United States
Securities and Exchange Commission
Washington, D.C. 20549
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
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
(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: 8/31/05
Date of Reporting Period: Six months ended 2/28/05
------------------------
Item 1. Reports to Stockholders
Federated
World-Class Investment Manager
Federated California Municipal Income Fund
A Portfolio of Federated Municipal Securities Income Trust
SEMI-ANNUAL SHAREHOLDER REPORT
February 28, 2005
Class A Shares
Class B Shares
FINANCIAL HIGHLIGHTS
SHAREHOLDER EXPENSE EXAMPLE
PORTFOLIO OF INVESTMENTS SUMMARY TABLES
FINANCIAL STATEMENTS
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
QUARTERLY PORTFOLIO SCHEDULE
Not FDIC Insured * May Lose Value * No Bank Guarantee
Federated Investors 50 Years of Growth & Innovation
Financial Highlights - Class A Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited) | | | Year Ended August 31,
|
|
| 2/28/2005
|
|
| 2004
|
|
| 2003
|
|
| 2002
|
|
| 2001
|
|
| 2000
|
|
Net Asset Value, Beginning of Period
| | $10.94 | | | $10.70 | | | $11.00 | | | $11.08 | | | $10.65 | | | $10.49 | |
Income From Investment Operations:
| | | | | | | | | | | | | | | | | | |
Net investment income
| | 0.26 | | | 0.52 | | | 0.52 | | | 0.52 | 1 | | 0.53 | | | 0.52 | |
Net realized and unrealized gain (loss) on investments, futures contracts and swap contracts
|
| 0.06
|
|
| 0.24
|
|
| (0.30
| )
|
| (0.08
| ) 1
|
| 0.43
|
|
| 0.16
|
|
TOTAL FROM INVESTMENT OPERATIONS
|
| 0.32
|
|
| 0.76
|
|
| 0.22
|
|
| 0.44
|
|
| 0.96
|
|
| 0.68
|
|
Less Distributions:
| | | | | | | | | | | | | | | | | | |
Distributions from net investment income
|
| (0.26
| )
|
| (0.52
| )
|
| (0.52
| )
|
| (0.52
| )
|
| (0.53
| )
|
| (0.52
| )
|
Net Asset Value, End of Period
|
| $11.00
|
|
| $10.94
|
|
| $10.70
|
|
| $11.00
|
|
| $11.08
|
|
| $10.65
|
|
Total Return 2
|
| 2.96
| %
|
| 7.26
| %
|
| 1.98
| %
|
| 4.16
| %
|
| 9.27
| %
|
| 6.82
| %
|
| | | | | | | | | | | | | | | | | | |
Ratios to Average Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
| 0.50
| % 3
|
| 0.50
| %
|
| 0.50
| %
|
| 0.50
| %
|
| 0.50
| %
|
| 0.50
| %
|
Net investment income
|
| 4.79
| % 3
|
| 4.81
| %
|
| 4.72
| %
|
| 4.81
| % 1
|
| 4.91
| %
|
| 5.08
| %
|
Expense waiver/reimbursement 4
|
| 0.91
| % 3
|
| 0.85
| %
|
| 0.80
| %
|
| 0.85
| %
|
| 0.91
| %
|
| 0.97
| %
|
Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
| $40,425
|
|
| $34,269
|
|
| $36,607
|
|
| $39,872
|
|
| $30,079
|
|
| $23,465
|
|
Portfolio turnover
|
| 9
| %
|
| 13
| %
|
| 24
| %
|
| 21
| %
|
| 30
| %
|
| 57
| %
|
1 Effective September 1, 2001, the Fund adopted the provisions of the American Institute of Certified Public Accountants (AICPA) Audit and Accounting Guide for Investment Companies and began accreting discount on debt securities. For the year ended August 31, 2002, this change had no effect on the net investment income per share, net realized and unrealized gain (loss) on investments per share, or the ratio of net investment income to average net assets. Per share, ratios and supplemental data for the periods prior to September 1, 2001 have not been restated to reflect this change in presentation.
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 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
Financial Highlights - Class B Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited) | | | Year Ended August 31,
|
|
| 2/28/2005
|
|
| 2004
|
|
| 2003
|
|
| 2002
|
|
| 2001
|
|
| 2000
|
|
Net Asset Value, Beginning of Period
| | $10.94 | | | $10.70 | | | $11.00 | | | $11.08 | | | $10.65 | | | $10.49 | |
Income From Investment Operations:
| | | | | | | | | | | | | | | | | | |
Net investment income
| | 0.22 | | | 0.44 | | | 0.44 | | | 0.44 | 1 | | 0.45 | | | 0.45 | |
Net realized and unrealized gain (loss) on investments, futures contracts and swap contracts
|
| 0.06
|
|
| 0.24
|
|
| (0.30
| )
|
| (0.08
| ) 1
|
| 0.43
|
|
| 0.16
|
|
TOTAL FROM INVESTMENT OPERATIONS
|
| 0.28
|
|
| 0.68
|
|
| 0.14
|
|
| 0.36
|
|
| 0.88
|
|
| 0.61
|
|
Less Distributions:
| | | | | | | | | | | | | | | | | | |
Distributions from net investment income
|
| (0.22
| )
|
| (0.44
| )
|
| (0.44
| )
|
| (0.44
| )
|
| (0.45
| )
|
| (0.45
| )
|
Net Asset Value, End of Period
|
| $11.00
|
|
| $10.94
|
|
| $10.70
|
|
| $11.00
|
|
| $11.08
|
|
| $10.65
|
|
Total Return 2
|
| 2.58
| %
|
| 6.46
| %
|
| 1.22
| %
|
| 3.39
| %
|
| 8.46
| %
|
| 6.03
| %
|
| | | | | | | | | | | | | | | | | | |
Ratios to Average Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
| 1.25
| % 3
|
| 1.25
| %
|
| 1.25
| %
|
| 1.25
| %
|
| 1.25
| %
|
| 1.25
| %
|
Net investment income
|
| 4.03
| % 3
|
| 4.06
| %
|
| 3.97
| %
|
| 4.05
| % 1
|
| 4.16
| %
|
| 4.34
| %
|
Expense waiver/reimbursement 4
|
| 0.66
| % 3
|
| 0.60
| %
|
| 0.55
| %
|
| 0.60
| %
|
| 0.66
| %
|
| 0.72
| %
|
Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
| $41,739
|
|
| $43,773
|
|
| $50,921
|
|
| $49,363
|
|
| $43,675
|
|
| $36,577
|
|
Portfolio turnover
|
| 9
| %
|
| 13
| %
|
| 24
| %
|
| 21
| %
|
| 30
| %
|
| 57
| %
|
1 Effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount on debt securities. For the year ended August 31, 2002, this change had no effect on the net investment income per share, net realized and unrealized gain (loss) on investments per share, or the ratio of net investment income to average net assets. Per share, ratios and supplemental data for the periods prior to September 1, 2001 have not been restated to reflect this change in presentation.
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 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
Shareholder Expense Example
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; 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, 2004 to February 28, 2005.
ACTUAL EXPENSES
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 provided to enable you to compare the ongoing costs of investing in the Fund and 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.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase or redemption payments. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
|
| Beginning
Account Value
9/1/2004
|
| Ending
Account Value
2/28/2005
|
| Expenses Paid
During Period 1
|
Actual:
|
|
|
|
|
|
|
Class A Shares
|
| $1,000
|
| $1,029.60
|
| $2.52
|
Class B Shares
|
| $1,000
|
| $1,025.80
|
| $6.28
|
Hypothetical (assuming a 5% return before expenses):
|
|
|
|
|
|
|
Class A Shares
|
| $1,000
|
| $1,022.32
|
| $2.51
|
Class B Shares
|
| $1,000
|
| $1,018.60
|
| $6.26
|
1 Expenses are equal to the Fund's annualized expense ratios, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). The annualized expense ratios are as follows:
Class A Shares
|
| 0.50%
|
Class B Shares
|
| 1.25%
|
Portfolio of Investments Summary Tables
At February 28, 2005, the Fund's credit quality ratings composition 1 was as follows:
S&P Long-Term Ratings as
Percentage of Total Investments 2
| | Moody's Long-Term Ratings as
Percentage of Total Investments 2
|
AAA
|
| 35.3%
| | Aaa
|
| 36.6%
|
AA
|
| 3.0%
| | Aa
|
| 5.0%
|
A
|
| 22.2%
| | A
|
| 20.4%
|
BBB
|
| 12.6%
| | Baa
|
| 7.6%
|
BB
|
| 0.9%
| | Caa1
|
| 0.9%
|
Not Rated by S&P
|
| 26.0%
| | Not Rated by Moody's
|
| 29.5%
|
TOTAL
|
| 100.0%
| | TOTAL
|
| 100.0%
|
1 These tables depict the long-term, credit-quality ratings assigned to the Fund's portfolio holdings by Standard & Poor's (S&P) and Moody's Investors Service (Moody's), each of which is a nationally recognized statistical rating organization (NRSRO). These credit-quality ratings are shown without regard to gradations within a given rating category. For example, securities rated "A-" have been included in the "A" rated category. Holdings that are rated only by a different NRSRO than the one identified have been included in the "Not rated by..." category. Rated securities that have been prerefunded, but not rated again by the NRSRO, also have been included in the "Not rated by..." category. Rated securities include a security with an obligor and/or credit enhancer that has received a rating from an NRSRO with respect to a class of debt obligations that is comparable in priority and security with the security held by the Fund. Credit-quality ratings are an assessment of the risk that a security will default in payment and do not address other risks presented by the security. Please see the descriptions of credit-quality ratings in the Fund's Statement of Additional Information.
These tables depict the long-term, credit-quality ratings as assigned only by the NRSRO identified in each table. Of the portfolio's total investments, 11.9% do not have long-term ratings by either of these NRSROs.
2 Percentages are based on total investments, which may differ from the Fund's total net assets used in computing the percentages in the Portfolio of Investments which follows.
Portfolio of Investments
February 28, 2005 (unaudited)
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | MUNICIPAL BONDS--96.7% | | | | | | |
| | | California--94.3% | | | | | | |
| $ | 500,000 | | ABAG Finance Authority for Non-Profit Corporations, Revenue Bonds, 6.125% (Southern California Presbyterian Homes)/ (Original Issue Yield: 6.25%), 11/15/2032
| | BBB/NR | | $ | 529,005 | |
| 500,000 | | Anaheim, CA Public Financing Authority, Lease Revenue Bonds (Series 1997C), 6.00% (Anaheim Public Improvements Project)/(FSA INS), 9/1/2016
| | AAA/Aaa | | | 595,180 | |
| 500,000 | | Bell Community Redevelopment Agency, CA, Refunding Tax Allocation Revenue Bonds, 5.50% (Radian Asset Assurance INS), 10/1/2023
| | AA/NR | | | 539,345 | |
| 605,000 | | Blythe, CA Financing Authority, Sewer Revenue Bonds (Series 1998), 5.75%, 4/1/2028
| | NR | | | 614,420 | |
| 500,000 | | California Educational Facilities Authority, Revenue Bonds (Series 2000A), 6.75% (Fresno Pacific University), 3/1/2019
| | NR/Baa3 | | | 550,520 | |
| 1,000,000 | | California Educational Facilities Authority, Revenue Bonds (Series 2002A), 5.50% (Pepperdine University), 8/1/2032
| | NR/A1 | | | 1,044,780 | |
| 325,000 | | California Educational Facilities Authority, Student Loan Revenue Bonds (Series 1998), 5.55% (AMBAC INS), 4/1/2028
| | AAA/NR | | | 338,426 | |
| 425,000 | | California Educational Facilities Authority, Student Loan Revenue Bonds (Series A), 5.40% (Cal Loan Program)/(MBIA Insurance Corp. INS), 3/1/2021
| | NR/Aaa | | | 447,091 | |
| 425,000 | | California Health Facilities Financing Authority, Health Facility Revenue Bonds (Series 2004I), 4.95% TOBs (Catholic Healthcare West), Mandatory Tender 7/1/2014, Maturity 7/1/2026
| | BBB+/Baa1 | | | 446,879 | |
| 1,000,000 | | California Health Facilities Financing Authority, Insured Health Facilities Refunding Revenue Bonds (Series 1997), 5.50% (Valley Care Hospital Corp.)/(California Mortgage Insurance INS)/(Original Issue Yield: 5.737%), 5/1/2020
| | A/NR | | | 1,045,070 | |
| 1,000,000 | | California Health Facilities Financing Authority, Revenue Bonds (Series 1998), 5.40% (Northern California Presbyterian Homes, Inc.)/(Original Issue Yield: 5.417%), 7/1/2028
| | BBB+/NR | | | 1,023,300 | |
| 1,500,000 | | California Health Facilities Financing Authority, Revenue Bonds (Series 1999A), 6.125% (Cedars-Sinai Medical Center), 12/1/2030
| | NR/A3 | | | 1,625,775 | |
| 700,000 | 1 | California Health Facilities Financing Authority, Revenue Refunding Bonds (1996 Series A), 6.00% (Catholic Healthcare West)/ (MBIA Insurance Corp. INS)/(Original Issue Yield: 6.15%), 7/1/2017
| | AAA/Aaa | | | 743,666 | |
| 500,000 | | California Infrastructure & Economic Development Bank, Revenue Bonds (Series 2000A), 5.75% (Scripps Research Institute)/(Original Issue Yield: 5.85%), 7/1/2030
| | NR/Aa3 | | | 535,830 | |
| 1,000,000 | | California Infrastructure & Economic Development Bank, Revenue Bonds (Series 2001B), 5.50% (Kaiser Permanente), 8/1/2031
| | A/A2 | | | 1,054,380 | |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | MUNICIPAL BONDS--continued | | | | | | |
| | | California--continued | | | | | | |
| $ | 1,000,000 | | California PCFA, Refunding Revenue Bonds (1996 Series A), 5.35% (Pacific Gas & Electric Co.)/(MBIA Insurance Corp. INS), 12/1/2016
| | AAA/Aaa | | $ | 1,080,840 | |
| 900,000 | | California PCFA, Sewer & Solid Waste Disposal Revenue Bonds, 5.75% (Anheuser-Busch Cos., Inc.)/(Original Issue Yield: 5.818%), 12/1/2030
| | A+/A1 | | | 942,579 | |
| 750,000 | | California PCFA, Solid Waste Disposal Revenue Bonds, 5.125% TOBs (Waste Management, Inc.), Mandatory Tender 5/1/2014, Maturity 7/1/2031
| | BBB/NR | | | 779,437 | |
| 700,000 | | California PCFA, Solid Waste Disposal Revenue Bonds, 6.875% (Browning-Ferris Industries, Inc.)/(Original Issue Yield: 6.95%), 11/1/2027
| | BB-/Caa1 | | | 707,420 | |
| 1,000,000 | | California PCFA, Solid Waste Refunding Revenue Bonds (Series 1999A), 5.125% (West County Resource Recovery, Inc.)/(Comerica Bank - California LOC)/(Original Issue Yield: 5.323%), 1/1/2014
| | NR | | | 1,014,190 | |
| 90,000 | | California Rural Home Mortgage Finance Authority, SFM Revenue Bonds, (Series 1998 B-4), 6.35% (GNMA Collateralized Home Mortgage Program COL), 12/1/2029
| | AAA/NR | | | 90,835 | |
| 500,000 | | California State Department of Water Resources Power Supply Program, Power Supply Revenue Bonds (Insured Series), 5.375% (AMBAC INS), 5/1/2018
| | AAA/Aaa | | | 556,035 | |
| 1,500,000 | | California State Department of Water Resources Power Supply Program, Power Supply Revenue Bonds (Series A), 5.375% (Original Issue Yield: 5.48%), 5/1/2022
| | BBB+/A2 | | | 1,624,590 | |
| 1,545,000 | | California State Department of Water Resources, Revenue Bonds (Series 2005AC), 5.00% (Central Valley Project)/(MBIA Insurance Corp. INS), 12/1/2024
| | AAA/Aaa | | | 1,636,047 | |
| 1,000,000 | | California State Public Works Board, Lease Revenue Bonds, 5.25% (California State Department of Corrections), 1/1/2013
| | A-/Baa1 | | | 1,091,460 | |
| 2,000,000 | | California State, Refunding UT GO Bonds, 5.00%, 3/1/2024
| | A/A3 | | | 2,093,820 | |
| 870,000 | | California State, UT GO Bonds, 5.25% (Original Issue Yield: 5.375%), 12/1/2027
| | A/A3 | | | 918,468 | |
| 1,000,000 | | California State, UT GO Bonds, 5.125% (Original Issue Yield: 5.40%), 6/1/2025
| | A/A3 | | | 1,040,050 | |
| 20,000 | | California State, UT GO Bonds, 5.75% (Original Issue Yield: 6.25%), 3/1/2019
| | A/A3 | | | 20,451 | |
| 1,000,000 | | California State, Various Purpose UT GO Bonds, 5.125% (Original Issue Yield: 5.16%), 4/1/2023
| | A/A3 | | | 1,061,120 | |
| 1,000,000 | | California State, Various Purpose UT GO Bonds, 5.25%, 11/1/2021
| | A/A3 | | | 1,082,650 | |
| 400,000 | | California Statewide Communities Development Authority, Certificates of Participation, 5.25% (St. Joseph Health System Group, CA)/(Original Issue Yield: 5.47%), 7/1/2021
| | AA-/Aa3 | | | 420,876 | |
| 1,000,000 | | California Statewide Communities Development Authority, Certificates of Participation, 5.50% (Sutter Health)/(FSA INS)/(Original Issue Yield: 5.77%), 8/15/2018
| | AAA/Aaa | | | 1,099,900 | |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | MUNICIPAL BONDS--continued | | | | | | |
| | | California--continued | | | | | | |
| $ | 500,000 | 2 | California Statewide Communities Development Authority, Revenue Bonds (Series 2001), 6.75% (Saint Mark's School), 6/1/2028
| | NR | | $ | 523,390 | |
| 400,000 | 2 | California Statewide Communities Development Authority, Revenue Bonds (Series 2002), 6.75% (Prospect Sierra School)/(Original Issue Yield: 6.85%), 9/1/2032
| | NR | | | 420,412 | |
| 1,000,000 | | California Statewide Communities Development Authority, Revenue Bonds (Series 2005A), 5.25% (Daughters of Charity Health System), 7/1/2035
| | BBB+/NR | | | 1,027,080 | |
| 500,000 | 2 | California Statewide Communities Development Authority, Revenue Bonds, 6.50% (Turningpoint School), 11/1/2031
| | NR | | | 518,000 | |
| 1,000,000 | | California Statewide Communities Development Authority, Revenue Bonds, 5.75% (Los Angeles Orthopedic Hospital Foundation)/(AMBAC INS), 6/1/2030
| | AAA/Aaa | | | 1,065,290 | |
| 500,000 | | Capistrano Unified School District, CA Community Facilities District No. 90-2, Special Tax Bonds (Series 2003), 5.875% (Talega Ranch), 9/1/2023
| | NR | | | 531,620 | |
| 450,000 | | Central Unified School District, CA, UT GO Bonds (Series 2004A), 5.50% (FGIC INS), 7/1/2022
| | AAA/Aaa | | | 503,834 | |
| 455,000 | | Central Unified School District, CA, UT GO Bonds (Series 2004A), 5.50% (FGIC INS), 7/1/2024
| | AAA/Aaa | | | 506,802 | |
| 250,000 | | Chula Vista, CA Community Facilities District No. 06-1, Special Tax Revenue Bonds (Series 2002A), 6.15% (Eastlake-Woods, Vistas & Land Swap), 9/1/2026
| | NR | | | 262,185 | |
| 1,000,000 | | Daly City, CA HDFA, Mobile Home Park Senior Revenue Bonds (Series 2002A0), 5.85% (Franciscan Acquisition Project)/ (Original Issue Yield: 5.95%), 12/15/2032
| | A-/NR | | | 1,040,180 | |
| 1,000,000 | | El Centro, CA Financing Authority, Insured Hospital Revenue Bonds (Series 2001), 5.25% (El Centro Regional Medical Center)/(California Mortgage Insurance LOC)/(Original Issue Yield: 5.32%), 3/1/2018
| | A/NR | | | 1,055,480 | |
| 755,000 | | El Monte, CA Public Financing Authority, Tax Allocation Revenue Bonds (Series 1998), 5.75% (El Monte, CA Community Redevelopment Agency), 6/1/2028
| | NR | | | 770,515 | |
| 700,000 | | Foothill/Eastern Transportation Corridor Agency, CA (Series 1995A), Senior Lien Toll Road Revenue Bonds, 6.50% (U.S. Treasury PRF 1/1/2007 @ 100)/(Original Issue Yield: 6.78%), 1/1/2032
| | AAA/Aaa | | | 749,994 | |
| 1,000,000 | | Foothill/Eastern Transportation Corridor Agency, CA, Toll Road Refunding Revenue Bonds, 5.75% (Original Issue Yield: 5.774%), 1/15/2040
| | BBB-/Baa3 | | | 1,018,390 | |
| 1,000,000 | | Fremont, CA Union High School District, Refunding UT GO Bonds (Series 2005), 5.00% (FGIC INS), 9/1/2022
| | AAA/Aaa | | | 1,070,480 | |
| 2,000,000 | | Golden State Tobacco Securitization Corp., CA, Tobacco Settlement Asset-Backed Revenue Bonds (Series 2003A-1), 6.75% (Original Issue Yield: 7.00%), 6/1/2039
| | BBB/Baa3 | | | 2,095,660 | |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | MUNICIPAL BONDS--continued | | | | | | |
| | | California--continued | | | | | | |
| $ | 1,000,000 | | Inglewood, CA Public Financing Authority, Refunding Revenue Bonds (Series 1999A), 5.625% (AMBAC INS), 8/1/2016
| | AAA/Aaa | | $ | 1,119,100 | |
| 500,000 | | Inland Empire Solid Waste Financing Authority, CA, Revenue Bonds (Series B), 6.25% (Escrowed to Maturity U.S. Treasury COL), 8/1/2011
| | AAA/Aaa | | | 556,790 | |
| 500,000 | | La Verne, CA, Revenue Certificates of Participation (Series 2003B), 6.625% (Brethren Hillcrest Homes)/(Original Issue Yield: 6.70%), 2/15/2025
| | BBB-/NR | | | 546,655 | |
| 1,000,000 | | Long Beach, CA Bond Financing Authority, Plaza Parking Facility Lease Revenue Bonds, 5.25% (Original Issue Yield: 5.54%), 11/1/2021
| | A+/NR | | | 1,053,070 | |
| 490,000 | | Los Angeles, CA Community Redevelopment Agency, Housing Revenue Refunding Bonds (Series A), 6.55% (AMBAC INS), 1/1/2027
| | AAA/Aaa | | | 500,442 | |
| 1,000,000 | | Oakland, CA Unified School District, UT GO (Series 2000F), 5.60% (MBIA Insurance Corp. INS)/(Original Issue Yield: 5.63%), 8/1/2019
| | AAA/Aaa | | | 1,112,580 | |
| 500,000 | | Orange County, CA Community Facilities District No. 2000-1, Special Tax Bonds (Series 2000A), 6.25% (Ladera Ranch)/ (Original Issue Yield: 6.28%), 8/15/2030
| | NR | | | 546,855 | |
| 400,000 | | Orange County, CA Community Facilities District No. 2000-1, Special Tax Bonds (Series 2002A), 6.00% (Ladera Ranch)/ (Original Issue Yield: 6.03%), 8/15/2032
| | NR | | | 426,204 | |
