PNC Bank. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings are charged interest at a rate offered to the Fund by PNC Bank at the time of the borrowing. As of February 28, 2010, there were no outstanding loans. During the six months ended February 28, 2010, the Fund did not utilize the LOC.
Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (SEC), the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the funds to borrow from other participating affiliated funds. As of February 28, 2010, there were no outstanding loans. During the six months ended February 28, 2010, the program was not utilized.
Since October 2003, Federated Investors, Inc. and related entities (collectively, “Federated”), and various Federated funds (“Federated Funds”) have been named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland. The lawsuits were purportedly filed on behalf of people who purchased, owned and/or redeemed shares of Federated-sponsored mutual funds during specified periods beginning November 1, 1998. The suits are generally similar in alleging that Federated Semi-Annual Shareholder ReportManagement has evaluated subsequent events through the date the financial statements were issued, and determined that no events have occurred that require additional disclosure.
Semi-Annual Shareholder ReportEvaluation and Approval of Advisory Contract - May 2009
Federated Ohio Municipal Income Fund (the “Fund”)
The Fund's Board reviewed the Fund's investment advisory contract at meetings held in May 2009. The Board's decision regarding the contract reflects the exercise of its business judgment on whether to continue the existing arrangements.
In this connection, the Federated funds' Board had previously appointed a Senior Officer, whose duties include specified responsibilities relating to the process by which advisory fees are to be charged to a Federated fund. The Senior Officer has the authority to retain consultants, experts, or staff as may be reasonably necessary to assist in the performance of his duties, reports directly to the Board, and may be terminated only with the approval of a majority of the independent members of the Board. The Senior Officer prepared and furnished to the Board an independent, written evaluation that covered topics discussed below. The Board considered that evaluation, along with other information, in deciding to approve the advisory contract.
During its review of the contract, the Board considered compensation and benefits received by the Adviser. This included the fees received for services provided to the Fund by other entities in the Federated organization and research services received by the Adviser from brokers that execute Federated fund trades, as well as advisory fees. The Board is also familiar with and considered judicial decisions concerning allegedly excessive investment advisory fees, which have indicated that the following factors may be relevant to an Adviser's fiduciary duty with respect to its receipt of compensation from a fund: the nature and quality of the services provided by the Adviser, including the performance of the fund; the Adviser's cost of providing the services; the extent to which the Adviser may realize “economies of scale” as a fund grows larger; any indirect benefits that may accrue to the Adviser and its affiliates as a result of the Adviser's relationship with a fund; performance and expenses of comparable funds; and the extent to which the independent Board members are fully informed about all facts the Board deems relevant bearing on the Adviser's services and fees. The Board further considered management fees (including any components thereof) charged to institutional and other clients of the Adviser for what might be viewed as like services, and the cost to the Adviser and its affiliates of supplying services pursuant to the management fee agreements, excluding any intra-corporate profit and profit margins of the Adviser and its affiliates for supplying such services. The Board was aware of these factors and was guided by them in its review of the Fund's advisory contract to the extent it considered them to be appropriate and relevant, as discussed further below.
Semi-Annual Shareholder ReportThe Senior Officer reviewed reports compiled by Federated, using data supplied by independent fund ranking organizations, regarding the performance of, and fees charged by, other mutual funds, noting his view that comparisons to fund peer groups are highly important in judging the reasonableness of proposed fees.
The Fund's performance fell below the median of the relevant peer group for the one-year, three-year and five-year periods covered by the report. The Board discussed the Fund's performance with the Adviser and recognized the efforts being undertaken by the Adviser. The Board will continue to monitor these efforts and the performance of the Fund.
The Board also received financial information about Federated, including reports on the compensation and benefits Federated derived from its relationships with the Federated funds. These reports covered not only the fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds' administrator). The reports also discussed any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades. In addition, the Board considered the fact that, in order for a fund to be competitive in the marketplace, Federated and its affiliates frequently waived fees and/or Semi-Annual Shareholder ReportFederated furnished reports, requested by the Senior Officer, that reported revenues on a fund-by-fund basis and made estimates of the allocation of expenses on a fund-by-fund basis, using allocation methodologies specified by the Senior Officer. The Senior Officer noted that, although they may apply consistent allocation processes, the inherent difficulties in allocating costs (and the unavoidable arbitrary aspects of that exercise) and the lack of consensus on how to allocate those costs may render such allocation reports unreliable. The allocation reports were considered in the analysis by the Board but were determined to be of limited use.
The Board and the Senior Officer also reviewed a report compiled by Federated comparing profitability information for Federated to other publicly held fund management companies. In this regard, the Senior Officer noted the limited availability of such information, but nonetheless concluded that Federated's profit margins did not appear to be excessive and the Board agreed.