| 500,000 | | Orange County, CA Community Facilities District No. 2000-1, Special Tax Bonds (Series 2004A), 5.625% (Ladera Ranch)/ (Original Issue Yield: 5.65%), 8/15/2034
| | NR | | | 512,840 | |
| 1,000,000 | | Oxnard, CA Union High School District, Refunding UT GO Bonds (Series 2001A), 6.20% (MBIA Insurance Corp. INS), 8/1/2030
| | AAA/Aaa | | | 1,171,040 | |
| 500,000 | | Perris, CA Public Financing Authority, Tax Allocation Revenue Bonds (Series 2001A), 5.75% (Original Issue Yield: 5.85%), 10/1/2031
| | A-/NR | | | 529,305 | |
| 900,000 | | Port of Oakland, CA, Revenue Bonds (Series 1997G), 5.50% (MBIA Insurance Corp. INS)/(Original Issue Yield: 5.83%), 11/1/2017
| | AAA/Aaa | | | 960,390 | |
| 1,000,000 | | Port of Oakland, CA, Revenue Bonds (Series 2000K), 5.75% (FGIC INS)/(Original Issue Yield: 5.78%), 11/1/2020
| | AAA/Aaa | | | 1,092,980 | |
| 1,000,000 | | Rancho Mirage Joint Powers Financing Authority, CA, Revenue Bonds (Series 2004), 5.875% (Eisenhower Medical Center), 7/1/2026
| | NR/A3 | | | 1,078,530 | |
| 2,000,000 | | Richmond, CA, Wastewater Revenue Bonds (Series 1999), 5.80% (FGIC INS), 8/1/2018
| | AAA/Aaa | | | 2,246,340 | |
| 1,395,000 | | Sacramento, CA Unified School District, UT GO Bonds (Series A), 6.00% (U.S. Treasury PRF 7/1/2009 @ 102), 7/1/2025
| | NR/Aa3 | | | 1,598,796 | |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | MUNICIPAL BONDS--continued | | | | | | |
| | | California--continued | | | | | | |
| $ | 1,000,000 | | San Bernardino County, CA Housing Authority, Multifamily Mortgage Revenue Bonds (Series 2001A), 6.70% (Glen Aire Park)/(GNMA Collateralized Home Mortgage Program GTD), 12/20/2041
| | NR/Aaa | | $ | 1,078,880 | |
| 350,000 | | San Bernardino County, CA Housing Authority, Subordinated Revenue Bonds, 7.25% (Glen Aire Park & Pacific Palms), 4/15/2042
| | NR | | | 326,515 | |
| 400,000 | | San Bernardino, CA Joint Powers Financing Authority, Tax Allocation Refunding Revenue Bonds, 6.625%, 4/1/2026
| | NR | | | 435,568 | |
| 1,000,000 | | San Diego County, CA, Certificates of Participation, 5.25% (University of San Diego)/(Original Issue Yield: 5.47%) 10/1/2021
| | NR/A2 | | | 1,054,870 | |
| 1,000,000 | | San Diego County, CA, Refunding Certificates of Participation (Series 2005), 5.00% (AMBAC INS), 2/1/2019
| | AAA/Aaa | | | 1,074,860 | |
| 300,000 | | San Dimas, CA Housing Authority, Mobile Home Park Revenue Bonds (Series 1998A), 5.70% (Charter Oak Mobile Home Estates Acquisition Project)/(Original Issue Yield: 5.90%), 7/1/2028
| | NR | | | 303,978 | |
| 300,000 | | San Francisco, CA City & County Airport Commission, Second Series Revenue Bonds (Issue 12A), 5.90% (San Francisco International Airport)/(Original Issue Yield: 5.97%), 5/1/2026
| | A/A1 | | | 311,289 | |
| 400,000 | | San Francisco, CA City & County Redevelopment Agency Community Facilities District No. 6, Special Tax Revenue Bonds, 6.625% (Mission Bay South), 8/1/2027
| | NR | | | 427,396 | |
| 1,000,000 | | San Jose, CA Unified School District, Certificates of Participation, 5.75% (MBIA Insurance Corp. INS)/(Original Issue Yield: 5.85%), 6/1/2020
| | AAA/Aaa | | | 1,071,090 | |
| 500,000 | | San Mateo, CA Redevelopment Agency, Merged Area Tax Allocation Bonds (Series 2001A), 5.50% (Original Issue Yield: 5.55%), 8/1/2022
| | A-/Baa1 | | | 533,645 | |
| 1,000,000 | | Santa Clara County, CA Housing Authority, Multifamily Housing Revenue Bonds (Series 2001A), 5.85% (River Town Apartments Project), 8/1/2031
| | NR/A3 | | | 1,016,860 | |
| 1,500,000 | | Simi Valley, CA PFA, Lease Revenue Bonds (Series 1995), 5.75% (AMBAC INS), 9/1/2015
| | AAA/Aaa | | | 1,666,350 | |
| 1,000,000 | | South Orange County, CA Public Financing Authority, 1999 Reassessment Revenue Bonds, 5.80% (FSA INS)/(Original Issue Yield: 5.85%), 9/2/2018
| | NR/Aaa | | | 1,120,880 | |
| 400,000 | | Stockton, CA Community Facilities District No. 2001-1, Special Tax Revenue Bonds, 6.375% (Spanos Park West)/(Original Issue Yield: 6.43%), 9/1/2032
| | NR | | | 419,756 | |
| 1,400,000 | | Stockton, CA, Certificates of Participation (Series 1999), 5.875% (Original Issue Yield: 5.90%), 8/1/2019
| | A/NR | | | 1,510,992 | |
| 400,000 | | Stockton, CA, Health Facility Revenue Bonds (Series 1997A), 5.70% (Dameron Hospital Association), 12/1/2014
| | BBB+/NR | | | 419,452 | |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | MUNICIPAL BONDS--continued | | | | | | |
| | | California--continued | | | | | | |
| $ | 2,000,000 | | Sweetwater, CA Union High School District Public Financing Authority, Revenue Bonds (Series 2005A), 5.00% (FSA INS), 9/1/2029
| | AAA/Aaa | | $ | 2,097,520 | |
| 1,000,000 | | Torrance, CA, Hospital Revenue Bonds (Series 2001 A), 5.50% (Torrance Memorial Medical Center)/(Original Issue Yield: 5.65%), 6/1/2031
| | A+/A1 | | | 1,054,610 | |
| 1,000,000 | | Vallejo, CA Unified School District, UT GO Bonds, 5.90% (MBIA Insurance Corp. INS), 2/1/2021
| | AAA/Aaa | | | 1,205,680 | |
| 1,000,000 | | Vista, CA Community Development Commission, Tax Allocation Bonds (Series 2001), 5.80% (Vista Redevelopment Project Area)/(Original Issue Yield: 5.85%), 9/1/2030
| | BBB+/NR | | | 1,062,720 | |
| 965,000 | | Walnut, CA Public Financing Authority, Tax Allocation Revenue Bonds (Series 2002), 5.375% (Walnut Improvement Project)/(AMBAC INS), 9/1/2019
| | AAA/Aaa | | | 1,070,947 | |
| 500,000 | | Watsonville, CA, Insured Hospital Revenue Refunding Bonds (Series 1996A), 6.20% (Watsonville Community Hospital)/ (Escrowed to Maturity U.S. Treasury COL)/(Original Issue Yield: 6.225%), 7/1/2012
| | NR | | | 573,220 | |
| 1,000,000 | | Whittier, CA, Health Facilities Revenue Bonds, 5.75% (Presbyterian Intercommunity Hospital)/(Original Issue Yield: 5.80%), 6/1/2031
|
| A/NR
|
|
| 1,062,190
|
|
| | | TOTAL
|
|
|
|
| 77,504,932
|
|
| | | Puerto Rico--2.4% | | | | | | |
| 1,000,000 | 2,3 | Puerto Rico Electric Power Authority, Drivers (Series 266), 8.8599% (FSA INS), 7/1/2015
| | AAA/NR | | | 1,309,710 | |
| 595,000 | | 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
|
| NR/Baa3
|
|
| 643,986
|
|
| | | TOTAL
|
|
|
|
| 1,953,696
|
|
| | | TOTAL MUNICIPAL BONDS (IDENTIFIED COST $74,848,961)
|
|
|
|
| 79,458,628
|
|
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | SHORT-TERM MUNICIPALS--4.7% | | | | | | |
| | | California--1.8% | | | | | | |
| $ | 1,500,000 | | Metropolitan Water District of Southern California, (Series 2001 B-1) Weekly VRDNs (Dexia Credit Local LIQ)
|
| A-1+/VMIG1
|
| $
| 1,500,000
|
|
| | | Puerto Rico--2.9% | | | | | | |
| 2,400,000 | | Puerto Rico Government Development Bank (GDB) Weekly VRDNs (MBIA Insurance Corp. INS)/(Credit Suisse First Boston LIQ)
|
| AAA/Aaa
|
|
| 2,400,000
|
|
| | | TOTAL SHORT-TERM MUNICIPALS
(AT AMORTIZED COST)
|
|
|
|
| 3,900,000
|
|
| | | TOTAL MUNICIPAL INVESTMENTS--101.4%
(IDENTIFIED COST $78,748,961) 4
|
|
|
|
| 83,358,628
|
|
| | | OTHER ASSETS AND LIABILITIES - NET--(1.4)%
|
|
|
|
| (1,194,206
| )
|
| | | TOTAL NET ASSETS--100%
|
|
|
| $
| 82,164,422
|
|
Securities that are subject to the federal alternative minimum tax (AMT) represent 12.0% of the Fund's portfolio as calculated based upon total portfolio market value.
1 Pledged as collateral to ensure the Fund is able to satisfy the obligations of its outstanding short future contracts.
2 Denotes a restricted security, including securities purchased under Rule 144A of the Securities Act of 1933. These securities, unless registered under the Act or exempted from registration, may only be sold to qualified institutional investors. At February 28, 2005, these securities amounted to $2,771,512 which represents 3.4% of total net assets.
3 Denotes a restricted security, including securities purchased under Rule 144A that have been deemed liquid by criteria approved by the Fund's Board of Trustees. At February 28, 2005, these securities amounted to $1,309,710 which represents 1.6% of total net assets.
4 The cost of investments for federal tax purposes amounts to $78,746,211.
Note: The categories of investments are shown as a percentage of total net assets at February 28, 2005.
The following acronyms are used throughout this portfolio:
| AMBAC | - --American Municipal Bond Assurance Corporation |
| COL | - --Collateralized |
| FGIC | - --Financial Guaranty Insurance Company |
| FSA | - --Financial Security Assurance |
| GNMA | - --Government National Mortgage Association |
| GO | - --General Obligation |
| GTD | - --Guaranteed |
| HDFA | - --Housing Development Finance Authority |
| INS | - --Insured |
| LIQ | - --Liquidity Agreement |
| LOC | - --Letter of Credit |
| PCFA | - --Pollution Control Finance Authority |
| PFA | - --Public Facility Authority |
| PRF | - --Prerefunded |
| 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
Statement of Assets and Liabilities
February 28, 2005 (unaudited)
Assets:
| | | | | | | |
Total investments in securities, at value (identified cost $78,748,961)
| | | | | $ | 83,358,628 | |
Cash
| | | | | | 45,468 | |
Income receivable
| | | | | | 978,528 | |
Receivable for investments sold
| | | | | | 5,000 | |
Receivable for shares sold
| | | | | | 3,238,114 | |
Receivable for daily variation margin
| | | | | | 11,250 | |
Prepaid expenses
|
|
|
|
|
| 7,513
|
|
TOTAL ASSETS
|
|
|
|
|
| 87,644,501
|
|
Liabilities:
| | | | | | | |
Payable for investments purchased
| | $ | 5,260,750 | | | | |
Payable for shares redeemed
| | | 73,229 | | | | |
Income distribution payable
| | | 106,243 | | | | |
Payable for distribution services fee (Note 5)
| | | 24,227 | | | | |
Payable for shareholder services fee (Note 5)
| | | 15,270 | | | | |
Payable for Directors'/Trustees' fee
|
|
| 360
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
|
|
| 5,480,079
|
|
Net assets for 7,466,770 shares outstanding
|
|
|
|
| $
| 82,164,422
|
|
Net Assets Consist of:
| | | | | | | |
Paid-in capital
| | | | | $ | 80,926,086 | |
Net unrealized appreciation of investments and futures contracts
| | | | | | 4,620,142 | |
Accumulated net realized loss on investments, futures contracts and swap contracts
| | | | | | (3,383,413 | ) |
Undistributed net investment income
|
|
|
|
|
| 1,607
|
|
TOTAL NET ASSETS
|
|
|
|
| $
| 82,164,422
|
|
Net Asset Value, Offering Price and Redemption Proceeds Per Share
| | | | | | | |
Class A Shares:
| | | | | | | |
Net asset value per share ($40,425,302 ÷ 3,673,626 shares outstanding), no par value, unlimited shares authorized
|
|
|
|
|
| $11.00
|
|
Offering price per share (100/95.50 of $11.00) 1
|
|
|
|
|
| $11.52
|
|
Redemption proceeds per share
|
|
|
|
|
| $11.00
|
|
Class B Shares:
| | | | | | | |
Net asset value per share ($41,739,120 ÷ 3,793,144 shares outstanding), no par value, unlimited shares authorized
|
|
|
|
|
| $11.00
|
|
Offering price per share
|
|
|
|
|
| $11.00
|
|
Redemption proceeds per share (94.50/100 of $11.00) 1
|
|
|
|
|
| $10.40
|
|
1 See "What Do Shares Cost?" in the Prospectus.
See Notes which are an integral part of the Financial Statements
Statement of Operations
Six Months Ended February 28, 2005 (unaudited)
Investment Income:
| | | | | | | | | | | |
Interest
|
|
|
|
|
|
|
|
|
| $
| 2,054,511
|
Expenses:
| | | | | | | | | | | |
Investment adviser fee (Note 5)
| | | | | | $ | 155,276 | | | | |
Administrative personnel and services fee (Note 5)
| | | | | | | 94,219 | | | | |
Custodian fees
| | | | | | | 2,448 | | | | |
Transfer and dividend disbursing agent fees and expenses
| | | | | | | 30,338 | | | | |
Directors'/Trustees' fees
| | | | | | | 1,157 | | | | |
Auditing fees
| | | | | | | 7,561 | | | | |
Legal fees
| | | | | | | 2,747 | | | | |
Portfolio accounting fees
| | | | | | | 32,063 | | | | |
Distribution services fee--Class A Shares (Note 5)
| | | | | | | 44,076 | | | | |
Distribution services fee--Class B Shares (Note 5)
| | | | | | | 158,914 | | | | |
Shareholder services fee--Class A Shares (Note 5)
| | | | | | | 44,076 | | | | |
Shareholder services fee--Class B Shares (Note 5)
| | | | | | | 52,971 | | | | |
Share registration costs
| | | | | | | 17,926 | | | | |
Printing and postage
| | | | | | | 7,331 | | | | |
Insurance premiums
| | | | | | | 3,851 | | | | |
Miscellaneous
|
|
|
|
|
|
| 907
|
|
|
|
|
TOTAL EXPENSES
|
|
|
|
|
|
| 655,861
|
|
|
|
|
Waivers and Reimbursement (Note 5):
| | | | | | | | | | | |
Waiver of investment adviser fee
| | $ | (155,276 | ) | | | | | | | |
Waiver of administrative personnel and services fee
| | | (16,968 | ) | | | | | | | |
Waiver of distribution services fee--Class A Shares
| | | (44,076 | ) | | | | | | | |
Waiver of shareholder services fee--Class A Shares
| | | (43 | ) | | | | | | | |
Reimbursement of other operating expenses
|
|
| (84,630
| )
|
|
|
|
|
|
|
|
TOTAL WAIVERS AND REIMBURSEMENT
|
|
|
|
|
|
| (300,993
| )
|
|
|
|
Net expenses
|
|
|
|
|
|
|
|
|
|
| 354,868
|
Net investment income
|
|
|
|
|
|
|
|
|
|
| 1,699,643
|
Realized and Unrealized Gain on Investments and Futures Contracts:
| | | | | | | | | | | |
Net realized gain on investments
| | | | | | | | | | | 222,164 |
Net realized gain on futures contracts
| | | | | | | | | | | 20,491 |
Net change in unrealized appreciation of investments
| | | | | | | | | | | 159,661 |
Net change in unrealized appreciation of futures contracts
|
|
|
|
|
|
|
|
|
|
| 1,812
|
Net realized and unrealized gain on investments and futures contracts
|
|
|
|
|
|
|
|
|
|
| 404,128
|
Change in net assets resulting from operations
|
|
|
|
|
|
|
|
|
| $
| 2,103,771
|
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
|
| Six Months
Ended
(unaudited)
2/28/2005
|
|
|
|
Year Ended
8/31/2004
| |
Increase (Decrease) in Net Assets
| | | | | | | | |
Operations:
| | | | | | | | |
Net investment income
| | $ | 1,699,643 | | | $ | 3,718,858 | |
Net realized gain (loss) on investments, futures contracts and swap contracts
| | | 242,655 | | | | (38,480 | ) |
Net change in unrealized appreciation/depreciation of investments and futures contracts
|
|
| 161,473
|
|
|
| 1,900,235
|
|
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS
|
|
| 2,103,771
|
|
|
| 5,580,613
|
|
Distributions to Shareholders:
| | | | | | | | |
Distributions from net investment income
| | | | | | | | |
Class A Shares
| | | (843,398 | ) | | | (1,770,023 | ) |
Class B Shares
|
|
| (854,573
| )
|
|
| (1,947,806
| )
|
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS
|
|
| (1,697,971
| )
|
|
| (3,717,829
| )
|
Share Transactions:
| | | | | | | | |
Proceeds from sale of shares
| | | 8,656,459 | | | | 9,037,022 | |
Net asset value of shares issued to shareholders in payment of distributions declared
| | | 1,029,519 | | | | 2,186,350 | |
Cost of shares redeemed
|
|
| (5,969,241
| )
|
|
| (22,572,306
| )
|
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS
|
|
| 3,716,737
|
|
|
| (11,348,934
| )
|
Change in net assets
|
|
| 4,122,537
|
|
|
| (9,486,150
| )
|
Net Assets:
| | | | | | | | |
Beginning of period
|
|
| 78,041,885
|
|
|
| 87,528,035
|
|
End of period (including undistributed (distributions in excess of) net investment income of $1,607 and $(65), respectively)
|
| $
| 82,164,422
|
|
| $
| 78,041,885
|
|
See Notes which are an integral part of the Financial Statements
Notes to Financial Statements
February 28, 2005 (unaudited)
1. ORGANIZATION
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 seven portfolios. The financial statements included herein are only those of Federated California Municipal Income Fund (the "Fund"), a non-diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The investment objective of the Fund is to provide current income exempt from federal regular income tax (federal regular income tax does not include the federal alternative minimum tax) and the personal income taxes imposed by the state of California and California municipalities. Interest income from the Fund's investments may be subject to the federal alternative minimum tax for individuals and corporations. The Fund offers two classes of shares: Class A Shares and Class B Shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles (GAAP) in the United States of America.
Investment Valuation
Municipal bonds are valued by an independent pricing service, taking into consideration yield, liquidity, risk, credit quality, coupon, maturity, type of issue, and any other factors or market data the pricing service deems relevant. Short-term securities are valued at the prices provided by an independent pricing service. However, short-term securities with remaining maturities of 60 days or less at the time of purchase may be valued at amortized cost, which approximates fair market value. Securities for which no quotations are readily available are valued at fair value as determined in accordance with procedures established by and under general supervision of the Board of Trustees (the "Trustees").
Investment Income, Gains and Losses, Expenses, and Distributions
Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at fair value. Investment income, realized and unrealized gains and losses, and certain fund-level expenses are allocated to each class based on relative average daily net assets, except that each class bears certain expenses unique to that class such as distribution and shareholder services fees. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.
Premium 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 (the "Code") and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary.
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.
Swap Contracts
The Fund may enter into swap contracts. A swap is an exchange of cash payments between the Fund and another party, which is based on a specific financial index. The value of the swap is adjusted daily and the change in value is recorded as unrealized appreciation or depreciation. When a swap contract is closed, the Fund recognizes a realized gain or loss. The swap contracts entered into by the Fund are on a forward-settling basis. For the six months ended February 28, 2005, the Fund had no realized gain (loss) on swap contracts.
Risks may arise upon entering into these agreements from the potential inability of the counterparties to meet the terms of their contract and from unanticipated changes in the value of the financial index on which the swap agreement is based. The Fund uses swaps for hedging purposes to reduce its exposure to interest rate fluctuations.
At February 28, 2005, the Fund had no open swap contracts.
Futures Contracts
The Fund periodically may sell bond interest rate futures contracts to manage duration and to potentially reduce transaction costs. Upon entering into a bond interest rate futures contract with a broker, the Fund is required to deposit in a segregated account a specified amount of cash or U.S. government securities. Futures contracts are valued daily and unrealized gains or losses are recorded in a "variation margin" account. Daily, the Fund receives from or pays to the broker a specified amount of cash based upon changes in the "variation margin" account. When a contract is closed, the Fund recognizes a realized gain or loss. Futures contracts have market risks, including the risk that the change in the value of the contract may not correlate with changes in the value of the underlying securities. For the six months ended February 28, 2005, the Fund had realized gains on futures contracts of $20,491.
At February 28, 2005, the Fund had the following open futures contracts:
Expiration Date
|
| Contracts to Receive
|
| Position
|
| Unrealized
Appreciation
|
June 2005
|
| 20 U.S. Treasury Note 10-Year Futures
|
| Short
|
| $10,475
|
Restricted Securities
Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. In some cases, the issuer of restricted securities 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 restricted securities may be resold in the secondary market in transactions exempt from registration. Such 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 general supervision of the Trustees.
Additional information on restricted securities, excluding securities purchased under Rule 144A that have been deemed liquid by the Trustees, held at February 28, 2005, is as follows:
Security
|
| Acquisition
Date
|
| Acquisition
Cost
|
California Statewide Communities Development Authority, Revenue Bonds (Series 2001), 6.75% (Saint Mark's School), 6/1/2028
|
| 7/3/2001
|
| $ 500,000
|
California Statewide Communities Development Authority, Revenue Bonds (Series 2002), 6.75% (Prospect Sierra School)/(Original Issue Yield: 6.85%), 9/1/2032
|
| 5/10/2002
|
| $ 395,025
|
California Statewide Communities Development Authority, Revenue Bonds, 6.50% (Turningpoint School), 11/1/2031
|
| 3/23/2001
|
| $ 500,000
|
Puerto Rico Electric Power Authority, Drivers (Series 266), 8.8599% (FSA INS), 7/1/2015
|
| 6/27/2002
|
| $1,202,548
|
Use of Estimates
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.
Other
Investment transactions are accounted for on a trade date basis. Realized gains and losses from investment transactions are recorded on an identified cost basis.
3. SHARES OF BENEFICIAL INTEREST
The following tables summarize share activity:
|
| Six Months
Ended
2/28/2005
|
|
| Year Ended
8/31/2004
|
|
Class A Shares:
|
| Shares
|
|
|
| Amount
|
|
| Shares
|
|
|
| Amount
|
|
Shares sold
| | 731,706 | | | $ | 8,066,934 | | | 667,738 | | | $ | 7,306,120 | |
Shares issued to shareholders in payment of distributions declared
|
| 45,656 | | | | 501,989 |
|
| 90,213 | | | | 984,973 |
|
Shares redeemed
|
| (234,838
| )
|
|
| (2,587,175
| )
|
| (1,046,644
| )
|
|
| (11,414,259
| )
|
NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS
|
| 542,524
|
|
| $
| 5,981,748
|
|
| (288,693
| )
|
| $
| (3,123,166
| )
|
| | | | | | | | | | | | | | |
|
| Six Months
Ended
2/28/2005
|
|
| Year Ended
8/31/2004
|
|
Class B Shares:
|
| Shares
|
|
|
| Amount
|
|
| Shares
|
|
|
| Amount
|
|
Shares sold
| | 53,293 | | | $ | 589,525 | | | 158,215 | | | $ | 1,730,902 | |
Shares issued to shareholders in payment of distributions declared
|
| 47,982 | | | | 527,530 |
|
| 109,957 | | | | 1,201,377 |
|
Shares redeemed
|
| (307,577
| )
|
|
| (3,382,066
| )
|
| (1,025,938
| )
|
|
| (11,158,047
| )
|
NET CHANGE RESULTING FROM CLASS B SHARE TRANSACTIONS
|
| (206,302
| )
|
| $
| (2,265,011
| )
|
| (757,766
| )
|
| $
| (8,225,768
| )
|
NET CHANGE RESULTING FROM SHARE TRANSACTIONS
|
| 336,222
|
|
| $
| 3,716,737
|
|
| (1,046,459
| )
|
| $
| (11,348,934
| )
|
4. FEDERAL TAX INFORMATION
At February 28, 2005, the cost of investments for federal tax purposes was $78,746,211. The net unrealized appreciation of investments for federal tax purposes excluding any unrealized appreciation from futures contracts was $4,612,417. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $4,730,922 and net unrealized depreciation from investments for those securities having an excess of cost over value of $118,505.
At August 31, 2004, the Fund had a capital loss carryforward of $3,620,962 which will reduce the Fund's taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Code and thus will reduce the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal tax. Pursuant to the Code, such capital loss carryforward will expire as follows:
Expiration Year
|
| Expiration Amount
|
2008
|
| $1,047,161
|
2009
|
| $ 1,337,342
|
2010
|
| $ 166,229
|
2011
|
| $ 562,757
|
2012
|
| $ 507,473
|
5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment adviser fee equal to 0.40% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee and/or reimburse certain operating expenses of the Fund. The Adviser can modify or terminate this voluntary waiver and/or reimbursement at any time at its sole discretion.
Administrative Fee
Federated 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 all Federated funds as specified below:
Maximum
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. FAS may voluntarily choose to waive any portion of its fee. FAS can modify or terminate this voluntary waiver at any time at its sole discretion.
Distribution Services Fee
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the Fund's Class A Shares and Class B Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses according to the following schedule annually, to compensate FSC:
Share Class Name
|
| Percentage of Average Daily
Net Assets of Class
|
Class A Shares
|
| 0.25%
|
Class B Shares
|
| 0.75%
|
FSC may voluntarily choose to waive any portion of its fee. FSC can modify or terminate this voluntary waiver at any time at its sole discretion. Rather than paying investment professionals directly, the Fund may pay fees to FSC and FSC will use the fees to compensate investment professionals. For the six months ended February 28, 2005, FSC did not retain any fees paid by the Fund.
Sales Charges
For the six months ended February 28, 2005, FSC retained $9,971 in sales charges from the sale of Class A Shares. See "What do Shares Cost?" in the prospectus.
Shareholder Services Fee
Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company (FSSC), the Fund will pay FSSC up to 0.25% of the average daily net assets of the Fund's Class A Shares and Class B Shares for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion. Rather than paying investment professionals directly, the Fund may pay fees to FSSC and FSSC will use the fees to compensate investment professionals. For the six months ended February 28, 2005, FSSC retained $1,361 of fees paid by the Fund.
Interfund Transactions
During the six months ended February 28, 2005, 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 $12,100,000 and $8,500,000, respectively.
General
Certain of the Officers and Trustees of the Fund are Officers and Directors or Trustees of the above companies.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations (and in-kind contributions), for the six months ended February 28, 2005, were as follows:
Purchases
|
| $
| 9,061,615
|
Sales
|
| $
| 6,918,498
|
7. CONCENTRATION OF CREDIT RISK
Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at February 28, 2005, 41.4% of the securities in the portfolio of investments are backed by letters of credit or bond insurance of various financial institutions and financial guaranty assurance agencies. The largest percentage of investments insured by or supported (backed) by a letter of credit from any one institution or agency was 14.2% of total investments.
8. LEGAL PROCEEDINGS
Beginning in October 2003, Federated Investors, Inc. and various subsidiaries thereof (including the advisers and distributor for various investment companies, collectively, "Federated"), along with various investment companies sponsored by Federated (Funds) were named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland seeking damages of unspecified amounts. 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 engaged in illegal and improper trading practices including market timing and late trading in concert with certain institutional traders, which allegedly caused financial injury to the mutual fund shareholders. Federated and various Funds have also been named as defendants in several additional lawsuits, the majority of which are now pending in the United States District Court for the Western District of Pennsylvania, alleging, among other things, excessive advisory and Rule 12b-1 fees, and seeking damages of unspecified amounts. The Board of the Funds has retained the law firm of Dickstein Shapiro Morin & Oshinsky LLP to represent the Funds in these lawsuits. Federated and the Funds, and their respective counsel, are reviewing the allegations and will respond appropriately. Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these recent lawsuits and future potential similar suits is uncertain. Although we do not believe that these lawsuits will have a material adverse effect on the Funds, there can be no assurance that these suits, the ongoing adverse publicity and/or other developments resulting from the regulatory investigations will not result in increased Fund redemptions, reduced sales of Fund shares, or other adverse consequences for the Funds.
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
A description of the policies and procedures that the Fund uses to determine how to vote proxies 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 through Federated's website. Go to FederatedInvestors.com , select "Products," select the "Prospectuses and Regulatory Reports" link, then select the Fund to access the link to Form N-PX. This information is also available from the EDGAR database on the SEC's website 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 website 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 website at FederatedInvestors.com by clicking on "Portfolio Holdings" and selecting the name of the Fund, or by selecting the name of the Fund and clicking on "Portfolio Holdings." You must register on the website the first time you wish to access this information.
Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including 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 DELIVERY
In 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.
Federated
World-Class Investment Manager
Federated California Municipal Income Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
Cusip 313923104
Cusip 313923203
4031005 (4/05)
Federated is a registered mark of Federated Investors, Inc. 2005 (c)Federated Investors, Inc.
Federated
World-Class Investment Manager
Federated Michigan Intermediate Municipal Trust
A Portfolio of Federated Municipal Securities Income Trust
SEMI-ANNUAL SHAREHOLDER REPORT
February 28, 2005
Class A Shares
FINANCIAL HIGHLIGHTS
SHAREHOLDER EXPENSE EXAMPLE
PORTFOLIO OF INVESTMENTS SUMMARY TABLES
FINANCIAL STATEMENTS
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
QUARTERLY PORTFOLIO SCHEDULE
Not FDIC Insured * May Lose Value * No Bank Guarantee
Federated Investors 50 Years of Growth & Innovation
Financial Highlights
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited) | | | Year Ended August 31,
|
|
| 2/28/2005
|
|
| 2004
|
|
| 2003
|
|
| 2002
|
|
| 2001
|
|
| 2000
|
|
Net Asset Value, Beginning of Period
| | $11.36 | | | $11.17 | | | $11.22 | | | $11.06 | | | $10.64 | | | $10.62 | |
Income From Investment Operations:
| | | | | | | | | | | | | | | | | | |
Net investment income
| | 0.22 | | | 0.43 | | | 0.45 | | | 0.50 | 1 | | 0.53 | | | 0.53 | |
Net realized and unrealized gain (loss) on investments, futures contracts, and swap contracts
|
| (0.11
| )
|
| 0.19
|
|
| (0.05
| )
|
| 0.16
| 1
|
| 0.42
|
|
| 0.02
|
|
TOTAL FROM INVESTMENT OPERATIONS
|
| 0.11
|
|
| 0.62
|
|
| 0.40
|
|
| 0.66
|
|
| 0.95
|
|
| 0.55
|
|
Less Distributions:
| | | | | | | | | | | | | | | | | | |
Distributions from net investment income
|
| (0.22
| )
|
| (0.43
| )
|
| (0.45
| )
|
| (0.50
| )
|
| (0.53
| )
|
| (0.53
| )
|
Net Asset Value, End of Period
|
| $11.25
|
|
| $11.36
|
|
| $11.17
|
|
| $11.22
|
|
| $11.06
|
|
| $10.64
|
|
Total Return 2
|
| 0.97
| %
|
| 5.60
| %
|
| 3.58
| %
|
| 6.15
| %
|
| 9.12
| %
|
| 5.39
| %
|
| | | | | | | | | | | | | | | | | | |
Ratios to Average Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
| 0.50
| % 3
|
| 0.50
| %
|
| 0.50
| %
|
| 0.50
| %
|
| 0.50
| %
|
| 0.50
| %
|
Net investment income
|
| 3.92
| % 3
|
| 3.76
| %
|
| 3.96
| %
|
| 4.53
| % 1
|
| 4.86
| %
|
| 5.07
| %
|
Expense waiver 4
|
| 0.32
| % 3
|
| 0.36
| %
|
| 0.36
| %
|
| 0.39
| %
|
| 0.42
| %
|
| 0.52
| %
|
Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
| $213,493
|
| $164,213
|
| $147,959
|
| $134,718
|
| $107,043
|
| $89,177
|
|
Portfolio turnover
|
| 11
| %
|
| 20
| %
|
| 15
| %
|
| 19
| %
|
| 13
| %
|
| 40
| %
|
1 Effective September 1, 2001, the Fund adopted the provisions of the American Institute of Certified Public Accountants (AICPA) Audit and Accounting Guide for Investment Companies and began accreting discount on debt securities. For the year ended August 31, 2002, this change had no effect on the net investment income per share, net realized and unrealized gain (loss) on investments per share, or the ratio of net investment income to average net assets. Per share, ratios and supplemental data for the periods prior to September 1, 2001 have not been restated to reflect this change in presentation.
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 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
Shareholder Expense Example
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; 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, 2004 to February 28, 2005.
ACTUAL EXPENSES
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 provided to enable you to compare the ongoing costs of investing in the Fund and 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.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase or redemption payments. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
|
| Beginning
Account Value
9/1/2004
|
| Ending
Account Value
2/28/2005
|
| Expenses Paid
During Period 1
|
Actual
|
| $1,000
|
| $1,009.70
|
| $2.49
|
Hypothetical (assuming a 5% return before expenses)
|
| $1,000
|
| $1,022.32
|
| $2.51
|
1 Expenses are equal to the Fund's annualized expense ratio of 0.50%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Portfolio of Investments Summary Tables
At February 28, 2005, the Fund's credit-quality ratings composition 1 was as follows:
S&P Long-Term Ratings as
Percentage of Total Investments 2
| | Moody's Long-Term Ratings as
Percentage of Total Investments 2
|
AAA
|
| 52.3%
| | Aaa
|
| 52.6%
|
AA
|
| 32.2%
| | Aa
|
| 34.0%
|
A
|
| 7.2%
| | A
|
| 3.6%
|
BBB
|
| 3.9%
| | Baa
|
| 2.2%
|
Not Rated by S&P
|
| 4.4%
| | Not Rated by Moody's
|
| 7.6%
|
TOTAL
|
| 100.0%
| | TOTAL
|
| 100.0%
|
1 These tables depict the long-term, credit-quality ratings assigned to the Fund's portfolio holdings by Standard & Poor's (S&P) and Moody's Investors Service (Moody's), each of which is a nationally recognized statistical rating organization (NRSRO). These credit-quality ratings are shown without regard to gradations within a given rating category. For example, securities rated "A-" have been included in the "A" rated category. Holdings that are rated only by a different NRSRO than the one identified have been included in the "Not rated by..." category. Rated securities that have been prerefunded, but not rated again by the NRSRO, also have been included in the "Not rated by..." category. Rated securities include a security with an obligor and/or credit enhancer that has received a rating from an NRSRO with respect to a class of debt obligations that is comparable in priority and security with the security held by the Fund. Credit-quality ratings are an assessment of the risk that a security will default in payment and do not address other risks presented by the security. Please see the descriptions of credit-quality ratings in the Fund's Statement of Additional Information.
These tables depict the long-term, credit-quality ratings as assigned only by the NRSRO identified in each table. Of the portfolio's total investments , 0.0% do not have long-term ratings by either of these NRSROs.
2 Percentages are based on total investments, which may differ from the Fund's total net assets used in computing the percentages in the Portfolio of Investments which follows.
Portfolio of Investments
February 28, 2005 (unaudited)
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
| | | MUNICIPAL BONDS--98.1% | | | | | |
| | | Michigan--98.1% | | | | | |
| $ | 500,000 | | Anchor Bay, MI, School District, Refunding UT GO Bonds (Series III), 5.50% (Q-SBLF GTD), 5/1/2014
| | AA+/Aa2 | | $ | 560,310 |
| 1,000,000 | | Anchor Bay, MI, School District, Refunding UT GO Bonds (Series III), 5.50% (Q-SBLF GTD), 5/1/2017
| | AA+/Aa2 | | | 1,116,340 |
| 365,000 | | Anchor Bay, MI, School District, School Building & Site UT GO Bonds (Series II), 6.125% (Q-SBLF GTD)/(FGIC INS), 5/1/2011
| | AAA/Aaa | | | 421,827 |
| 500,000 | | Anchor Bay, MI, School District, School Building & Site UT GO Bonds, 5.00% (Q-SBLF GTD), 5/1/2012
| | AA+/Aa2 | | | 546,370 |
| 1,070,000 | | Anchor Bay, MI, School District, UT GO Bonds (Series 1999I), 5.75% (U.S. Treasury PRF 5/1/2009 @ 100)/(Original Issue Yield: 5.80%), 5/1/2014
| | AAA/Aaa | | | 1,186,159 |
| 500,000 | | Ann Arbor, MI, Public School District, Refunding UT GO Bonds, 5.00% (Q-SBLF GTD), 5/1/2011
| | AA+/Aa2 | | | 545,215 |
| 600,000 | | Avondale, MI, School District, School Building & Site UT GO Bonds, 5.00% (Q-SBLF GTD), 5/1/2009
| | AA+/Aa2 | | | 646,050 |
| 500,000 | | Avondale, MI, School District, School Building & Site UT GO Bonds, 5.00% (Q-SBLF GTD), 5/1/2010
| | AA+/Aa2 | | | 542,885 |
| 250,000 | | Big Rapids, MI, Public School District, UT GO Bonds, 7.30% (Q-SBLF GTD)/ (FGIC INS), 5/1/2005
| | AAA/Aaa | | | 252,215 |
| 1,500,000 | | Bishop, MI, International Airport Authority, Revenue Bonds (Series 199B), 5.125% (American Capital Access INS)/ (Original Issue Yield: 5.25%), 12/1/2017
| | A/NR | | | 1,545,450 |
| 1,090,000 | | Boyne City, MI, Public School District, UT GO Bonds, 5.60% (U.S. Treasury PRF 5/1/2009 @ 100)/(Original Issue Yield: 5.70%), 5/1/2014
| | AAA/Aaa | | | 1,201,954 |
| 1,215,000 | | Bridgeport Spaulding, MI, Community School District, UT GO Bonds, 5.50% (Q-SBLF GTD), 5/1/2015
| | AA+/Aa2 | | | 1,359,354 |
| 1,125,000 | | Brighton Township, MI, LT GO Sanitary Sewer Drainage District, 5.25% (FSA INS)/(Original Issue Yield: 5.68%), 10/1/2020
| | AAA/Aaa | | | 1,200,735 |
| 2,050,000 | | Caledonia, MI, Community Schools, UT GO Bonds, 5.40% (Q-SBLF GTD)/(Original Issue Yield: 5.48%), 5/1/2018
| | AA+/Aa2 | | | 2,241,429 |
| 860,000 | | Central Michigan University, Revenue Bonds, 5.20% (U.S. Treasury PRF 4/1/2007 @ 101)/(Original Issue Yield: 5.227%), 10/1/2009
| | AAA/Aaa | | | 913,088 |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
| | | MUNICIPAL BONDS--continued | | | | | |
| | | Michigan--continued | | | | | |
| $ | 1,775,000 | | Charles Stewart Mott Community College, MI, Building & Improvement UT GO Bonds, 5.50% (FGIC INS)/(Original Issue Yield: 5.63%), 5/1/2018
| | AAA/Aaa | | $ | 1,952,642 |
| 1,650,000 | | Charles Stewart Mott Community College, MI, Community College Facilities Refunding UT GO Bonds, 5.00% (MBIA Insurance Corp. INS), 5/1/2014
| | AAA/Aaa | | | 1,809,043 |
| 1,070,000 | | Charlevoix, MI, Public School District, Refunding UT GO Bonds, 5.25% (Q-SBLF GTD), 5/1/2014
| | AA+/Aa2 | | | 1,177,813 |
| 1,245,000 | | Charlevoix, MI, Public School District, Refunding UT GO Bonds, 5.25% (Q-SBLF GTD), 5/1/2016
| | AA+/Aa2 | | | 1,369,512 |
| 1,690,000 | | Chippewa Valley, MI, Schools, Refunding UT GO Bonds, 5.00% (Q-SBLF GTD), 5/1/2009
| | AA+/Aa2 | | | 1,819,707 |
| 1,775,000 | | Chippewa Valley, MI, Schools, School Building & Site Refunding Bonds, 5.50% (Q-SBLF GTD), 5/1/2015
| | AA+/Aa2 | | | 1,985,888 |
| 1,000,000 | | Cornell Township MI, Economic Development Corp., Refunding Revenue Bonds, 5.875% (MeadWestvaco Corp.), 5/1/2018
| | BBB/Baa2 | | | 1,103,420 |
| 2,665,000 | | Detroit, MI, City School District, UT GO Bonds (Series 2001A), 5.50% (Q-SBLF GTD), 5/1/2009
| | AA+/Aa2 | | | 2,921,426 |
| 1,000,000 | | Detroit, MI, Sewage Disposal System, Senior Lien Refunding Revenue Bonds (Series 2003A), 5.00% (FSA INS), 7/1/2009
| | AAA/Aaa | | | 1,080,170 |
| 500,000 | | Detroit, MI, Water Supply System, Second Lien Revenue Bonds (Series 1995A), 5.10% (MBIA Insurance Corp. INS)/ (Original Issue Yield: 5.20%), 7/1/2007