The Senior Officer's evaluation also discussed the notion of possible realization of “economies of scale” as a fund grows larger. The Board considered in this regard that the Adviser has made significant and long-term investments in areas that support all of the Federated funds, such as personnel and processes for the portfolio management, compliance, and risk management functions; and systems technology; and that the benefits of these efforts (as well as any economies, should they exist) were likely to be enjoyed by the fund complex as a whole. Finally, the Board also noted the absence of any applicable regulatory or industry guidelines on this subject, which (as discussed in the Senior Officer's evaluation) is compounded by the lack of any common industry practice or general pattern with respect to structuring fund advisory fees with “breakpoints” that serve to reduce the fee as the fund attains a certain size. The Senior Officer did not recommend institution of breakpoints in pricing Federated's fund advisory services at this time.
It was noted in the materials for the Board meeting that for the period covered by the report, the Fund's investment advisory fee, after waivers and expense reimbursements, if any, was below the median of the relevant peer group. The Board reviewed the fees and other expenses of the Fund with the Adviser and was satisfied that the overall expense structure of the Fund remained competitive.
The Senior Officer's evaluation noted his belief that the information and observations contained in his evaluation supported a finding that the proposed management fees are reasonable, and that Federated appeared to provide appropriate administrative services to the Fund for the fees paid. Under these Semi-Annual Shareholder ReportIn its decision to continue an existing investment advisory contract, the Board was mindful of the potential disruptions of the Fund's operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew an advisory contract. In particular, the Board recognized that many shareholders have invested in the Fund on the strength of the Adviser's industry standing and reputation and with the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's approval of the advisory contract reflected the fact that it is the shareholders who have effectively selected the Adviser by virtue of having invested in the Fund.
The Board based its decision to approve the advisory contract on the totality of the circumstances and relevant factors and with a view to past and future long-term considerations. Not all of the factors and considerations identified above were necessarily relevant to the Fund, nor did the Board consider any one of them to be determinative. With respect to the factors that were relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.
Semi-Annual Shareholder ReportVoting Proxies on Fund Portfolio Securities
A description of the policies and procedures that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. A report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available from Federated's Web site at FederatedInvestors.com. To access this information from the “Products” section of the Web site, click on the “Prospectuses and Regulatory Reports” link under “Related Information,” then select the appropriate link opposite the name of the Fund; or select the name of the Fund and from the Fund's page, click on the “Prospectuses and Regulatory Reports” link. Form N-PX filings are also available at the SEC's Web site at www.sec.gov.
Quarterly Portfolio Schedule
The Fund files with the SEC a complete schedule of its portfolio holdings, as of the close of the first and third quarters of its fiscal year, on “Form N-Q.” These filings are available on the SEC's Web site at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. (Call 1-800-SEC-0330 for information on the operation of the Public Reference Room.) You may also access this information from the “Products” section of Federated's Web site at FederatedInvestors.com by clicking on “Portfolio Holdings” under “Related Information,” then selecting the appropriate link opposite the name of the Fund; or select the name of the Fund and from the Fund's page, click on the “Portfolio Holdings” link.
Semi-Annual Shareholder ReportMutual funds are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal.
This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund's Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.
IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERYIn an effort to reduce costs and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents to each household in which more than one shareholder of the Fund(s) resides (so-called “householding”), as permitted by applicable rules. The Fund's “householding” program covers its/their Prospectus and Statement of Additional Information, and supplements to each, as well as Semi-Annual and Annual Shareholder Reports and any Proxies or information statements. Shareholders must give their written consent to participate in the “householding” program. The Fund is also permitted to treat a shareholder as having given consent (“implied consent”) if (i) shareholders with the same last name, or believed to be members of the same family, reside at the same street address or receive mail at the same post office box, (ii) the Fund gives notice of its intent to “household” at least sixty (60) days before it begins “householding” and (iii) none of the shareholders in the household have notified the Fund(s) or their agent of the desire to “opt out” of “householding.” Shareholders who have granted written consent, or have been deemed to have granted implied consent, can revoke that consent and opt out of “householding” at any time: shareholders who purchased shares through an intermediary should contact their representative; other shareholders may call the Fund at 1-800-341-7400.
Semi-Annual Shareholder ReportFederated Ohio Municipal Income Fund
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
Cusip 313923823
Cusip 313923609
2032305 (4/10)
Federated is a registered mark of Federated Investors, Inc.
2010 © Federated Investors, Inc.
Item 12. | Exhibits |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant Federated Municipal Securities Income Trust |
By | /S/ Richard A. Novak | |
Richard A. Novak, | ||
Principal Financial Officer |
Date June 22, 2010
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By | /S/ J. CHRISTOPHER DONAHUE | |
J. Christopher Donahue, Principal Executive Officer | ||
Date June 22, 2010 |
By | /S/ RICHARD A. NOVAK | |
Richard A. Novak, | ||
Principal Financial Officer | ||
Date June 22, 2010 |