| | AAA/Aaa | | | 526,625 |
| 1,000,000 | | Detroit, MI, Water Supply System, Senior Lien Revenue Bonds (Series 1999A), 5.75% (U.S. Treasury PRF 1/1/2010 @ 101)/ (Original Issue Yield: 5.84%), 7/1/2019
| | AAA/Aaa | | | 1,128,060 |
| 200,000 | | Detroit, MI, Refunding UT GO Bonds, 5.00% (AMBAC INS)/ (Original Issue Yield: 5.10%), 5/1/2005
| | AAA/Aaa | | | 200,990 |
| 1,335,000 | | Detroit, MI, Refunding UT GO Bonds, 5.75% (FSA INS), 4/1/2010
| | AAA/Aaa | | | 1,481,810 |
| 1,000,000 | | Detroit, MI, UT GO Bonds (Series 1999A), 5.00% (FSA INS)/ (Original Issue Yield: 5.16%), 4/1/2019
| | AAA/Aaa | | | 1,068,880 |
| 1,000,000 | | Detroit, MI, UT GO Bonds (Series 2001A-1), 5.375% (MBIA Insurance Corp. INS), 4/1/2017
| | AAA/Aaa | | | 1,110,920 |
| 1,000,000 | | Detroit, MI, UT GO Refunding Bonds, 5.25% (AMBAC INS)/ (Original Issue Yield: 5.29%), 5/1/2008
| | AAA/Aaa | | | 1,071,850 |
| 1,000,000 | | Detroit/Wayne County, MI, Stadium Authority, Revenue Bonds, 5.25% (FGIC INS)/(Original Issue Yield: 5.55%), 2/1/2011
| | AAA/Aaa | | | 1,065,480 |
| 1,000,000 | | Dickinson County, MI, EDC, Refunding Environmental Improvement Revenue Bonds (Series 2002A), 5.75% (International Paper Co.), 6/1/2016
| | BBB/Baa2 | | | 1,084,650 |
| 2,000,000 | | Dickinson County, MI, EDC, Refunding PCR Bonds (Series 2004A), 4.80% (International Paper Co.), 11/1/2018
| | BBB/Baa2 | | | 2,041,800 |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
| | | MUNICIPAL BONDS--continued | | | | | |
| | | Michigan--continued | | | | | |
| $ | 1,925,000 | | East Grand Rapids, MI, Public School District, Refunding UT GO Bonds (Series 2001), 5.50% (Q-SBLF GTD), 5/1/2019
| | AA+/Aa2 | | $ | 2,136,480 |
| 315,000 | | East Lansing, MI, UT GO Refunding Bonds (Series 1993B), 4.85%, 10/1/2007
| | AA/A1 | | | 315,721 |
| 1,000,000 | | Ecorse, MI, Public School District, UT GO Bonds, 5.50% (Q-SBLF GTD)/ (FGIC INS)/(Original Issue Yield: 5.59%), 5/1/2017
| | AAA/Aaa | | | 1,081,950 |
| 1,100,000 | | Farmington, MI, Public School District, UT GO Bonds, 4.00% (Q-SBLF GTD)/(Original Issue Yield: 4.27%), 5/1/2009
| | AA+/Aa2 | | | 1,141,602 |
| 675,000 | | Ferris State University, MI, Revenue Bonds, 5.40% (U.S. Treasury PRF 4/1/2007 @ 101)/(Original Issue Yield: 5.45%), 10/1/2009
| | AAA/Aaa | | | 719,401 |
| 1,000,000 | | Forest Hills, MI, Public School, Refunding UT GO Bonds, 5.00%, 5/1/2012
| | AA/Aa2 | | | 1,096,060 |
| 2,000,000 | | Forest Hills, MI, Public School, UT GO Bonds, 5.25% (Original Issue Yield: 5.50%), 5/1/2019
| | NR/Aa2 | | | 2,174,620 |
| 1,075,000 | | Gibraltar, MI, School District, School Building & Site UT GO Bonds, 5.00% (Q-SBLF GTD)/(FGIC INS), 5/1/2012
| | AAA/Aaa | | | 1,178,264 |
| 1,600,000 | | Grand Blanc, MI, Community Schools, School Building & Site UT GO Bonds, 5.00% (Q-SBLF GTD)/(FSA INS), 5/1/2009
| | AAA/Aaa | | | 1,725,408 |
| 1,000,000 | | Grand Blanc, MI, Community Schools, School Building & Site UT GO Bonds, 5.00% (Q-SBLF GTD)/(FSA INS), 5/1/2015
| | AAA/Aaa | | | 1,092,330 |
| 200,000 | | Grand Rapids, MI, Downtown Development Authority, Tax Increment Revenue Bonds, 6.60% (MBIA Insurance Corp. INS)/(Original Issue Yield: 6.70%), 6/1/2008
| | AAA/Aaa | | | 204,772 |
| 1,000,000 | | Harper Creek, MI, Community School District, UT GO Bonds, 5.125% (Q-SBLF GTD)/(Original Issue Yield: 5.21%), 5/1/2021
| | AA+/Aa2 | | | 1,070,560 |
| 1,000,000 | | Hartland, MI, Consolidated School District, Refunding UT GO Bonds, 5.375% (Q-SBLF GTD), 5/1/2016
| | AA+/Aa2 | | | 1,104,720 |
| 1,650,000 | | Hartland, MI, Consolidated School District, UT GO Bonds, 5.75% (Q-SBLF GTD), 5/1/2010
| | AA+/Aa2 | | | 1,850,128 |
| 1,315,000 | | Hazel Park, MI, School District, UT GO Bonds, 5.00% (Q-SBLF GTD), 5/1/2013
| | AA+/Aa2 | | | 1,426,801 |
| 1,660,000 | | Hemlock, MI, Public School District, UT GO Bonds, 5.50% (Q-SBLF GTD), 5/1/2018
| | AA+/Aa2 | | | 1,853,407 |
| 1,375,000 | | Howell, MI, Public Schools, Refunding UT GO Bonds (Series 2001), 5.25% (Q-SBLF GTD), 5/1/2014
| | AA+/Aa2 | | | 1,509,846 |
| 1,575,000 | | Howell, MI, Public Schools, Refunding UT GO Bonds, 5.25% (Q-SBLF GTD), 5/1/2017
| | AA+/Aa2 | | | 1,721,758 |
| 2,000,000 | | Howell, MI, Public Schools, UT GO Bonds, 5.875% (U.S. Treasury PRF 5/1/2009 @ 100)/(Original Issue Yield: 5.95%), 5/1/2022
| | AAA/Aaa | | | 2,226,880 |
| 250,000 | | Iron Mountain, MI, LT GO Tax Allocation Bonds, 5.00% (AMBAC INS)/(Original Issue Yield: 5.35%), 5/1/2005
| | AAA/Aaa | | | 251,255 |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
| | | MUNICIPAL BONDS--continued | | | | | |
| | | Michigan--continued | | | | | |
| $ | 2,000,000 | | Jackson County, MI, Public Schools, UT GO Bonds, 5.60% (Q-SBLF GTD)/(FGIC INS)/(Original Issue Yield: 5.70%), 5/1/2019
| | AAA/Aaa | | $ | 2,234,440 |
| 1,575,000 | | Jenison, MI, Public Schools, UT GO Refunding Bonds, 5.25% (FGIC INS), 5/1/2011
| | AAA/Aaa | | | 1,743,840 |
| 1,350,000 | | Kalamazoo, MI, City School District, Building & Site UT GO Bonds, 5.00% (FSA INS), 5/1/2013
| | AAA/Aaa | | | 1,465,182 |
| 1,345,000 | | Kent County, MI, Capital Improvement LT GO Bonds (Series 2004A), 5.00%, 12/1/2020
| | AAA/Aaa | | | 1,453,272 |
| 1,000,000 | | Kent Hospital Finance Authority, MI, Revenue Bonds, 5.50% (Spectrum Health), 1/15/2015
| | AA/Aa3 | | | 1,085,160 |
| 1,925,000 | | Lake Fenton, MI, Community Schools, UT GO Bonds, 5.50% (Q-SBLF GTD), 5/1/2017
| | AA+/Aa2 | | | 2,148,954 |
| 1,000,000 | | Lake Orion, MI, School District, UT GO Bonds (Series 2000A), 5.75% (U.S. Treasury PRF 5/1/2010 @ 100)/(Original Issue Yield: 5.89%), 5/1/2015
| | AAA/Aaa | | | 1,124,330 |
| 1,700,000 | | Lake Superior State University, MI, General Revenue Bonds, 5.50% (AMBAC INS), 11/15/2021
| | AAA/Aaa | | | 1,892,100 |
| 1,500,000 | | Lakeshore, MI, Public Schools, UT GO Bonds, 5.70% (U.S. Treasury PRF 5/1/2005 @ 101)/(Original Issue Yield: 5.92%), 5/1/2022
| | AAA/Aaa | | | 1,524,330 |
| 1,000,000 | | Lanse Creuse, MI, Public Schools, UT GO Bonds (Series 2000), 5.40% (Q-SBLF GTD)/(FGIC INS)/(Original Issue Yield: 5.50%), 5/1/2016
| | AAA/Aaa | | | 1,107,730 |
| 500,000 | | Lansing, MI, Sewer Disposal System, Refunding Revenue Bonds, 5.00% (FGIC INS), 5/1/2011
| | AAA/Aaa | | | 546,675 |
| 1,000,000 | | Madison, MI, District Public Schools, Refunding UT GO Bonds, 5.50% (Q-SBLF GTD)/(FGIC INS), 5/1/2015
| | AAA/Aaa | | | 1,090,190 |
| 1,000,000 | | Marquette, MI, Hospital Finance Authority, Hospital Revenue Refunding Bonds (1996 Series D), 5.30% (Marquette General Hospital, MI)/(FSA INS), 4/1/2005
| | AAA/Aaa | | | 1,002,940 |
| 2,000,000 | | Mattawan, MI, Consolidated School District, UT GO Bonds, 5.65% (Q-SBLF GTD)/(FSA INS)/(Original Issue Yield: 5.67%), 5/1/2018
| | AAA/Aaa | | | 2,214,280 |
| 1,350,000 | | Michigan Higher Education Student Loan Authority, Student Loan Revenue Bonds, (Series XVII-A), 5.65% (AMBAC INS), 6/1/2010
| | AAA/Aaa | | | 1,405,553 |
| 1,500,000 | | Michigan Municipal Bond Authority, Refunding Revenue Bonds (Series 2002), 5.25% (Clean Water Revolving Fund), 10/1/2008
| | AAA/Aaa | | | 1,623,900 |
| 1,000,000 | | Michigan Municipal Bond Authority, Revenue Bonds (Series 2003C), 5.00% (Local Government Loan Program), 5/1/2008
| | AA+/Aa2 | | | 1,064,310 |
| 1,200,000 | | Michigan Municipal Bond Authority, Revenue Bonds, 5.25% (Clean Water Revolving Fund), 10/1/2009
| | AAA/Aaa | | | 1,314,168 |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
| | | MUNICIPAL BONDS--continued | | | | | |
| | | Michigan--continued | | | | | |
| $ | 1,000,000 | | Michigan Municipal Bond Authority, Revenue Bonds, 5.75% (Clean Water Revolving Fund)/(U.S. Treasury PRF 10/1/2009 @ 101), 10/1/2015
| | AAA/Aaa | | $ | 1,126,060 |
| 1,455,000 | | Michigan Municipal Bond Authority, Revenue Bonds, 5.25% (Drinking Water Revolving Fund), 10/1/2007
| | AAA/Aaa | | | 1,548,178 |
| 810,000 | | Michigan Municipal Bond Authority, Revenue Bonds, 5.50% (State Revolving Fund), 10/1/2006
| | AAA/Aaa | | | 847,600 |
| 2,190,000 | | Michigan Municipal Bond Authority, Revenue Bonds, 5.625% (Drinking Water Revolving Fund)/(U.S. Treasury PRF 10/1/2009 @ 101), 10/1/2013
| | AAA/Aaa | | | 2,454,421 |
| 2,500,000 | | Michigan Public Power Agency, Belle River Project Refunding Revenue Bonds (Series 2002A), 5.25% (MBIA Insurance Corp. INS), 1/1/2010
| | AAA/Aaa | | | 2,738,050 |
| 500,000 | | Michigan Public Power Agency, Campbell Project Refunding Revenue Bonds (Series 1997A), 5.50% (AMBAC INS), 1/1/2006
| | AAA/Aaa | | | 512,885 |
| 1,000,000 | | Michigan State Building Authority, Facilities Program Refunding Revenue Bonds (Series 2001I), 5.50%, 10/15/2019
| | AA/Aa3 | | | 1,115,830 |
| 1,000,000 | | Michigan State Building Authority, Revenue Bonds, 5.00% (State Police Communication System)/(MBIA Insurance Corp. INS), 10/1/2008
| | AAA/Aaa | | | 1,072,350 |
| 500,000 | | Michigan State Building Authority, Revenue Refunding Bonds, 3.40% (MBIA Insurance Corp. INS)/(Original Issue Yield: 3.45%), 10/1/2009
| | AAA/Aaa | | | 507,760 |
| 1,100,000 | | Michigan State Building Authority, Revenue Refunding Bonds, (Series 1), 4.75% (Original Issue Yield: 4.98%), 10/15/2018
| | AA/Aa3 | | | 1,144,847 |
| 1,000,000 | | Michigan State Comprehensive Transportation Board, Revenue Bonds (Series 2002B), 5.00% (FSA INS), 5/15/2008
| | AAA/Aaa | | | 1,066,170 |
| 1,500,000 | | Michigan State Hospital Finance Authority, Hospital Refunding Revenue Bonds (Series 2003A), 5.50% (Henry Ford Health System, MI), 3/1/2013
| | A-/A1 | | | 1,645,560 |
| 1,000,000 | | Michigan State Hospital Finance Authority, Hospital Refunding Revenue Bonds, 5.75% (Sparrow Obligated Group, MI), 11/15/2016
| | A/A1 | | | 1,086,650 |
| 60,000 | | Michigan State Hospital Finance Authority, Refunding Revenue Bonds (Series 1993P), 4.90% (Sisters of Mercy Health System)/ (Escrowed to maturity U.S. Treasury)/(Original Issue Yield: 5.10%), 8/15/2005
| | AAA/Aaa | | | 60,572 |
| 1,000,000 | | Michigan State Hospital Finance Authority, Refunding Revenue Bonds (Series 1998A), 4.90% (St. John Hospital, MI)/ (U.S. Treasury)/(Original Issue Yield: 5.05%), 5/15/2013
| | AAA/#Aaa | | | 1,066,590 |
| 1,300,000 | | Michigan State Hospital Finance Authority, Refunding Revenue Bonds (Series 2002A), 5.50% (Crittenton Hospital, MI), 3/1/2016
| | A+/A2 | | | 1,397,864 |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
| | | MUNICIPAL BONDS--continued | | | | | |
| | | Michigan--continued | | | | | |
| $ | 1,175,000 | | Michigan State Hospital Finance Authority, Refunding Revenue Bonds (Series A), 6.00% (Trinity Healthcare Credit Group)/ (Original Issue Yield: 6.14%), 12/1/2020
| | AA-/Aa3 | | $ | 1,302,159 |
| 1,000,000 | | Michigan State Hospital Finance Authority, Revenue & Refunding Bonds (Series 1998A), 5.10% (McLaren Health Care Corp.)/(Original Issue Yield: 5.15%), 6/1/2013
| | NR/A1 | | | 1,038,350 |
| 2,000,000 | | Michigan State Hospital Finance Authority, Revenue Bonds (Series 1993P), 5.375% (Sisters of Mercy Health System)/(MBIA Insurance Corp. INS)/(Original Issue Yield: 5.55%), 8/15/2014
| | AAA/Aaa | | | 2,208,900 |
| 1,325,000 | | Michigan State Hospital Finance Authority, Revenue Bonds (Series 1997W), 5.00% (Mercy Health Services)/ (Escrowed to maturity U.S. Treasury COL)/ (Original Issue Yield: 5.26%), 8/15/2011
| | NR/Aa2 | | | 1,410,569 |
| 2,000,000 | | Michigan State Hospital Finance Authority, Revenue Bonds (Series 1999A), 6.00% (Ascension Health Credit Group)/ (MBIA Insurance Corp. INS), 11/15/2011
| | AAA/Aaa | | | 2,230,560 |
| 1,500,000 | | Michigan State Hospital Finance Authority, Revenue Bonds, 5.00% (Oakwood Obligated Group), 11/1/2010
| | A/A2 | | | 1,605,255 |
| 480,000 | | Michigan State Hospital Finance Authority, Revenue Bonds, 5.20% (Sparrow Obligated Group, MI)/(MBIA Insurance Corp. INS), 11/15/2007
| | AAA/Aaa | | | 507,946 |
| 450,000 | | Michigan State Hospital Finance Authority, Revenue Bonds, 5.30% (Sparrow Obligated Group, MI)/(MBIA Insurance Corp. INS), 11/15/2008
| | AAA/Aaa | | | 475,695 |
| 450,000 | | Michigan State Hospital Finance Authority, Revenue Bonds, 5.40% (Sparrow Obligated Group, MI)/(MBIA Insurance Corp. INS), 11/15/2009
| | AAA/Aaa | | | 474,773 |
| 1,000,000 | | Michigan State Hospital Finance Authority, Revenue Refunding Bonds, 5.00% (Chelsea Community Hospital)/(Original Issue Yield: 5.30%), 5/15/2012
| | BBB/NR | | | 1,000,520 |
| 2,180,000 | | Michigan State Hospital Finance Authority, Revenue Refunding Bonds, (Series A), 5.00% (Detroit Medical Center Obligated Group)/(AMBAC INS), 8/15/2005
| | AAA/Aaa | | | 2,207,446 |
| 600,000 | | Michigan State Hospital Finance Authority, Revenue Refunding Bonds, (Series A), 5.10% (Henry Ford Health System, MI)/ (Original Issue Yield: 5.20%), 11/15/2007
| | A-/A1 | | | 624,174 |
| 1,400,000 | | Michigan State Hospital Finance Authority, Revenue Refunding Bonds, (Series A), 5.50% (MidMichigan Obligated Group)/(FSA INS), 6/1/2008
| | AAA/Aaa | | | 1,509,298 |
| 565,000 | | Michigan State Housing Development Authority, LO MFH Revenue Refunding Bonds (Series 2000A), 6.30% (Oakbrook Villa Townhomes)/(GNMA Collateralized Home Mortgage Program GTD), 7/20/2019
| | NR/Aaa | | | 610,460 |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
| | | MUNICIPAL BONDS--continued | | | | | |
| | | Michigan--continued | | | | | |
| $ | 1,000,000 | | Michigan State Housing Development Authority, SFM Revenue Bonds (Series 2001A), 5.30% (MBIA Insurance Corp. INS), 12/1/2016
| | AAA/Aaa | | $ | 1,054,870 |
| 10,000 | | Michigan State South Central Power Agency, Power Supply System Revenue Bond, 5.80% (Escrowed to maturity U.S. Treasury COL)/(Original Issue Yield: 5.90%), 11/1/2005
| | AAA/Aaa | | | 10,234 |
| 390,000 | | Michigan State South Central Power Agency, Power Supply System Revenue Refunding Bonds, 5.80% (MBIA Insurance Corp. INS)/(Original Issue Yield: 5.90%), 11/1/2005
| | AAA/Aaa | | | 399,157 |
| 820,000 | | Michigan State Strategic Fund, Revenue Bonds (Series 2004), 5.00% (NSF International), 8/1/2013
| | A-/NR | | | 875,719 |
| 2,000,000 | | Michigan State Strategic Fund, Revenue Bonds, 4.25% TOBs (Republic Services, Inc.), Mandatory Tender 4/1/2014, Maturity 8/1/2031
| | BBB+/NR | | | 1,937,560 |
| 175,000 | | Michigan State Strategic Fund, Revenue Bonds, 5.30% (Porter Hills Presbyterian Village, Inc.)/(Original Issue Yield: 5.422%), 7/1/2018
| | BBB+/NR | | | 178,945 |
| 325,000 | | Michigan State Strategic Fund, Revenue Bonds, 5.30% (Porter Hills Presbyterian Village, Inc.)/(U.S. Treasury PRF 7/1/2008 @ 101)/(Original Issue Yield: 5.422%), 7/1/2018
| | BBB+/NR | | | 353,317 |
| 1,105,000 | | Michigan State Strategic Fund, Revenue Bonds, (Series A), 5.40% (NSF International)/(U.S. Treasury PRF 8/1/2007 @ 101), 8/1/2010
| | NR/Aa3 | | | 1,182,151 |
| 1,065,000 | | Michigan State Strategic Fund, Revenue Bonds, (Series A), 5.50% (NSF International)/(U.S. Treasury PRF 8/1/2007 @ 101), 8/1/2011
| | NR/Aa3 | | | 1,141,840 |
| 600,000 | | Michigan State Strategic Fund, Revenue Refunding Bonds, (Series A), 7.10% (Ford Motor Co.)/(Original Issue Yield: 7.127%), 2/1/2006
| | BBB-/Baa1 | | | 622,134 |
| 1,950,000 | | Michigan State Trunk Line, Refunding Revenue Bonds (Series 1998A), 5.25%, 11/1/2012
| | AA/Aa3 | | | 2,174,796 |
| 1,000,000 | | Michigan State Trunk Line, Refunding Revenue Bonds, 5.25% (FSA INS), 11/1/2012
| | AAA/Aaa | | | 1,115,280 |
| 1,000,000 | | Michigan State Trunk Line, Refunding Revenue Bonds, 5.25% (FSA INS), 11/1/2013
| | AAA/Aaa | | | 1,119,430 |
| 1,000,000 | | Michigan State Trunk Line, Revenue Bonds (Series 2001A), 5.50% (FSA INS), 11/1/2018
| | AAA/Aaa | | | 1,124,920 |
| 3,000,000 | | Michigan State, Refunding UT GO Bonds, 5.00%, 12/1/2007
| | AA+/Aa2 | | | 3,185,220 |
| 1,250,000 | | Milan, MI, Area Schools, UT GO Bonds (Series 2000A), 5.75% (U.S. Treasury PRF 5/1/2010 @ 100)/(Original Issue Yield: 5.86%), 5/1/2020
| | AAA/Aaa | | | 1,405,413 |
| 300,000 | | Montague, MI, Public School District, UT GO Bonds, 5.125% (FSA INS), 5/1/2006
| | AAA/Aaa | | | 309,120 |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
| | | MUNICIPAL BONDS--continued | | | | | |
| | | Michigan--continued | | | | | |
| $ | 300,000 | | Montague, MI, Public School District, UT GO Bonds, 5.125% (U.S. Treasury PRF 5/1/2006 @ 100), 5/1/2008
| | AAA/Aaa | | $ | 309,210 |
| 1,200,000 | | Newaygo, MI, Public Schools, UT GO Bonds, 5.50% (Q-SBLF GTD), 5/1/2014
| | AA+/Aa2 | | | 1,325,124 |
| 500,000 | | Northville, MI, Public School District, Refunding UT GO Bonds, 5.00% (U.S. Treasury PRF 5/1/2007 @ 100)/(Original Issue Yield: 5.05%), 5/1/2010
| | AAA/Aaa | | | 523,305 |
| 300,000 | | Novi, MI, UT GO Refunding Bonds, 3.25% (MBIA Insurance Corp. INS), 10/1/2011
| | AAA/Aaa | | | 299,817 |
| 1,765,000 | | Oakland County, MI, EDC, LO Revenue Bonds (Series 1997), 5.50% (Lutheran Social Services of Michigan)/(U.S. Treasury PRF 6/1/2007 @ 102), 6/1/2014
| | NR/Aa3 | | | 1,908,636 |
| 1,130,000 | | Oakland University, MI, Revenue Bonds, 5.75% (MBIA Insurance Corp. INS)/(Original Issue Yield: 5.835%), 5/15/2015
| | AAA/Aaa | | | 1,161,211 |
| 1,250,000 | | Orchard View, MI, Schools, School Building & Site Bonds (Series 2003), 5.00% (Q-SBLF GTD), 5/1/2010
| | AA+/Aa2 | | | 1,357,213 |
| 1,000,000 | | Paw, MI, Public School District, School Building & Site UT GO Bonds, 5.50% (U.S. Treasury PRF 5/1/2010 @ 100)/(Original Issue Yield: 5.60%), 5/1/2020
| | AA+/Aa2 | | | 1,112,470 |
| 275,000 | | Pewamo Westphalia, MI, Community School District, UT GO Bonds, 5.00% (Q-SBLF GTD)/(FGIC INS), 5/1/2006
| | AAA/Aaa | | | 283,038 |
| 2,925,000 | | Pinckney, MI, Community Schools, Refunding UT GO Bonds, 5.00% (Q-SBLF GTD)/(FSA INS), 5/1/2016
| | AAA/Aaa | | | 3,179,241 |
| 1,100,000 | | Plymouth-Canton, MI, Community School District, Refunding UT GO Bonds, 4.50% (Q-SBLF GTD)/(FGIC INS)/(Original Issue Yield: 4.55%), 5/1/2012
| | AAA/Aaa | | | 1,133,572 |
| 500,000 | | Portage, MI, Public Schools, UT GO Refunding Bonds, 4.35% (FSA INS)/(Original Issue Yield: 4.47%), 5/1/2011
| | AAA/Aaa | | | 520,005 |
| 500,000 | | Portage, MI, Public Schools, UT GO Refunding Bonds, 4.45% (FSA INS)/(Original Issue Yield: 4.57%), 5/1/2012
| | AAA/Aaa | | | 518,770 |
| 1,625,000 | | River Rouge, MI, School District, Refunding UT GO Bonds, 5.00% (Q-SBLF GTD)/(FGIC INS), 5/1/2009
| | AAA/Aaa | | | 1,752,368 |
| 1,000,000 | | Rochester, MI, Community School District, UT GO Bonds, 5.50% (Q-SBLF GTD)/(MBIA Insurance Corp. INS), 5/1/2006
| | AAA/Aaa | | | 1,034,710 |
| 2,775,000 | | Rockford, MI, Public Schools, Refunding UT GO Bonds, 5.00% (Q-SBLF GTD)/(FSA INS), 5/1/2016
| | AAA/Aaa | | | 3,037,737 |
| 1,155,000 | | Romeo, MI, Community School District, Building & Site UT GO Bonds, 5.00% (Q-SBLF GTD)/(Original Issue Yield: 5.12%), 5/1/2012
| | AA+/Aa2 | | | 1,245,321 |
| 1,170,000 | | Romulus, MI, Community Schools, UT GO Bonds, 6.00% (U.S. Treasury PRF 5/1/2009 @ 100), 5/1/2011
| | AAA/Aaa | | | 1,308,423 |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
| | | MUNICIPAL BONDS--continued | | | | | |
| | | Michigan--continued | | | | | |
| $ | 1,500,000 | | Roseville, MI, School District, UT GO Bonds, 4.45% (Q-SBLF GTD)/ (FSA INS), 5/1/2006
| | AAA/Aaa | | $ | 1,533,945 |
| 1,000,000 | | Saginaw, MI, Hospital Finance Authority, Hospital Revenue Refunding Bonds (Series 2004G), 5.00% (Covenant Medical Center, Inc.), 7/1/2017
| | A/NR | | | 1,046,280 |
| 1,500,000 | | Saginaw, MI, Hospital Finance Authority, Refunding Revenue Bonds (Series 1999E), 5.625% (Covenant Medical Center, Inc.)/(MBIA Insurance Corp. INS), 7/1/2013
| | AAA/Aaa | | | 1,651,980 |
| 5,000,000 | | Saginaw, MI, Hospital Finance Authority, Revenue Bonds, (Series F), 6.50% (Covenant Medical Center, Inc.)/(Original Issue Yield: 6.645%), 7/1/2030
| | A/NR | | | 5,491,700 |
| 2,000,000 | | Saline, MI, Area Schools, UT GO Bonds (Series 2000A), 5.75% (U.S. Treasury PRF 5/1/2010 @ 100), 5/1/2018
| | AA+/Aa2 | | | 2,248,660 |
| 1,000,000 | | Sault Ste Marie, MI, Area Public Schools, UT GO Bonds, 5.375% (Q-SBLF GTD)/(FGIC INS)/(Original Issue Yield: 5.65%), 5/1/2019
| | AAA/Aaa | | | 1,093,940 |
| 675,000 | | South Lyon, MI, Community School District, UT GO Bonds, (Series A), 5.75% (Q-SBLF GTD)/(Original Issue Yield: 5.85%), 5/1/2019
| | AA+/Aa2 | | | 749,149 |
| 1,165,000 | | South Lyon, MI, Community School District, UT GO Bonds, (Series II), 5.25% (MBIA Insurance Corp. INS), 5/1/2016
| | AAA/Aaa | | | 1,289,527 |
| 1,675,000 | | Southfield, MI, Public Schools, UT GO School Building and Site Bonds (Series B), 5.00% (Q-SBLF GTD)/(FSA INS), 5/1/2012
| | AAA/Aaa | | | 1,835,901 |
| 1,250,000 | | Trenton, MI, Building Authority, LT GO Bonds, 5.625% (AMBAC INS)/(Original Issue Yield: 5.73%), 10/1/2021
| | AAA/Aaa | | | 1,398,150 |
| 170,000 | | Troy, MI, City School District, Refunding UT GO Bonds, 4.75% (Q-SBLF GTD)/(Original Issue Yield: 4.80%), 5/1/2008
| | AA+/Aa3 | | | 176,620 |
| 830,000 | | Troy, MI, City School District, UT GO Bonds, 4.75% (U.S. Treasury PRF 5/1/2007 @ 100)/(Original Issue Yield: 4.80%), 5/1/2008
| | AA+/Aa3 | | | 867,076 |
| 1,000,000 | | University of Michigan, Revenue Refunding Bonds, (Series A-1), 5.25%, 12/1/2009
| | AA+/Aa2 | | | 1,070,220 |
| 1,000,000 | | Utica, MI, Community Schools, UT GO Bonds, 5.00% (Q-SBLF GTD), 5/1/2016
| | AA+/Aa2 | | | 1,087,150 |
| 1,000,000 | | Utica, MI, Community Schools, UT GO School Building & Site Refunding Bonds, 5.50% (Q-SBLF GTD), 5/1/2016
| | AA+/Aa2 | | | 1,118,140 |
| 500,000 | | Walled Lake, MI, Consolidated School District, School Building & Site UT GO Bonds, 5.00% (Q-SBLF GTD)/(MBIA Insurance Corp. INS), 5/1/2012
| | AAA/Aaa | | | 548,030 |
| 1,375,000 | | Washtenaw Community College, MI, UT GO Bonds, (Series A), 4.35% (Original Issue Yield: 4.35%), 4/1/2005
| | AA/Aa3 | | | 1,377,791 |
| 1,200,000 | | Washtenaw Community College, MI, UT GO Bonds, (Series A), 4.90% (Original Issue Yield: 4.90%), 4/1/2006
| | AA/Aa3 | | | 1,231,128 |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
| | | MUNICIPAL BONDS--continued | | | | | |
| | | Michigan--continued | | | | | |
| $ | 1,450,000 | | Waterford, MI, School District, UT GO Refunding Bonds, 4.85% (Q-SBLF GTD)/(Original Issue Yield: 4.90%), 6/1/2010
| | AA+/Aa3 | | $ | 1,489,745 |
| 1,000,000 | | Waverly, MI, Community Schools, School Building and Site UT GO Bonds (Series 2000), 5.75% (FGIC INS), 5/1/2015
| | AAA/Aaa | | | 1,115,370 |
| 1,000,000 | | Wayne County, MI, Building Authority, LT GO Capital Improvement Bonds, 5.35% (MBIA Insurance Corp. INS)/ (Original Issue Yield: 5.40%), 6/1/2009
| | AAA/Aaa | | | 1,054,770 |
| 2,000,000 | | Wayne Westland Community Schools, MI, UT GO Refunding Bonds, 5.00% (Q-SBLF GTD)/(FSA INS), 5/1/2014
| | AAA/Aaa | | | 2,200,940 |
| 1,775,000 | | West Bloomfield, MI, School District, Refunding UT GO Bonds, 5.50% (MBIA Insurance Corp. INS), 5/1/2015
| | AAA/Aaa | | | 1,977,297 |
| 900,000 | | West Bloomfield, MI, School District, UT GO Bonds, 5.70% (U.S. Treasury PRF 5/1/2010 @ 100)/(Original Issue Yield: 5.75%), 5/1/2014
| | AAA/Aaa | | | 1,009,764 |
| 1,000,000 | | West Branch Rose City, MI, Area School District, UT GO Bonds, 5.50% (Q-SBLF GTD)/(FGIC INS)/(Original Issue Yield: 5.60%), 5/1/2017
| | AAA/Aaa | | | 1,088,680 |
| 800,000 | | West Ottawa, MI, Public School District, UT GO Bonds (Series 2002A), 4.00% (Q-SBLF GTD), 5/1/2007
| | AA+/Aa2 | | | 821,544 |
| 1,025,000 | | Whitehall, MI, District Schools, UT GO Bonds, 5.50% (Q-SBLF GTD), 5/1/2016
| | AA+/Aa2 | | | 1,148,297 |
| 1,075,000 | | Whitmore Lake, MI, Public School District, UT GO Bonds, 5.00% (Q-SBLF GTD), 5/1/2009
| | AA+/Aa2 | | | 1,157,506 |
| 1,400,000 | | Wyandotte, MI, Electric Authority, Revenue Refunding Bonds, 6.25% (MBIA Insurance Corp. INS)/(Original Issue Yield: 6.55%), 10/1/2008
|
| AAA/Aaa
|
|
| 1,500,814
|
| | | TOTAL MUNICIPAL BONDS (IDENTIFIED COST $198,780,331)
|
|
|
|
| 209,381,267
|
| | | SHORT-TERM MUNICIPALS--1.8% | | | | | |
| | | Michigan--1.8% | | | | | |
| 3,800,000 | | Michigan State Hospital Finance Authority, (Series 1999 A) Weekly VRDNs (Covenant Retirement Communities, Inc.)/ (Lasalle Bank, N.A. LOC) (at amortized cost)
|
| A-1/NR
|
|
| 3,800,000
|
| | | TOTAL MUNICIPAL INVESTMENTS--99.9%
(IDENTIFIED COST $202,580,331) 1
|
|
|
|
| 213,181,267
|
| | | OTHER ASSETS AND LIABILITIES - NET--0.1%
|
|
|
|
| 311,260
|
| | | TOTAL NET ASSETS--100%
|
|
|
| $
| 213,492,527
|
Securities subject to the federal alternative minimum tax (AMT) represent 3.0% of the Fund's portfolio as calculated based upon total portfolio market value.
1 The cost of investments for federal tax purposes amounts to $202,566,956.
Note: The categories of investments are shown as a percentage of total net assets at February 28, 2005.
The following acronyms are used throughout this portfolio:
| AMBAC | - --American Municipal Bond Assurance Corporation |
| EDC | - --Economic Development Commission |
| FGIC | - --Financial Guaranty Insurance Company |
| FSA | - --Financial Security Assurance, Inc. |
| GNMA | - --Government National Mortgage Association |
| GO | - --General Obligation |
| GTD | - --Guaranteed |
| INS | - --Insured |
| LO | - --Limited Obligation |
| LOC | - --Letter of Credit |
| LT | - --Limited Tax |
| MFH | - --Multifamily Housing |
| PCR | - --Pollution Control Revenue |
| PRF | - --Prerefunded |
| Q-SBLF | - --Qualified State Bond Loan Fund |
| 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
Statement of Assets and Liabilities
February 28, 2005 (unaudited)
Assets:
| | | | | | | |
Total investments in securities, at value (identified cost $202,580,331)
| | | | | $ | 213,181,267 | |
Cash
| | | | | | 22,314 | |
Income receivable
| | | | | | 3,104,957 | |
Receivable for investments sold
| | | | | | 757,500 | |
Receivable for shares sold
|
|
|
|
|
| 61,449
|
|
TOTAL ASSETS
|
|
|
|
|
| 217,127,487
|
|
Liabilities:
| | | | | | | |
Payable for investments purchased
| | $ | 3,103,033 | | | | |
Payable for shares redeemed
| | | 221,238 | | | | |
Income distribution payable
| | | 293,919 | | | | |
Payable for Directors'/Trustees fees
| | | 339 | | | | |
Payable for shareholder services fee (Note 5)
| | | 11,567 | | | | |
Accrued expenses
|
|
| 4,864
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
|
|
| 3,634,960
|
|
Net assets for 18,984,379 shares outstanding
|
|
|
|
| $
| 213,492,527
|
|
Net Assets Consist of:
| | | | | | | |
Paid-in capital
| | | | | $ | 204,832,958 | |
Net unrealized appreciation of investments
| | | | | | 10,600,936 | |
Accumulated net realized loss on investments and futures contracts
| | | | | | (1,947,883 | ) |
Undistributed net investment income
|
|
|
|
|
| 6,516
|
|
TOTAL NET ASSETS
|
|
|
|
| $
| 213,492,527
|
|
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
| | | | | | | |
Net asset value per share ($213,492,527 ÷ 18,984,379 shares outstanding), no par value, unlimited shares authorized
|
|
|
|
|
| $11.25
|
|
Offering price per share (100/97.00 of $11.25) 1
|
|
|
|
|
| $11.60
|
|
Redemption proceeds per share
|
|
|
|
|
| $11.25
|
|
1 See "What Do Shares Cost?" in the Prospectus.
See Notes which are an integral part of the Financial Statements
Statement of Operations
Six Months Ended February 28, 2005 (unaudited)
Investment Income:
| | | | | | | | | | | | |
Interest
|
|
|
|
|
|
|
|
|
| $
| 4,579,883
|
|
Expenses:
| | | | | | | | | | | | |
Investment adviser fee (Note 5)
| | | | | | $ | 413,828 | | | | | |
Administrative personnel and services fee (Note 5)
| | | | | | | 80,144 | | | | | |
Custodian fees
| | | | | | | 5,575 | | | | | |
Transfer and dividend disbursing agent fees and expenses
| | | | | | | 21,372 | | | | | |
Directors'/Trustees' fees
| | | | | | | 1,518 | | | | | |
Auditing fees
| | | | | | | 8,295 | | | | | |
Legal fees
| | | | | | | 2,871 | | | | | |
Portfolio accounting fees
| | | | | | | 32,552 | | | | | |
Shareholder services fee (Note 5)
| | | | | | | 258,643 | | | | | |
Share registration costs
| | | | | | | 13,958 | | | | | |
Printing and postage
| | | | | | | 6,336 | | | | | |
Insurance premiums
| | | | | | | 4,027 | | | | | |
Miscellaneous
|
|
|
|
|
|
| 565
|
|
|
|
|
|
TOTAL EXPENSES
|
|
|
|
|
|
| 849,684
|
|
|
|
|
|
Waivers (Note 5):
| | | | | | | | | | | | |
Waiver of investment adviser fee
| | $ | (133,194 | ) | | | | | | | | |
Waiver of administrative personnel and services fee
| | | (7,913 | ) | | | | | | | | |
Waiver of shareholder services fee
|
|
| (186,223
| )
|
|
|
|
|
|
|
|
|
TOTAL WAIVERS
|
|
|
|
|
|
| (327,330
| )
|
|
|
|
|
Net expenses
|
|
|
|
|
|
|
|
|
|
| 522,354
|
|
Net investment income
|
|
|
|
|
|
|
|
|
|
| 4,057,529
|
|
Realized and Unrealized Gain (Loss) on Investments and Futures Contracts:
| | | | | | | | | | | | |
Net realized gain on investments
| | | | | | | | | | | 380,075 | |
Net realized gain on futures contracts
| | | | | | | | | | | 84,010 | |
Net change in unrealized appreciation of investments
| | | | | | | | | | | 813,013 | |
Net change in unrealized appreciation of futures contracts
|
|
|
|
|
|
|
|
|
|
| (20,477
| )
|
Net realized and unrealized gain on investments and futures contracts
|
|
|
|
|
|
|
|
|
|
| 1,256,621
|
|
Change in net assets resulting from operations
|
|
|
|
|
|
|
|
|
| $
| 5,314,150
|
|
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
|
|
| Six Months
Ended
(unaudited)
2/28/2005
|
|
|
|
Year Ended
8/31/2004
| |
Increase (Decrease) in Net Assets
| | | | | | | | |
Operations:
| | | | | | | | |
Net investment income
| | $ | 4,057,529 | | | $ | 6,049,930 | |
Net realized gain (loss) on investments, futures contracts and swap contracts
| | | 464,085 | | | | (1,611,390 | ) |
Net change in unrealized appreciation of investments and futures contracts
|
|
| 792,536
|
|
|
| 3,320,726
|
|
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS
|
|
| 5,314,150
|
|
|
| 7,759,266
|
|
Distributions to Shareholders:
| | | | | | | | |
Distributions from net investment income
|
|
| (4,050,954
| )
|
|
| (6,048,516
| )
|
Share Transactions:
| | | | | | | | |
Proceeds from sale of shares
| | | 15,317,177 | | | | 49,546,216 | |
Proceeds from shares issued in connection with the tax free transfer of assets from Golden Oak Michigan Tax-Free Bond Fund
| | | 58,659,649 | | | | - -- | |
Net asset value of shares issued to shareholders in payment of distributions declared
| | | 2,114,477 | | | | 2,705,245 | |
Cost of shares redeemed
|
|
| (28,075,140
| )
|
|
| (37,708,370
| )
|
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS
|
|
| 48,016,163
|
|
|
| 14,543,091
|
|
Change in net assets
|
|
| 49,279,359
|
|
|
| 16,253,841
|
|
Net Assets:
| | | | | | | | |
Beginning of period
|
|
| 164,213,168
|
|
|
| 147,959,327
|
|
End of period (including undistributed (distributions in excess of) net investment income of $6,516 and $(59), respectively)
|
| $
| 213,492,527
|
|
| $
| 164,213,168
|
|
See Notes which are an integral part of the Financial Statements
Notes to Financial Statements
February 28, 2005 (unaudited)
1. ORGANIZATION
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 seven portfolios. The financial statements included herein are only those of Federated Michigan Intermediate Municipal Trust (the "Fund"), a non-diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The investment objective of the Fund is to provide current income exempt from federal regular income tax and personal income taxes imposed by the state of Michigan and Michigan municipalities. Interest income from the Fund's investments may be subject to the federal alternative minimum tax for individuals and corporations. The Fund offers one class of shares: Class A Shares.
On September 29, 2004, the Fund received a tax-free transfer of assets from Golden Oak Michigan Tax-Free Bond Fund as follows:
|
| Shares of
the Fund
Issued
|
| Golden Oak
Michigan
Tax-Free
Bond Fund
Net Assets
Received
|
| Unrealized
Appreciation 1
|
| Net Assets
of the
Fund Prior to
Combination
|
| Net Assets of
Golden Oak
Michigan
Tax-Free
Bond Fund
Immediately
Prior to
Combination
|
| Net Assets
of the Fund
Immediately
After
Combination
|
Golden Oak Michigan Tax-Free Bond Fund Class A Shares
|
| 5,090,009
|
| $58,076,940
|
| $3,621,705
|
|
|
| $58,076,940
|
|
|
Golden Oak Michigan Tax-Free Bond Fund Class B Shares
|
| 51,065
|
| 582,642
|
| 11,721
|
|
|
| 582,642
|
|
|
TOTAL
|
| 5,141,074
|
| $58,659,582
|
| $3,633,426
|
| $159,760,822
|
| $58,659,582
|
| $218,420,404
|
1 Unrealized Appreciation is included in the Golden Oak Michigan Tax-Free 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 generally accepted accounting principles (GAAP) in the United States of America.
Investment Valuation
Municipal bonds are valued by an independent pricing service, taking into consideration yield, liquidity, risk, credit quality, coupon, maturity, type of issue, and any other factors or market data the pricing service deems relevant. Short-term securities are valued at the prices provided by an independent pricing service. However, short-term securities with remaining maturities of 60 days or less at the time of purchase may be valued at amortized cost, which approximates fair market value. Investments in other open-end regulated investment companies are valued at net asset value. Securities for which no quotations are readily available are valued at fair value as determined in accordance with procedures established by and under general supervision of the Board of Trustees (the "Trustees").
Investment Income, Expenses, and Distributions
Interest income and expenses are accrued daily. Distributions to shareholders are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at fair value.
Premium 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 (the "Code") and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary.
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.
Swap Contracts
The Fund may enter into swap contracts. A swap is an exchange of cash payments between the Fund and another party, which is based on a specific financial index. The value of the swap is adjusted daily and the change in value is recorded as unrealized appreciation or depreciation. When a swap contract is closed, the Fund recognizes a realized gain or loss. The swap contracts entered into by the Fund are on a forward settling basis. For the six months ended February 28, 2005, the Fund had no realized gain (loss) on swap contracts.
Risks may arise upon entering into these agreements from the potential inability of the counterparties to meet the terms of their contract and from unanticipated changes in the value of the financial index on which the swap agreement is based. The Fund uses swaps for hedging purposes to reduce its exposure to interest rate fluctuations.
At February 28, 2005, the Fund had no open swap contracts.
Futures Contracts
The Fund periodically may sell bond interest rate futures contracts to manage duration and to potentially reduce transaction costs. Upon entering into a bond interest rate futures contract with a broker, the Fund is required to deposit in a segregated account a specified amount of cash or U.S. government securities. Futures contracts are valued daily and unrealized gains or losses are recorded in a "variation margin" account. Daily, the Fund receives from or pays to the broker a specified amount of cash based upon changes in the variation margin account. When a contract is closed, the Fund recognizes a realized gain or loss. Futures contracts have market risks, including the risk that the change in the value of the contract may not correlate with the changes in the value of the underlying securities. For the six months ended February 28, 2005, the Fund had realized gains on futures contracts of $84,010.
At February 28, 2005, the Fund had no open futures contracts.
Use of Estimates
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.
Other
Investment transactions are accounted for on a trade date basis. Realized gains and losses from investment transactions are recorded on an identified cost basis.
3. SHARES OF BENEFICIAL INTEREST
The following table summarizes share activity:
|
| Six Months
Ended
2/28/2005
|
|
|
Year Ended
8/31/2004
|
|
Shares sold
| | 1,671,778 | | | 4,306,696 | |
Shares issued in connection with tax-free transfer of assets from Golden Oak Michigan Tax-Free Bond Fund
| | 5,141,074 | | | - -- | |
Shares issued to shareholders in payment of distributions declared
| | 186,979 | | | 237,993 | |
Shares redeemed
|
| (2,476,666
| )
|
| (3,333,020
| )
|
NET CHANGE RESULTING FROM SHARE TRANSACTIONS
|
| 4,523,165
|
|
| 1,211,669
|
|
4. FEDERAL TAX INFORMATION
At February 28, 2005, the cost of investments for federal tax purposes was $202,566,956. The net unrealized appreciation of investments for federal tax purposes was $10,614,311. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $10,802,492 and net unrealized depreciation from investments for those securities having an excess of cost over value of $188,181.
At August 31, 2004, the Fund had a capital loss carryforward of $822,865 which will reduce the Fund's taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Code and thus will reduce the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal tax. Pursuant to the Code, such capital loss carryforward will expire as follows:
Expiration Year
|
| Expiration Amount
|
2008
|
| $804,301
|
2009
|
| $ 2,481
|
2012
|
| $ 16,083
|
Under current tax regulations, capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. As of August 31, 2004, for federal income tax purposes, post October losses of $1,574,829 were deferred to September 1, 2004.
5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment adviser fee equal to 0.40% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion.
Administrative Fee
Federated 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 all Federated funds as specified below:
Maximum
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. FAS may voluntarily choose to waive any portion of its fee. FAS can modify or terminate this voluntary waiver at any time at its sole discretion.
Sales Charges
For the six months ended February 28, 2005, Federated Securities Corp., the principal distributor, retained $7,418 of contingent deferred sales charges relating to redemptions of Fund Shares. See "What Do Shares Cost?" in the Prospectus.
Shareholder Services Fee
Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company (FSSC), the Fund will pay FSSC up to 0.25% of the average daily net assets of the Fund's Shares for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion. Rather than paying investment professionals directly, the Fund may pay fees to FSSC and FSSC will use the fees to compensate investment professionals. For the six months ended February 28, 2005, FSSC did not retain any fees paid by the Fund.
Interfund Transactions
During the six months ended February 28, 2005, 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 $23,400,000 and $24,200,000, respectively.
General
Certain of the Officers and Trustees of the Fund are Officers and Directors or Trustees of the above companies.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations (and in-kind contributions), for the six months ended February 28, 2005, were as follows:
Purchases
|
| $
| 22,361,700
|
Sales
|
| $
| 25,937,120
|
7. CONCENTRATION OF CREDIT RISK
Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at February 28, 2005, 42.5% 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 14.7% of total investments.
8. LEGAL PROCEEDINGS
Beginning in October 2003, Federated Investors, Inc. and various subsidiaries thereof (including the advisers and distributor for various investment companies, collectively, "Federated"), along with various investment companies sponsored by Federated ("Funds") were named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland seeking damages of unspecified amounts. 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 engaged in illegal and improper trading practices including market timing and late trading in concert with certain institutional traders, which allegedly caused financial injury to the mutual fund shareholders. Federated and various Funds have also been named as defendants in several additional lawsuits, the majority of which are now pending in the United States District Court for the Western District of Pennsylvania, alleging, among other things, excessive advisory and Rule 12b-1 fees, and seeking damages of unspecified amounts. The Board of the Funds has retained the law firm of Dickstein Shapiro Morin & Oshinsky LLP to represent the Funds in these lawsuits. Federated and the Funds, and their respective counsel, are reviewing the allegations and will respond appropriately. Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these recent lawsuits and future potential similar suits is uncertain. Although we do not believe that these lawsuits will have a material adverse effect on the Funds, there can be no assurance that these suits, the ongoing adverse publicity and/or other developments resulting from the regulatory investigations will not result in increased Fund redemptions, reduced sales of Fund shares, or other adverse consequences for the Funds.
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
A description of the policies and procedures that the Fund uses to determine how to vote proxies 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 through Federated's website. Go to FederatedInvestors.com, select "Products," select the "Prospectuses and Regulatory Reports" link, then select the Fund to access the link to Form N-PX. This information is also available from the EDGAR database on the SEC's website 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 website 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 website at FederatedInvestors.com by clicking on "Portfolio Holdings" and selecting the name of the Fund, or by selecting the name of the Fund and clicking on "Portfolio Holdings." You must register on the website the first time you wish to access this information.
Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including 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 DELIVERY
In 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.
Federated
World-Class Investment Manager
Federated Michigan Intermediate Municipal Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
Cusip 313923302
3032602 (4/05)
Federated is a registered mark of Federated Investors, Inc. 2005 (c)Federated Investors, Inc.
Federated
World-Class Investment Manager
Federated New York Municipal Income Fund
A Portfolio of Federated Municipal Securities Income Trust
SEMI-ANNUAL SHAREHOLDER REPORT
February 28, 2005
Class A Shares
Class B Shares
FINANCIAL HIGHLIGHTS
SHAREHOLDER EXPENSE EXAMPLE
PORTFOLIO OF INVESTMENTS SUMMARY TABLES
FINANCIAL STATEMENTS
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
QUARTERLY PORTFOLIO SCHEDULE
Not FDIC Insured * May Lose Value * No Bank Guarantee
Federated Investors 50 Years of Growth & Innovation
Financial Highlights - Class A Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited) | | | Year Ended August 31,
|
|
| 2/28/2005
|
|
| 2004
|
|
| 2003
|
|
| 2002
|
|
| 2001
|
|
| 2000
|
|
Net Asset Value, Beginning of Period
| | $10.65 | | | $10.44 | | | $10.59 | | | $10.80 | | | $10.29 | | | $10.36 | |
Income From Investment Operations:
| | | | | | | | | | | | | | | | | | |
Net investment income
| | 0.22 | | | 0.46 | | | 0.44 | | | 0.49 | 1 | | 0.52 | | | 0.53 | |
Net realized and unrealized gain (loss) on investments, futures contracts and swap contracts
|
| 0.09
|
|
| 0.21
|
|
| (0.15
| )
|
| (0.20
| ) 1
|
| 0.51
|
|
| (0.07
| )
|
TOTAL FROM INVESTMENT OPERATIONS
|
| 0.31
|
|
| 0.67
|
|
| 0.29
|
|
| 0.29
|
|
| 1.03
|
|
| 0.46
|
|
Less Distributions:
| | | | | | | | | | | | | | | | | | |
Distributions from net investment income
|
| (0.22
| )
|
| (0.46
| )
|
| (0.44
| )
|
| (0.50
| )
|
| (0.52
| )
|
| (0.53
| )
|
Net Asset Value, End of Period
|
| $10.74
|
|
| $10.65
|
|
| $10.44
|
|
| $10.59
|
|
| $10.80
|
|
| $10.29
|
|
Total Return 2
|
| 2.97
| %
|
| 6.51
| %
|
| 2.81
| %
|
| 2.79
| %
|
| 10.29
| %
|
| 4.64
| %
|
| | | | | | | | | | | | | | | | | | |
Ratios to Average Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
| 0.61
| % 3
|
| 0.61
| %
|
| 0.76
| %
|
| 0.91
| %
|
| 0.91
| %
|
| 0.84
| %
|
Net investment income
|
| 4.21
| % 3
|
| 4.31
| %
|
| 4.19
| %
|
| 4.72
| % 1
|
| 4.97
| %
|
| 5.23
| %
|
Expense waiver/reimbursement 4
|
| 1.10
| % 3
|
| 1.07
| %
|
| 1.16
| %
|
| 1.10
| %
|
| 1.39
| %
|
| 1.42
| %
|
Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
| $25,556
|
|
| $27,600
|
|
| $26,673
|
|
| $23,466
|
|
| $23,011
|
|
| $21,392
|
|
Portfolio turnover
|
| 4
| %
|
| 15
| %
|
| 8
| %
|
| 35
| %
|
| 40
| %
|
| 31
| %
|
1 Effective September 1, 2001, the Fund adopted the provisions of the American Institute of Certified Public Accountants (AICPA) Audit and Accounting Guide for Investment Companies and began accreting discount on debt securities. For the year ended August 31, 2002, this change had no effect on the net investment income per share, the net realized and unrealized gain (loss) on investments per share, or the ratio of net investment income to average net assets. Per share, ratios and supplemental data for the periods prior to September 1, 2001 have not been restated to reflect this change in presentation.
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 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
Financial Highlights - Class B Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited) | | | Year Ended | | | Period
Ended | |
|
| 2/28/2005
|
|
| 8/31/2004
|
|
| 8/31/2003
| 1
|
Net Asset Value, Beginning of Period
| | $10.65 | | | $10.44 | | | $10.65 | |
Income From Investment Operations:
| | | | | | | | | |
Net investment income
| | 0.18 | | | 0.38 | | | 0.36 | |
Net realized and unrealized gain (loss) on investments, futures contracts and swap contracts
|
| 0.09
|
|
| 0.21
|
|
| (0.21
| )
|
TOTAL FROM INVESTMENT OPERATIONS
|
| 0.27
|
|
| 0.59
|
|
| 0.15
|
|
Less Distributions:
| | | | | | | | | |
Distributions from net investment income
|
| (0.18
| )
|
| (0.38
| )
|
| (0.36
| )
|
Net Asset Value, End of Period
|
| $10.74
|
|
| $10.65
|
|
| $10.44
|
|
Total Return 2
|
| 2.59
| %
|
| 5.72
| %
|
| 1.42
| %
|
| | | | | | | | | |
Ratios to Average Net Assets:
|
|
|
|
|
|
|
|
|
|
Expenses
|
| 1.36
| % 3
|
| 1.36
| %
|
| 1.51
| % 3
|
Net investment income
|
| 3.47
| % 3
|
| 3.56
| %
|
| 3.36
| % 3
|
Expense waiver/reimbursement 4
|
| 0.84
| % 3
|
| 0.82
| %
|
| 0.91
| % 3
|
Supplemental Data:
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
| $22,539
|
|
| $21,802
|
|
| $19,000
|
|
Portfolio turnover
|
| 4
| %
|
| 15
| %
|
| 8
| %
|
1 Reflects operations for the period from September 5, 2002 (date of initial public investment) to August 31, 2003.
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 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
Shareholder Expense Example
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; 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, 2004 to February 28, 2005.
ACTUAL EXPENSES
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 provided to enable you to compare the ongoing costs of investing in the Fund and 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.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase or redemption payments. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
|
| Beginning
Account Value
9/1/2004
|
| Ending
Account Value
2/28/2005
|
| Expenses Paid
During Period 1
|
Actual:
|
|
|
|
|
|
|
Class A Shares
|
| $1,000
|
| $1,029.70
|
| $3.07
|
Class B Shares
|
| $1,000
|
| $1,025.90
|
| $6.83
|
Hypothetical (assuming a 5% return before expenses):
|
|
|
|
|
|
|
Class A Shares
|
| $1,000
|
| $1,021.77
|
| $3.06
|
Class B Shares
|
| $1,000
|
| $1,018.05
|
| $6.80
|
1 Expenses are equal to the Fund's annualized expense ratios multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). The annualized expense ratios are as follows:
Class A Shares
|
| 0.61%
|
Class B Shares
|
| 1.36%
|
Portfolio of Investments Summary Tables
At February 28, 2005, the Fund's credit-quality ratings composition 1 was as follows:
S&P Long-Term Ratings as
Percentage of Total Investments 2
| | Moody's Long-Term Ratings as
Percentage of Total Investments 2
|
AAA
|
| 27.3%
| | Aaa
|
| 26.7%
|
AA
|
| 20.5%
| | Aa
|
| 8.0%
|
A
|
| 16.9%
| | A
|
| 16.6%
|
BBB
|
| 10.4%
| | Baa
|
| 14.1%
|
BB
|
| 2.5%
| | Ba
|
| 4.7%
|
Not Rated by S&P
|
| 22.4%
| | Not Rated by Moody's
|
| 29.9%
|
TOTAL
|
| 100.0%
| | TOTAL
|
| 100.0%
|
1 These tables depict the long-term, credit-quality ratings assigned to the Fund's portfolio holdings by Standard & Poor's (S&P) and Moody's Investors Service (Moody's), each of which is a nationally recognized statistical rating organization (NRSRO). These credit-quality ratings are shown without regard to gradations within a given rating category. For example, securities rated "A-" have been included in the "A" rated category. Holdings that are rated only by a different NRSRO than the one identified have been included in the "Not rated by..." category. Rated securities that have been prerefunded, but not rated again by the NRSRO, also have been included in the "Not rated by..." category. Rated securities include a security with an obligor and/or credit enhancer that has received a rating from an NRSRO with respect to a class of debt obligations that is comparable in priority and security with the security held by the Fund. Credit-quality ratings are an assessment of the risk that a security will default in payment and do not address other risks presented by the security. Please see the descriptions of credit-quality ratings in the Fund's Statement of Additional Information.
These tables depict the long-term, credit-quality ratings as assigned only by the NRSRO identified in each table. Of the portfolio's total investments, 8.0% do not have long-term ratings by either of these NRSROs.
2 Percentages are based on total investments, which may differ from the Fund's total net assets used in computing the percentages in the Portfolio of Investments which follows.
Portfolio of Investments
February 28, 2005 (unaudited)
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
| | | MUNICIPAL BONDS--98.3% | | | | | |
| | | New York--92.0% | | | | | |
| $ | 500,000 | | Albany County, NY, IDA, IDRBs (Series 2004A), 5.375% (Albany College of Pharmacy), 12/1/2024
| | BBB-/NR/BBB- | | $ | 516,835 |
| 500,000 | | Albany, NY, IDA, Civic Facility Revenue Bonds, (Series A), 5.75% (Albany Law School)/(Radian Asset Assurance INS)/(Original Issue Yield: 5.83%), 10/1/2030
| | AA/NR/NR | | | 551,380 |
| 500,000 | | Amherst, NY, IDA, Civic Facility Revenue Bonds (Series 2000B), 5.75% (UBF Faculty-Student Housing Corp.)/ (AMBAC INS)/ Original Issue Yield: 5.82%), 8/1/2025
| | AAA/Aaa/AAA | | | 564,745 |
| 500,000 | | Broome County, NY, IDA, Civic Facility Revenue Bonds (Series 2004B), 5.00% (University Plaza-Phase II)/ (American Capital Access INS)/(Original Issue Yield: 5.05%), 8/1/2025
| | A/NR/NR | | | 508,440 |
| 295,000 | | Dutchess County, NY, IDA, Refunding Revenue Bonds (Series 2004A), 7.50% (St. Francis Hospital and Health Centers), 3/1/2029
| | NR | | | 301,086 |
| 785,000 | | Dutchess County, NY, IDA, Revenue Bonds (Series A), 5.00% (Marist College)/(Original Issue Yield: 5.15%), 7/1/2020
| | NR/Baa1/NR | | | 817,263 |
| 500,000 | | East Rochester, NY, Housing Authority, Revenue Bonds (Series 2002A), 5.375% (Rochester St. Mary's Residence Facility, LLC)/(GNMA GTD), 12/20/2022
| | AAA/NR/NR | | | 537,980 |
| 750,000 | | Erie County, NY, Public Improvement UT GO Bonds (Series 2003A), 5.25% (FGIC INS), 3/15/2020
| | NR/Aaa/AAA | | | 816,907 |
| 500,000 | | Essex County, NY, IDA, Solid Waste Disposal Revenue Bonds (Series A), 5.80% (International Paper Co.), 12/1/2019
| | BBB/Baa2/NR | | | 515,100 |
| 500,000 | | Hempstead Town, NY, IDA, Civic Facility Revenue Bonds, 5.00% (Hofstra University)/(Original Issue Yield: 5.10%), 7/1/2033
| | A/Baa1/NR | | | 514,920 |
| 220,000 | | Islip, NY, Resource Recovery Agency, Resource Recovery Revenue Bonds (Series 2001E), 5.75% (FSA INS), 7/1/2023
| | AAA/Aaa/AAA | | | 245,344 |
| 1,000,000 | | Long Island Power Authority, NY, Electric System General Revenue Bonds (Series 2003B), 5.25%, 12/1/2014
| | A-/A3/A- | | | 1,107,610 |
| 750,000 | | Long Island Power Authority, NY, Electric System Revenue Bonds, (Series A), 5.50% (Escrowed In Treasuries COL), 12/1/2012
| | AAA/Aaa/AAA | | | 856,132 |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
| | | MUNICIPAL BONDS--continued | | | | | |
| | | New York--continued | | | | | |
| $ | 500,000 | | Madison County, NY, IDA, Civic Facility Revenue Bonds (Series 2003A), 5.00% (Colgate University), 7/1/2023
| | AA-/Aa3/NR | | $ | 526,975 |
| 750,000 | | Metropolitan Transportation Authority, NY, Refunding Revenue Bonds (Series 2002A), 5.50% (AMBAC INS), 11/15/2018
| | AAA/Aaa/AAA | | | 844,927 |
| 500,000 | | Monroe County, NY, IDA, Civic Center Revenue Bonds, 5.25% (St. John Fisher College)/(Radian Asset Assurance Insurance)/(Original Issue Yield: 5.25%), 6/1/2026
| | AA/NR/NR | | | 530,730 |
| 500,000 | | Monroe County, NY, IDA, Civic Facility Revenue Bond, 5.25% (Nazareth College)/(MBIA Insurance Corp. INS), 10/1/2021
| | NR/Aaa/AAA | | | 538,980 |
| 190,000 | | Nassau County, NY, IDA, Civic Facility Refunding Revenue Bonds (Series 2001B), 5.875% (North Shore-Long Island Jewish Obligated Group)/(Original Issue Yield: 5.92%), 11/1/2011
| | NR/A3/A- | | | 208,137 |
| 500,000 | | Nassau County, NY, IDA, IDRBs (Series 2003A), 5.25% (Keyspan-Glenwood Energy Center, LLC)/(KeySpan Corp. GTD), 6/1/2027
| | A/A3/NR | | | 517,395 |
| 625,000 | | New York City, NY, Health and Hospitals Corp., Health System Revenue Bonds (Series 2002A), 5.50% (FSA INS), 2/15/2019
| | AAA/Aaa/AAA | | | 694,513 |
| 440,000 | | New York City, NY, Health and Hospitals Corp., Health System Revenue Bonds (Series 2003A), 5.00% (AMBAC INS), 2/15/2011
| | AAA/Aaa/AAA | | | 478,896 |
| 500,000 | | New York City, NY, IDA, (Series 1995) Civic Facility Revenue Bonds, 6.30% (College of New Rochelle)/(Original Issue Yield: 6.45%), 9/1/2015
| | NR/Baa2/NR | | | 514,770 |
| 250,000 | | New York City, NY, IDA, Civic Facilities Revenue Bonds, 5.375% (New York University)/(AMBAC INS), 7/1/2017
| | AAA/Aaa/AAA | | | 277,490 |
| 400,000 | | New York City, NY, IDA, Civic Facility Revenue Bonds (Series 2001A), 6.375% (Staten Island University Hospital), 7/1/2031
| | NR/Ba3/BB- | | | 373,700 |
| 300,000 | | New York City, NY, IDA, Civic Facility Revenue Bonds (Series 2002A), 5.375% (Lycee Francais de New York Project)/(American Capital Access INS)/(Original Issue Yield: 5.43%), 6/1/2023
| | A/NR/NR | | | 311,040 |
| 200,000 | | New York City, NY, IDA, Civic Facility Revenue Bonds (Series 2002C), 6.45% (Staten Island University Hospital), 7/1/2032
| | NR/Ba3/BB- | | | 196,948 |
| 1,000,000 | | New York City, NY, IDA, Civic Facility Revenue Bonds (Series 2003), 5.00% (Roundabout Theatre Co., Inc.)/ (American Capital Access INS), 10/1/2023
| | A/NR/NR | | | 1,022,740 |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
| | | MUNICIPAL BONDS--continued | | | | | |
| | | New York--continued | | | | | |
| $ | 315,000 | | New York City, NY, IDA, Civic Facility Revenue Bonds, 7.00% (Mt. St. Vincent College, NY), 5/1/2008
| | NR | | $ | 321,039 |
| 500,000 | | New York City, NY, IDA, Special Airport Facility Revenue Bonds (Series 2001A), 5.50% (Airis JFK I LLC Project at JFK International)/(Original Issue Yield: 5.65%), 7/1/2028
| | BBB-/Baa3/NR | | | 503,735 |
| 500,000 | | New York City, NY, IDA, Special Facilities Revenue Bonds, 5.25% (British Airways), 12/1/2032
| | BB+/Ba2/NR | | | 420,585 |
| 500,000 | | New York City, NY, Municipal Water Finance Authority, Crossover Refunding Revenue Bonds (Series 2002B), 5.00% (Original Issue Yield: 5.14%), 6/15/2026
| | AA+/Aa2/AA | | | 517,005 |
| 500,000 | | New York City, NY, Transitional Finance Authority, Future Tax Secured Bonds (Series 2003), 5.25% (AMBAC INS), 8/1/2022
| | AAA/Aaa/AAA | | | 544,985 |
| 500,000 | | New York City, NY, Transitional Finance Authority, Future Tax Secured Revenue Bonds (Series 2001C), 5.375%, 2/1/2015
| | AA+/Aa2/AA+ | | | 552,420 |
| 500,000 | | New York City, NY, UT GO Bonds (Fiscal 2005 Series C), 5.25%, 8/15/2025
| | A/A2/A+ | | | 536,000 |
| 515,000 | | New York City, NY, UT GO Bonds (Series 2002C), 5.50%, 3/15/2015
| | A/A2/A+ | | | 560,603 |
| 500,000 | | New York City, NY, UT GO Bonds (Series 2003J), 5.50%, 6/1/2023
| | A/A2/A+ | | | 542,460 |
| 500,000 | | New York Counties Tobacco Trust III, Revenue Bonds, 5.75% (Original Issue Yield: 5.93%), 6/1/2033
| | BBB/Ba1/NR | | | 500,600 |
| 500,000 | | New York State Dormitory Authority, Court Facilities Lease Revenue Bonds (Series 2003A), 5.375% (New York City, NY), 5/15/2023
| | A/A2/A | | | 539,525 |
| 500,000 | | New York State Dormitory Authority, Education Facilities Revenue Bonds (Series 2002A), 5.125% (State University of New York)/(FGIC INS), 5/15/2021
| | AAA/Aaa/AAA | | | 559,855 |
| 500,000 | | New York State Dormitory Authority, FHA-Insured Mortgage Hospital Revenue Bonds (Series 2003), 5.00% (Lutheran Medical Center)/(MBIA Insurance Corp. INS), 8/1/2016
| | AAA/Aaa/AAA | | | 536,640 |
| 500,000 | | New York State Dormitory Authority, FHA-Insured Mortgage Nursing Home Revenue Bonds (Series 2001), 6.10% (Norwegian Christian Home and Health Center)/ (FHA and MBIA Insurance Corp. INS), 8/1/2041
| | AAA/Aaa/AAA | | | 563,880 |
| 1,000,000 | | New York State Dormitory Authority, Insured Revenue Bonds (Series 1999), 6.00% (Pratt Institute)/(Radian Asset Assurance INS), 7/1/2020
| | AA/NR/NR | | | 1,119,840 |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
| | | MUNICIPAL BONDS--continued | | | | | |
| | | New York--continued | | | | | |
| $ | 750,000 | | New York State Dormitory Authority, Revenue Bonds (2003 Series 1), 5.00% (Memorial Sloan-Kettering Cancer Center)/(MBIA Insurance Corp. INS), 7/1/2022
| | AAA/Aaa/AAA | | $ | 790,305 |
| 500,000 | | New York State Dormitory Authority, Revenue Bonds (Series 1993A), 5.75% (City University of New York)/ (FSA INS)/(Original Issue Yield: 6.05%), 7/1/2018
| | AAA/Aaa/AAA | | | 582,640 |
| 250,000 | | New York State Dormitory Authority, Revenue Bonds (Series 2000B), 6.25% (Mt. Sinai NYU Health Obligated Group), 7/1/2022
| | BB/Ba1/BB+ | | | 250,385 |
| 500,000 | | New York State Dormitory Authority, Revenue Bonds (Series 2002), 5.00% (Fordham University)/ (FGIC INS), 7/1/2022
| | AAA/Aaa/AAA | | | 531,120 |
| 500,000 | | New York State Dormitory Authority, Revenue Bonds (Series 2002D), 5.00% (School Districts Financing Program)/(MBIA Insurance Corp. INS), 10/1/2012
| | AAA/Aaa/AAA | | | 549,780 |
| 750,000 | | New York State Dormitory Authority, Revenue Bonds (Series 2003), 5.00% (Kateri Residence)/(Allied Irish Banks PLC LOC), 7/1/2022
| | NR/Aa3/NR | | | 778,703 |
| 250,000 | | New York State Dormitory Authority, Revenue Bonds (Series 2003), 5.375% (North Shore-Long Island Jewish Obligated Group)/(Original Issue Yield: 5.48%), 5/1/2023
| | NR/A3/A- | | | 263,670 |
| 500,000 | | New York State Dormitory Authority, Revenue Bonds (Series 2003A), 5.50% (Brooklyn Law School)/(Radian Asset Assurance INS), 7/1/2018
| | AA/NR/NR | | | 551,790 |
| 750,000 | | New York State Dormitory Authority, Revenue Bonds (Series 2003A), 5.50% (Winthrop-University Hospital Association)/(Original Issue Yield: 5.70%), 7/1/2023
| | NR/Baa1/BBB+ | | | 790,433 |
| 500,000 | | New York State Dormitory Authority, Revenue Bonds (Series 2004), 5.25% (New York Methodist Hospital), 7/1/2024
| | NR/A3/NR | | | 529,290 |
| 250,000 | | New York State Dormitory Authority, Revenue Bonds (Series 2004A), 5.25% (University of Rochester, NY), 7/1/2024
| | A+/A1/NR | | | 269,195 |
| 250,000 | | New York State Dormitory Authority, Revenue Bonds, 5.00% (Manhattan College)/(Radian Asset Assurance INS)/ (Original Issue Yield: 5.30%), 7/1/2020
| | AA/NR/NR | | | 262,870 |
| 500,000 | | New York State Dormitory Authority, Revenue Bonds, 5.10% (Catholic Health Services of Long Island)/(Original Issue Yield: 5.19%), 7/1/2034
| | BBB/Baa1/BBB+ | | | 513,425 |
| 500,000 | | New York State Dormitory Authority, Revenue Bonds, 5.25% (Cansius College)/(MBIA Insurance Corp. INS)/(Original Issue Yield: 5.28%), 7/1/2030
| | AAA/Aaa/AAA | | | 532,605 |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
| | | MUNICIPAL BONDS--continued | | | | | |
| | | New York--continued | | | | | |
| $ | 500,000 | | New York State Dormitory Authority, Revenue Bonds, 6.25% (Nyack Hospital)/(Original Issue Yield: 6.50%), 7/1/2013
| | NR/Ba3/B+ | | $ | 501,020 |
| 400,000 | | New York State Environmental Facilities Corp. State Clean Water and Drinking Water, Revenue Bonds (Series 2002B), 5.00% (Original Issue Yield: 5.07%), 6/15/2022
| | AAA/Aaa/AAA | | | 424,840 |
| 500,000 | | New York State Environmental Facilities Corp., Revenue Bonds (Series 2002A), 5.25% (New York State Personal Income Tax Revenue Bond Fund)/(FGIC INS), 1/1/2021
| | AAA/Aaa/AAA | | | 544,600 |
| 500,000 | | New York State Environmental Facilities Corp., Solid Waste Disposal Revenue Bonds (Series 2004A), 4.45% TOBs (Waste Management, Inc.), Mandatory Tender 7/1/2009
| | BBB/NR/NR | | | 511,565 |
| 500,000 | | New York State Environmental Facilities Corp., Solid Waste Disposal Revenue Bonds, 6.10% (Occidental Petroleum Corp.)/(Original Issue Yield: 6.214%), 11/1/2030
| | BBB+/Baa1/NR | | | 514,355 |
| 900,000 | | New York State Environmental Facilities Corp., Water Facilities Revenue Refunding Bonds (Series A), 6.30% (Spring Valley Water Co., NY)/(AMBAC INS), 8/1/2024
| | AAA/Aaa/AAA | | | 949,950 |
| 500,000 | | New York State HFA, Revenue Bonds (Series 2003A), 5.25% (New York State Personal Income Tax Revenue Bond Fund), 3/15/2021
| | AA/A1/AA- | | | 538,175 |
| 110,000 | | New York State HFA, Service Contract Obligation Revenue Bonds (Series 1995 A), 6.375% (U.S. Treasury PRF 9/15/2005 @ 102), 9/15/2015
| | AA-/A2/NR | | | 114,622 |
| 5,000 | | New York State HFA, Service Contract Obligation Revenue Bonds (Series 1995 A), 6.375%, 9/15/2015
| | AA-/A2/NR | | | 5,193 |
| 885,000 | | New York State Medical Care Facilities Finance Agency, FHA-Mortgage Revenue Bonds (Series A), 6.50% (Lockport Memorial Hospital, NY)/(FHA GTD), 2/15/2035
| | AA/Aa2/NR | | | 905,364 |
| 500,000 | | New York State Power Authority, Revenue Bonds (Series 2002A), 5.00%, 11/15/2021
| | AA-/Aa2/AA | | | 534,040 |
| 500,000 | | New York State Thruway Authority (Series 2003A), 5.25% (New York State Thruway Authority - Highway and Bridge Trust Fund)/(MBIA Insurance Corp. INS), 4/1/2014
| | AAA/Aaa/AAA | | | 555,040 |
| 500,000 | | New York State Urban Development Corp., Correctional & Youth Facilities Service Contract Revenue Bonds (Series 2002A), 5.50% TOBs (New York State), Mandatory Tender 1/1/2011
| | AA-/A2/A+ | | | 551,700 |
| 750,000 | | New York State Urban Development Corp., Revenue Bonds (Series 2003B), 5.25% (New York State Personal Income Tax Revenue Bond Fund), 3/15/2019
| | AA/NR/AA- | | | 842,970 |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
| | | MUNICIPAL BONDS--continued | | | | | |
| | | New York--continued | | | | | |
| $ | 500,000 | | New York State Urban Development Corp., Revenue Bonds (Series A-1), 5.00% (New York State Personal Income Tax Revenue Bond Fund), 12/15/2013
| | AA/A1/AA- | | $ | 545,970 |
| 500,000 | | New York State Urban Development Corp., Subordinated Lien Revenue Bonds (Series 2004A), 5.125% (Empire State Development Corp.), 1/1/2022
| | A/A2/A | | | 533,215 |
| 500,000 | | Niagara County, NY, IDA, Solid Waste Disposal Facility Revenue Refunding Bonds (Series 2001D), 5.55% TOBs (American Ref-Fuel Co. of Niagara, L.P. Facility) 11/15/2015, Maturity 11/15/2024
| | BBB/Baa1/NR | | | 531,515 |
| 400,000 | | Niagara Falls, NY, City School District, COPs (Series 1998), 5.375% (Original Issue Yield: 5.42%), 6/15/2028
| | BBB-/Baa3/NR | | | 410,268 |
| 500,000 | | Port Authority of New York and New Jersey, Revenue Bonds (128th Series), 5.00% (FSA INS), 11/1/2019
| | AAA/Aaa/AAA | | | 539,765 |
| 250,000 | | Schenectady, NY, TANs (Series 2004), 5.90% TANs, 12/30/2005
| | NR | | | 249,930 |
| 500,000 | | Suffolk County, NY, IDA, IDRBs (Series 1998), 5.50% (Nissequogue Cogen Partners Facility)/(Original Issue Yield: 5.528%), 1/1/2023
| | NR | | | 482,880 |
| 500,000 | | Tobacco Settlement Financing Corp., NY, Asset-Backed Revenue Bonds (Series 2003A-1), 5.50% (New York State), 6/1/2019
| | AA-/A2/A+ | | | 557,670 |
| 440,000 | | Tompkins County, NY, IDA, Continuing Care Retirement Community Revenue Bonds (Series 2003A), 5.375% (Kendal at Ithaca, Inc.)/(Original Issue Yield: 5.50%), 7/1/2018
| | BBB/NR/NR | | | 449,398 |
| 500,000 | | United Nations, NY, Development Corp., Senior Lien Refunding Revenue Bonds (Series 2004A), 5.25%, 7/1/2022
| | NR/A3/A- | | | 524,900 |
| 300,000 | | Utica, NY, IDA, Civic Facility, Revenue Bonds (Series 2004A), 6.875% (Utica College), 12/1/2024
| | NR | | | 319,203 |
| 500,000 | | Westchester County, NY, IDA, Civic Facility Revenue Bonds (Series 2001), 5.20% (Windward School)/(Radian Asset Assurance INS)/(Original Issue Yield: 5.21%), 10/1/2021
| | AA/NR/NR | | | 528,305 |
| 175,000 | | Westchester County, NY, IDA, Continuing Care Retirement Mortgage Revenue Bonds (Series 2003A), 6.375% (Kendal on Hudson)/(Original Issue Yield: 6.55%), 1/1/2024
| | NR | | | 178,854 |
| 500,000 | | Yonkers, NY, IDA, Civic Facility Revenue Bonds (Series 2001B), 7.125% (St. John's Riverside Hospital), 7/1/2031
|
| BB/NR/NR
|
|
| 508,685
|
| | | TOTAL
|
|
|
|
| 44,260,358
|
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
| | | MUNICIPAL BONDS--continued | | | | | |
| | | Puerto Rico--6.3% | | | | | |
| $ | 500,000 | 1 | Puerto Rico Electric Power Authority, Drivers (Series 266), 8.859% (FSA INS), 7/1/2015
| | AAA/NR/NR | | $ | 654,855 |
| 1,000,000 | 1 | Puerto Rico Highway and Transportation Authority, Residual Interest Tax-Exempt Securities (Series PA 331A), 9.343% (AMBAC INS), 1/1/2010
| | NR | | | 1,289,450 |
| 500,000 | | Puerto Rico Highway and Transportation Authority, Transportation Revenue Bonds (Series G), 5.00% (Original Issue Yield: 5.10%), 7/1/2033
| | A/Baa1/NR | | | 515,095 |
| 135,000 | | Puerto Rico Public Building Authority, Revenue Bonds (Series 2002D), 5.25% (Commonwealth of Puerto Rico GTD)/ (Original Issue Yield: 5.40%), 7/1/2027
| | A-/Baa1/NR | | | 143,168 |
| 365,000 | | Puerto Rico Public Building Authority, Revenue Bonds (Series 2002D), 5.25% (U.S. Treasury PRF 7/1/2012 @ 100)/ (Original Issue Yield: 5.40%), 7/1/2027
|
| A-/Baa1/NR
|
|
| 403,657
|
| | | TOTAL
|
|
|
|
| 3,006,225
|
| | | TOTAL MUNICIPAL BONDS
(IDENTIFIED COST $45,508,555)
|
|
|
|
| 47,266,583
|
| | | SHORT-TERM MUNICIPALS--0.6% | | | | | |
| | | Puerto Rico--0.6% | | | | | |
| 300,000 | | Puerto Rico Government Development Bank (GDB) Weekly VRDNs (MBIA Insurance Corp. INS)/(Credit Suisse First Boston LIQ) (AT AMORTIZED COST)
|
| A-1/VMIG1/AAA
|
|
| 300,000
|
| | | TOTAL MUNICIPAL INVESTMENTS--98.9%
(IDENTIFIED COST $45,808,555) 2
|
|
|
|
| 47,566,583
|
| | | OTHER ASSETS AND LIABILITIES--1.1%
|
|
|
|
| 528,528
|
| | | TOTAL NET ASSETS--100%
|
|
|
| $
| 48,095,111
|
Securities that are subject to the federal alternative minimum tax (AMT) represent 9.8% of the Fund's portfolio as calculated based upon total portfolio market value.
1 Denotes a restricted security, including securities purchased under Rule 144A of the Securities Act of 1933. These securities, all of which have been deemed liquid by criteria approved by the Fund's Board of Trustees, unless registered under the Act or exempted from registration, may only be sold to qualified institutional investors. At February 28, 2005, these securities amounted to $1,944,305 which represents 4.0% of total net assets.
2 The cost of investments for federal tax purposes amounts to $45,805,423.
Note: The categories of investments are shown as a percentage of total net assets at February 28, 2005.
The following acronyms are used throughout this portfolio:
| AMBAC | - --American Municipal Bond Assurance Corporation |
| COL | - --Collateralized |
| COPs | - --Certificates of Participation |
| FGIC | - --Financial Guaranty Insurance Company |
| FHA | - --Federal Housing Administration |
| FSA | - --Financial Security Assurance |
| GNMA | - --Government National Mortgage Association |
| GO | - --General Obligation |
| GTD | - --Guaranteed |
| HFA | - --Housing Finance Authority |
| IDA | - --Industrial Development Authority |
| IDRBs | - --Industrial Development Revenue Bonds |
| INS | - --Insured |
| LIQ | - --Liquidity Agreement |
| LOC | - --Letter of Credit |
| PRF | - --Prerefunded |
| TANs | - --Tax Anticipation Notes |
| TOBs | - --Tender Option Bonds |
| UT | - --Unlimited Tax |
| VRDNs | - --Variable Rate Demand Notes |
See Notes which are an integral part of the Financial Statements
Statement of Assets and Liabilities
February 28, 2005 (unaudited)
Assets:
| | | | | | | |
Total investments in securities, at value (identified cost $45,808,555)
| | | | | $ | 47,566,583 | |
Cash
| | | | | | 55,144 | |
Income receivable
| | | | | | 549,633 | |
Receivable for investments sold
| | | | | | 5,000 | |
Receivable for shares sold
| | | | | | 4,924 | |
Receivable for daily variation margin
| | | | | | 22,500 | |
Prepaid expenses
|
|
|
|
|
| 16,528
|
|
TOTAL ASSETS
|
|
|
|
|
| 48,220,312
|
|
Liabilities:
| | | | | | | |
Payable for shares redeemed
| | $ | 15,380 | | | | |
Income distribution payable
| | | 78,353 | | | | |
Payable for transfer and dividend disbursing agent fees and expenses
| | | 9,220 | | | | |
Payable for Directors'/Trustees' fees
| | | 271 | | | | |
Payable for distribution services fee (Note 5)
| | | 13,027 | | | | |
Payable for shareholder services fee (Note 5)
|
|
| 8,950
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
|
|
| 125,201
|
|
Net assets for 4,478,292 shares outstanding
|
|
|
|
| $
| 48,095,111
|
|
Net Assets Consist of:
| | | | | | | |
Paid-in capital
| | | | | $ | 47,295,028 | |
Net unrealized appreciation of investments and futures contracts
| | | | | | 1,778,978 | |
Accumulated net realized loss on investments and futures contracts
| | | | | | (979,825 | ) |
Undistributed net investment income
|
|
|
|
|
| 930
|
|
TOTAL NET ASSETS
|
|
|
|
| $
| 48,095,111
|
|
Net Asset Value, Offering Price and Redemption Proceeds Per Share
| | | | | | | |
Class A Shares:
| | | | | | | |
Net asset value per share ($25,556,065 ÷ 2,379,699 shares outstanding), no par value, unlimited shares authorized
|
|
|
|
|
| $10.74
|
|
Offering price per share (100/95.50 of $10.74) 1
|
|
|
|
|
| $11.25
|
|
Redemption proceeds per share
|
|
|
|
|
| $10.74
|
|
Class B Shares:
| | | | | | | |
Net asset value per share ($22,539,046 ÷ 2,098,593 shares outstanding), no par value, unlimited shares authorized
|
|
|
|
|
| $10.74
|
|
Offering price per share
|
|
|
|
|
| $10.74
|
|
Redemption proceeds per share (94.50/100 of $10.74) 1
|
|
|
|
|
| $10.15
|
|
1 See "What Do Shares Cost?" in the Prospectus.
See Notes which are an integral part of the Financial Statements
Statement of Operations
Six Months Ended February 28, 2005 (unaudited)
Investment Income:
| | | | | | | | | | | | |
Interest
|
|
|
|
|
|
|
|
|
| $
| 1,171,671
|
|
Expenses:
| | | | | | | | | | | | |
Investment adviser fee (Note 5)
| | | | | | $ | 97,085 | | | | | |
Administrative personnel and services fee (Note 5)
| | | | | | | 94,220 | | | | | |
Custodian fees
| | | | | | | 1,922 | | | | | |
Transfer and dividend disbursing agent fees and expenses
| | | | | | | 26,069 | | | | | |
Directors'/Trustees' fees
| | | | | | | 1,079 | | | | | |
Auditing fees
| | | | | | | 8,315 | | | | | |
Legal fees
| | | | | | | 3,014 | | | | | |
Portfolio accounting fees
| | | | | | | 31,909 | | | | | |
Distribution services fee--Class A Shares (Note 5)
| | | | | | | 33,199 | | | | | |
Distribution services fee--Class B Shares (Note 5)
| | | | | | | 82,438 | | | | | |
Shareholder services fee--Class A Shares (Note 5)
| | | | | | | 33,199 | | | | | |
Shareholder services fee--Class B Shares (Note 5)
| | | | | | | 27,479 | | | | | |
Share registration costs
| | | | | | | 17,188 | | | | | |
Printing and postage
| | | | | | | 7,818 | | | | | |
Insurance premiums
| | | | | | | 3,977 | | | | | |
Miscellaneous
|
|
|
|
|
|
| 559
|
|
|
|
|
|
TOTAL EXPENSES
|
|
|
|
|
|
| 469,470
|
|
|
|
|
|
Waivers and Reimbursement (Note 5):
| | | | | | | | | | | | |
Waiver of investment adviser fee
| | $ | (97,085 | ) | | | | | | | | |
Waiver of administrative personnel and services fee
| | | (17,113 | ) | | | | | | | | |
Waiver of distribution services fee--Class A Shares
| | | (33,199 | ) | | | | | | | | |
Waiver of shareholder services fee--Class A Shares
| | | (375 | ) | | | | | | | | |
Reimbursement of other operating expenses
|
|
| (90,392
| )
|
|
|
|
|
|
|
|
|
TOTAL WAIVERS AND REIMBURSEMENTS
|
|
|
|
|
|
| (238,164
| )
|
|
|
|
|
Net expenses
|
|
|
|
|
|
|
|
|
|
| 231,306
|
|
Net investment income
|
|
|
|
|
|
|
|
|
|
| 940,365
|
|
Realized and Unrealized Gain (Loss) on Investments and Futures Contracts:
| | | | | | | | | | | | |
Net realized gain on investments
| | | | | | | | | | | 13,192 | |
Net realized loss on futures contracts
| | | | | | | | | | | (3,903 | ) |
Net change in unrealized appreciation of investments
| | | | | | | | | | | 399,350 | |
Net change in unrealized appreciation on futures contracts
|
|
|
|
|
|
|
|
|
|
| 20,950
|
|
Net realized and unrealized gain on investments and futures contracts
|
|
|
|
|
|
|
|
|
|
| 429,589
|
|
Change in net assets resulting from operations
|
|
|
|
|
|
|
|
|
| $
| 1,369,954
|
|
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
|
|
| Six Months
Ended
(unaudited)
2/28/2005
|
|
|
|
Year Ended
8/31/2004
|
|
Increase (Decrease) in Net Assets
| | | | | | | | |
Operations:
| | | | | | | | |
Net investment income
| | $ | 940,365 | | | $ | 1,947,349 | |
Net realized gain (loss) on investments, futures contracts and swap contracts
| | | 9,289 | | | | (331,321 | ) |
Net change in unrealized appreciation/depreciation of investments, futures contracts and swap contracts
|
|
| 420,300
|
|
|
| 1,191,054
|
|
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS
|
|
| 1,369,954
|
|
|
| 2,807,082
|
|
Distributions to Shareholders:
| | | | | | | | |
Distributions from net investment income
| | | | | | | | |
Class A Shares
| | | (559,934 | ) | | | (1,187,212 | ) |
Class B Shares
|
|
| (379,477
| )
|
|
| (759,679
| )
|
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS
|
|
| (939,411
| )
|
|
| (1,946,891
| )
|
Share Transactions:
| | | | | | | | |
Proceeds from sale of shares
| | | 2,174,952 | | | | 10,782,409 | |
Net asset value of shares issued to shareholders in payment of distributions declared
| | | 473,617 | | | | 978,809 | |
Cost of shares redeemed
|
|
| (4,385,989
| )
|
|
| (8,891,672
| )
|
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS
|
|
| (1,737,420
| )
|
|
| 2,869,546
|
|
Change in net assets
|
|
| (1,306,877
| )
|
|
| 3,729,737
|
|
Net Assets:
| | | | | | | | |
Beginning of period
|
|
| 49,401,988
|
|
|
| 45,672,251
|
|
End of period (including undistributed (distributions in excess of) net investment income of $930 and $(24), respectively)
|
| $
| 48,095,111
|
|
| $
| 49,401,988
|
|
See Notes which are an integral part of the Financial Statements
Notes to Financial Statements
February 28, 2005 (unaudited)
1. ORGANIZATION
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 seven portfolios. The financial statements included herein are only those of Federated New York Municipal Income Fund (the "Fund"), a non-diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The investment objective of the Fund is to provide current income exempt from federal regular income tax (federal regular income tax does not include the federal alternative minimum tax) and the personal income taxes imposed by the state of New York and New York municipalities. Interest income from the Fund's investments may be subject to the federal alternative minimum tax for individuals and corporations. The Fund offers two classes of shares: Class A Shares and Class B Shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles (GAAP) in the United States of America.
Investment Valuation
Municipal bonds are valued by an independent pricing service, taking into consideration yield, liquidity, risk, credit quality, coupon, maturity, type of issue, and any other factors or market data the pricing service deems relevant. Short-term securities are valued at the prices provided by an independent pricing service. However, short-term securities with remaining maturities of 60 days or less at the time of purchase may be valued at amortized cost, which approximates fair market value. Securities for which no quotations are readily available are valued at fair value as determined in accordance with procedures established by and under general supervision of the Board of Trustees (the "Trustees").
Investment Income, Gains and Losses, Expenses, and Distributions
Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at fair value. Investment income, realized and unrealized gains and losses, and certain fund-level expenses are allocated to each class based on relative average daily net assets, except that each class bears certain expenses unique to that class such as distribution and shareholder services fees. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.
Premium 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 (the "Code") and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary.
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.
Swap Contracts
The Funds may enter into swap contracts. A swap is an exchange of cash payments between the Fund and another party, which is based on a specific financial index. The value of the swap is adjusted daily and the change in value is recorded as unrealized appreciation or depreciation. When a swap contract is closed, the Fund recognizes a realized gain or loss. The swap contracts entered into by the Fund are on a forward settling basis. For the six months ended February 28, 2005, the Fund had no realized gain (loss) on swap contracts.
Risks may arise upon entering into these agreements from the potential inability of the counterparties to meet the terms of their contract and from unanticipated changes in the value of the financial index on which the swap agreement is based. The Fund uses swaps for hedging purposes to reduce its exposure to interest rate fluctuations.
At February 28, 2005, the Fund had no open swap contracts.
Futures Contracts
The Fund periodically may sell bond interest rate futures contracts to manage duration and to potentially reduce transaction costs. Upon entering into a bond interest rate futures contract with a broker, the Fund is required to deposit in a segregated account a specified amount of cash or U.S. government securities. Futures contracts are valued daily and unrealized gains or losses are recorded in a "variation margin" account. Daily, the Fund receives from or pays to the broker a specified amount of cash based upon changes in the variation margin account. When a contract is closed, the Fund recognizes a realized gain or loss. Futures contracts have market risks, including the risk that the change in the value of the contract may not correlate with the changes in the value of the underlying securities. For the six months ended February 28, 2005, the Fund had realized losses on future contracts of $3,903.
At February 28, 2005, the Fund had the following open futures contract:
Expiration Date
|
| Contracts to Deliver
|
| Position
|
| Unrealized
Appreciation
|
June 2005
|
| U.S. Treasury Notes 10 Year 40 contracts
|
| Short
|
| $20,950
|
Restricted Securities
Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. In some cases, the issuer of restricted securities 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 restricted securities may be resold in the secondary market in transactions exempt from registration. Such 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 general supervision of the Trustees.
Additional information on restricted securities, excluding securities purchased under Rule 144A that have been deemed liquid by the Trustees, held at 2/28/2005, is as follows:
Security
|
| Acquisition Date
|
| Acquisition Cost
|
Puerto Rico Electric Power Authority, Drivers (Series 266), 8.859% (FSA INS), 7/1/2015
|
| 6/27/2002
|
| $ 601,255
|
Puerto Rico Highway and Transportation Authority, Residual Interest Tax-Exempt Securities (Series PA 331A), 9.343%, (AMBAC INS), 1/1/2010
|
| 7/22/2003
|
| $1,234,878
|
Use of Estimates
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.
Other
Investment transactions are accounted for on a trade date basis. Realized gains and losses from investment transactions are recorded on an identified cost basis.
3. SHARES OF BENEFICIAL INTEREST
The following table summarizes share activity:
|
| Six Months Ended
2/28/2005
|
| Year Ended
8/31/2004
|
Class A Shares:
|
| Shares
|
|
|
| Amount
|
|
| Shares
|
|
|
| Amount
|
|
Shares sold
| | 95,812 | | | $ | 1,030,724 | | | 469,545 | | | $ | 4,997,940 | |
Shares issued to shareholders in payment of distributions declared
| | 20,873 | | | | 223,663 | | | 43,270 | | | | 459,837 | |
Shares redeemed
|
| (329,632
| )
|
|
| (3,535,179
| )
|
| (475,773
| )
|
|
| (5,041,882
| )
|
NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS
|
| (212,947
| )
|
| $
| (2,280,792
| )
|
| 37,042
|
|
| $
| 415,895
|
|
| | | | | | | | | | | | | | |
|
| Six Months Ended
2/28/2005
|
| Year Ended
8/31/2004
|
Class B Shares:
|
| Shares
|
|
|
| Amount
|
|
| Shares
|
|
|
| Amount
|
|
Shares sold
| | 106,472 | | | $ | 1,144,228 | | | 542,789 | | | $ | 5,784,469 | |
Shares issued to shareholders in payment of distributions declared
| | 23,326 | | | | 249,954 | | | 48,825 | | | | 518,972 | |
Shares redeemed
|
| (79,250
| )
|
|
| (850,810
| )
|
| (363,901
| )
|
|
| (3,849,790
| )
|
NET CHANGE RESULTING FROM CLASS B SHARE TRANSACTIONS
|
| 50,548
|
|
| $
| 543,372
|
|
| 227,713
|
|
| $
| 2,453,651
|
|
NET CHANGE RESULTING FROM SHARE TRANSACTIONS
|
| (162,399
| )
|
| $
| (1,737,420
| )
|
| 264,755
|
|
| $
| 2,869,546
|
|
4. FEDERAL TAX INFORMATION
At February 28, 2005, the cost of investments for federal tax purposes was $45,805,423. The net unrealized appreciation of investments for federal tax purposes excluding any unrealized appreciation from futures contracts was $1,761,160. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $1,893,722 and net unrealized depreciation from investments for those securities having an excess of cost over value of $132,562.
At August 31, 2004, the Fund had a capital loss carryforward of $665,450 which will reduce the Fund's taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Code and thus will reduce the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal tax. Pursuant to the Code, such capital loss carryforward will expire as follows:
Expiration Year
|
| Expiration Amount
|
2008
|
| $288,795
|
2011
|
| $371,903
|
2012
|
| $ 4,752
|
Under current tax regulations, capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. As of August 31, 2004, for federal income tax purposes, post-October losses of $326,564 were deferred to September 1, 2004.
5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment adviser fee equal to 0.40% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee and/or reimburse certain operating expenses of the Fund. The Adviser can modify or terminate this voluntary waiver and/or reimbursement at any time at its sole discretion.
Administrative Fee
Federated 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 all Federated funds as specified below:
Maximum
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. FAS may voluntarily choose to waive any portion of its fee. FAS can modify or terminate this voluntary waiver at any time at its sole discretion.
Distribution Services Fee
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the Fund's Class A Shares and Class B Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses according to the following schedule annually, to compensate FSC.
Share
Class Name
|
| Percentage of Average Daily
Net Assets of Class
|
Class A Shares
|
| 0.25%
|
Class B Shares
|
| 0.75%
|
FSC may voluntarily choose to waive any portion of its fee. FSC can modify or terminate this voluntary waiver at any time at its sole discretion. Rather than paying investment professionals directly, the Fund may pay fees to FSC and FSC will use the fees to compensate investment professionals. For the six months ended February 28, 2005, FSC did not retain any fees paid by the Fund.
Sales Charges
For the six months ended February 28, 2005, FSC retained $3,933 in sales charges from the sale of Class A Shares. See "What do Shares Cost?" in the Prospectus.
Shareholder Services Fee
Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company (FSSC), the Fund will pay FSSC up to 0.25% of the average daily net assets of the Fund's Class A Shares and Class B Shares for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion. Rather than paying investment professionals directly, the Fund may pay fees to FSSC and FSSC will use the fees to compensate investment professionals. For the six months ended February 28, 2005, FSSC did not retain any fees paid by the Fund.
Interfund Transactions
During the six months ended February 28, 2005, 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 $6,350,000 and $6,850,000, respectively.
General
Certain of the Officers and Trustees of the Fund are Officers and Directors or Trustees of the above companies.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations (and in-kind contributions), for the year ended February 28, 2005, were as follows:
Purchases
|
| $
| 1,777,380
|
Sales
|
| $
| 2,532,538
|
7. CONCENTRATION OF CREDIT RISK
Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at February 28, 2005, 47.3% 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 10.4% of total investments.
8. LEGAL PROCEEDINGS
Beginning in October 2003, Federated Investors, Inc. and various subsidiaries thereof (including the advisers and distributor for various investment companies, collectively, "Federated"), along with various investment companies sponsored by Federated (Funds) were named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland seeking damages of unspecified amounts. 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 engaged in illegal and improper trading practices including market timing and late trading in concert with certain institutional traders, which allegedly caused financial injury to the mutual fund shareholders. Federated and various Funds have also been named as defendants in several additional lawsuits, the majority of which are now pending in the United States District Court for the Western District of Pennsylvania, alleging, among other things, excessive advisory and Rule 12b-1 fees, and seeking damages of unspecified amounts. The Board of the Funds has retained the law firm of Dickstein Shapiro Morin & Oshinsky LLP to represent the Funds in these lawsuits. Federated and the Funds, and their respective counsel, are reviewing the allegations and will respond appropriately. Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these recent lawsuits and future potential similar suits is uncertain. Although we do not believe that these lawsuits will have a material adverse effect on the Funds, there can be no assurance that these suits, the ongoing adverse publicity and/or other developments resulting from the regulatory investigations will not result in increased Fund redemptions, reduced sales of Fund shares, or other adverse consequences for the Funds.
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
A description of the policies and procedures that the Fund uses to determine how to vote proxies 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 through Federated's website. Go to FederatedInvestors.com, select "Products," select the "Prospectuses and Regulatory Reports" link, then select the Fund to access the link to Form N-PX. This information is also available from the EDGAR database on the SEC's website 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 website 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 website at FederatedInvestors.com by clicking on "Portfolio Holdings" and selecting the name of the Fund, or by selecting the name of the Fund and clicking on "Portfolio Holdings." You must register on the website the first time you wish to access this information.
Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including 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 DELIVERY
In 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.
Federated
World-Class Investment Manager
Federated New York Municipal Income Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
Cusip 313923401
Cusip 313923880
4031009 (4/05)
Federated is a registered mark of Federated Investors, Inc. 2005 (c)Federated Investors, Inc.
Federated
World-Class Investment Manager
Federated North Carolina Municipal Income Fund
A Portfolio of Federated Municipal Securities Income Trust
SEMI-ANNUAL SHAREHOLDER REPORT
February 28, 2005
Class A Shares
FINANCIAL HIGHLIGHTS
SHAREHOLDER EXPENSE EXAMPLE
PORTFOLIO OF INVESTMENTS SUMMARY TABLES
FINANCIAL STATEMENTS
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
QUARTERLY PORTFOLIO SCHEDULE
Not FDIC Insured * May Lose Value * No Bank Guarantee
Federated Investors 50 Years of Growth & Innovation
Financial Highlights
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited) | | | Year Ended August 31,
|
|
| 2/28/2005
|
|
| 2004
|
|
| 2003
|
|
| 2002
|
|
| 2001
|
|
| 2000
|
|
Net Asset Value, Beginning of Period
| | $11.05 | | | $10.92 | | | $11.07 | | | $10.99 | | | $10.45 | | | $10.44 | |
Income From Investment Operations:
| | | | | | | | | | | | | | | | | | |
Net investment income
| | 0.24 | | | 0.48 | | | 0.48 | | | 0.50 | 1 | | 0.50 | | | 0.49 | |
Net realized and unrealized gain (loss) on investments, futures contracts, and swap contracts
|
| 0.02
|
|
| 0.13
|
|
|
(0.15
| )
|
| 0.08
| 1
|
|
0.54
|
|
|
0.02
|
|
TOTAL FROM INVESTMENT OPERATIONS
|
| 0.26
|
|
| 0.61
|
|
| 0.33
|
|
| 0.58
|
|
| 1.04
|
|
| 0.51
|
|
Less Distributions:
| | | | | | | | | | | | | | | | | | |
Distributions from net investment income
| | (0.24 | ) | | (0.48 | ) | | (0.48 | ) | | (0.50 | ) | | (0.50 | ) | | (0.49 | ) |
Distributions from net realized gain on investments and futures contracts
|
| - --
|
|
| - --
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
(0.01
| )
|
TOTAL DISTRIBUTIONS
|
| (0.24
| )
|
| (0.48
| )
|
| (0.48
| )
|
| (0.50
| )
|
| (0.50
| )
|
| (0.50
| )
|
Net Asset Value, End of Period
|
| $11.07
|
|
| $11.05
|
|
| $10.92
|
|
| $11.07
|
|
| $10.99
|
|
| $10.45
|
|
Total Return 2
|
| 2.35
| %
|
| 5.61
| %
|
| 2.93
| %
|
| 5.48
| %
|
| 10.23
| %
|
| 5.14
| %
|
| | | | | | | | | | | | | | | | | | |
Ratios to Average Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
| 0.79
| % 3
|
| 0.79
| %
|
| 0.79
| %
|
| 0.79
| %
|
| 0.79
| %
|
| 0.79
| %
|
Net investment income
|
| 4.33
| % 3
|
| 4.26
| %
|
| 4.22
| %
|
| 4.62
| % 1
|
| 4.71
| %
|
| 4.77
| %
|
Expense waiver/reimbursement 4
|
| 0.64
| % 3
|
| 0.56
| %
|
| 0.49
| %
|
| 0.61
| %
|
| 0.68
| %
|
| 0.79
| %
|
Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
| $60,538
|
| $56,289
|
| $82,430
|
| $55,261
|
| $47,235
|
| $41,449
|
|
Portfolio turnover
|
| 3
| %
|
| 16
| %
|
| 16
| %
|
| 21
| %
|
| 28
| %
|
| 66
| %
|
1 Effective September 1, 2001, the Fund adopted the provisions of the American Institute of Certified Public Accountants (AICPA) Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premium on long-term debt securities. For the year ended August 31, 2002, this change had no effect on the net investment income per share or net realized and unrealized gain (loss) on investments per share, but increased the ratio of net investment income to average net assets from 4.61% to 4.62%. Per share, ratios and supplemental data for the periods prior to September 1, 2001 have not been restated to reflect this change in presentation.
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 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
Shareholder Expense Example
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; 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, 2004 to February 28, 2005.
ACTUAL EXPENSES
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 provided to enable you to compare the ongoing costs of investing in the Fund and 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.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase or redemption payments. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
|
| Beginning
Account Value
9/1/2004
|
| Ending
Account Value
2/28/2005
|
| Expenses Paid
During Period 1
|
Actual
|
| $1,000
|
| $1,023.50
|
| $3.96
|
Hypothetical (assuming a 5% return before expenses)
|
| $1,000
|
| $1,020,88
|
| $3.96
|
1 Expenses are equal to the Fund's annualized expense ratio of 0.79%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Portfolio of Investments Summary Tables
At February 28, 2005, the Fund's credit-quality ratings composition 1 was as follows:
S&P Long-Term Ratings as
Percentage of Total Investments 2
| | Moody's Long-Term Ratings as
Percentage of Total Investments 2
|
AAA
|
| 32.6%
| | Aaa
|
| 40.1%
|
AA
|
| 23.0%
| | Aa
|
| 19.5%
|
A
|
| 7.0%
| | A
|
| 4.5%
|
BBB
|
| 11.5%
| | Baa
|
| 11.1%
|
Not Rated by S&P
|
| 25.9%
| | Not Rated by Moody's
|
| 24.8%
|
TOTAL
|
| 100.0%
| | TOTAL
|
| 100.0%
|
1 These tables depict the long-term, credit-quality ratings assigned to the Fund's portfolio holdings by Standard & Poor's (S&P) and Moody's Investors Service (Moody's), each of which is a nationally recognized statistical rating organization (NRSRO). These credit-quality ratings are shown without regard to gradations within a given rating category. For example, securities rated "A-" have been included in the "A" rated category. Holdings that are rated only by a different NRSRO than the one identified have been included in the "Not rated by..." category. Rated securities that have been prerefunded, but not rated again by the NRSRO, also have been included in the "Not rated by..." category. Rated securities include a security with an obligor and/or credit enhancer that has received a rating from an NRSRO with respect to a class of debt obligations that is comparable in priority and security with the security held by the Fund. Credit-quality ratings are an assessment of the risk that a security will default in payment and do not address other risks presented by the security. Please see the descriptions of credit-quality ratings in the Fund's Statement of Additional Information.
These tables depict the long-term, credit-quality ratings as assigned only by the NRSRO identified in each table. Of the portfolio's total investments, 12.0% do not have long-term ratings by either of these NRSROs.
2 Percentages are based on total investments, which may differ from the Fund's total net assets used in computing the percentages in the Portfolio of Investments which follows.
Portfolio of Investments
February 28, 2005 (unaudited)
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
| | | MUNICIPAL BONDS--95.1% | | | | | |
| | | North Carolina--85.5% | | | | | |
| $ | 1,190,000 | | Appalachian State University, NC, Parking System Revenue Bonds, 5.625% (FSA INS)/(Original Issue Yield: 5.65%), 7/15/2025
| | NR/Aaa | | $ | 1,317,306 |
| 940,000 | | Asheville, NC Housing Authority, Multifamily Housing Revenue Bonds, 5.625% TOBs (Oak Knoll Apartments Project)/(FNMA GTD) Optional Tender 3/1/2011
| | AAA/NR | | | 1,004,061 |
| 500,000 | | Broad River, NC Water Authority, Water System Revenue Bonds (Series 2000), 5.375% (MBIA Insurance Corp. INS)/(Original Issue Yield: 5.55%), 6/1/2026
| | NR/Aaa | | | 541,535 |
| 1,330,000 | | Cabarrus County, NC, COP (Series 2002), 5.25%, 2/1/2018
| | AA-/Aa3 | | | 1,443,329 |
| 2,000,000 | | Charlotte, NC Airport, Revenue Bonds, (Series B), 5.875% (MBIA Insurance Corp. INS)/(Original Issue Yield: 5.95%), 7/1/2019
| | AAA/Aaa | | | 2,190,360 |
| 1,000,000 | | Charlotte, NC, COP, 5.50% (Charlotte Convention Facilities)/(Original Issue Yield: 5.70%), 12/1/2020
| | AA+/Aa2 | | | 1,108,860 |
| 1,000,000 | | Columbus County, NC Industrial Facilities & PCFA, Revenue Bonds (Series 1996A), 5.85% (International Paper Co.), 12/1/2020
| | BBB/Baa2 | | | 1,040,450 |
| 1,000,000 | | Cumberland County, NC, UT GO Bonds, 5.70% (U.S. Treasury PRF 3/1/2010 @102)/(Original Issue Yield: 5.78%), 3/1/2017
| | AA-/Aa3 | | | 1,139,860 |
| 1,000,000 | | Fayetteville, NC Public Works Commission, Revenue Bonds (Series 1999), 5.70% (U.S. Treasury PRF 3/1/2010 @101)/(Original Issue Yield: 5.79%), 3/1/2019
| | AAA/Aaa | | | 1,131,260 |
| 1,000,000 | | Forsyth County, NC, COP, 5.375%, 10/1/2022
| | AA+/Aa1 | | | 1,082,110 |
| 900,000 | | Gastonia, NC Combined Utilities System, Water & Sewer Revenue Bonds, 5.625% (MBIA Insurance Corp. INS)/(Original Issue Yield: 5.85%), 5/1/2019
| | AAA/Aaa | | | 1,002,942 |
| 750,000 | | Harnett County, NC, COP, 5.50% (FSA INS), 12/1/2015
| | AAA/Aaa | | | 840,172 |
| 1,000,000 | | Haywood County, NC Industrial Facilities & PCFA, Revenue Refunding Bonds, 6.40% (Champion International Corp.)/(Original Issue Yield: 6.42%), 11/1/2024
| | NR/Baa2 | | | 1,080,980 |
| 1,000,000 | | High Point, NC, Public Improvement UT GO Bonds (Series 2000B), 5.50% (Original Issue Yield: 5.67%), 6/1/2018
| | AA/Aa3 | | | 1,121,410 |
| 1,500,000 | | Martin County, NC IFA (Series 1995), Solid Waste Disposal Revenue Bonds, 6.00% (Weyerhaeuser Co.), 11/1/2025
| | BBB/Baa2 | | | 1,539,300 |
| 500,000 | | North Carolina Eastern Municipal Power Agency, Power Supply Revenue Refunding Bonds (Series D), 5.125% (Original Issue Yield: 5.33%), 1/1/2026
| | BBB/Baa2 | | | 510,975 |
| 500,000 | | North Carolina Eastern Municipal Power Agency, Power System Refunding Revenue Bonds (Series 2003C), 5.375% (Original Issue Yield: 5.57%), 1/1/2017
| | BBB/Baa2 | | | 531,835 |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
| | | MUNICIPAL BONDS--continued | | | | | |
| | | North Carolina--continued | | | | | |
| $ | 500,000 | | North Carolina Eastern Municipal Power Agency, Power System Revenue Bonds (Series 1999D), 6.70%, 1/1/2019
| | BBB/Baa2 | | $ | 560,895 |
| 880,000 | | North Carolina HFA, Home Ownership Revenue Bonds (Series 5-A), 5.55%, 1/1/2019
| | AA/Aa2 | | | 918,799 |
| 770,000 | | North Carolina HFA, Home Ownership Revenue Bonds (Series 6-A), 6.10%, 1/1/2018
| | AA/Aa2 | | | 813,536 |
| 300,000 | | North Carolina Medical Care Commission, FHA INS Mortgage Revenue Bonds (Series 2003), 5.375% (Betsy Johnson Regional Hospital)/(FSA INS), 10/1/2024
| | AAA/Aaa | | | 328,614 |
| 500,000 | | North Carolina Medical Care Commission, Health Care Facilities First Mortgage Revenue Bonds (Series 2001), 6.625% (Moravian Homes, Inc.)/ (Original Issue Yield: 7.00%), 4/1/2031
| | NR | | | 512,725 |
| 500,000 | | North Carolina Medical Care Commission, Health Care Facilities First Mortgage Revenue Bonds, 6.25% (Arbor Acres Community)/(Original Issue Yield: 6.40%), 3/1/2027
| | NR | | | 503,150 |
| 500,000 | | North Carolina Medical Care Commission, Health Care Facilities First Mortgage Revenue Bonds, 6.875% (Presbyterian Homes, Inc.)/(Original Issue Yield: 7.00%), 10/1/2021
| | NR | | | 534,625 |
| 500,000 | | North Carolina Medical Care Commission, Health Care Facilities First Mortgage Revenue Refunding Bonds (Series 2004A), 5.00% (Deerfield Episcopal Retirement Community), 11/1/2023
| | NR | | | 509,070 |
| 1,000,000 | | North Carolina Medical Care Commission, Health Care Facilities Revenue Bonds (Series 1999), 6.25% (Stanly Memorial Hospital Project)/(Original Issue Yield: 6.40%), 10/1/2019
| | A-/NR | | | 1,077,170 |
| 250,000 | | North Carolina Medical Care Commission, Health Care Facilities Revenue Bonds (Series 2002A), 5.25% (Union Regional Medical Center)/(Original Issue Yield: 5.33%), 1/1/2021
| | A/A2 | | | 261,895 |
| 200,000 | | North Carolina Medical Care Commission, Health Care Facilities Revenue Bonds (Series 2002A), 5.25% (Union Regional Medical Center)/(Original Issue Yield: 5.38%), 1/1/2022
| | A/A2 | | | 207,960 |
| 1,000,000 | | North Carolina Medical Care Commission, Health Care Facilities Revenue Bonds (Series 2003A), 5.00% (Novant Health Obligated Group), 11/1/2017
| | AA-/Aa3 | | | 1,063,590 |
| 1,205,000 | | North Carolina Medical Care Commission, Health Care Facilities Revenue Bonds (Series 2004A), 5.25% (Cleveland Community Healthcare)/(AMBAC INS), 7/1/2021
| | AAA/Aaa | | | 1,311,582 |
| 1,230,000 | | North Carolina Medical Care Commission, Health Care Facilities Revenue Bonds, 5.50% (Hugh Chatham Memorial Hospital)/(Radian Asset Assurance INS), 10/1/2019
| | AA/NR | | | 1,344,279 |
| 625,000 | | North Carolina Medical Care Commission, Health Care Facilities Revenue Bonds, 5.50% (Scotland Memorial Hospital)/(Radian Asset Assurance INS)/(Original Issue Yield: 5.593%), 10/1/2019
| | AA/NR | | | 673,337 |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
| | | MUNICIPAL BONDS--continued | | | | | |
| | | North Carolina--continued | | | | | |
| $ | 400,000 | | North Carolina Medical Care Commission, Health Care Housing Revenue Bonds (Series 2004A), 5.80% (Arc of North Carolina Projects), 10/1/2034
| | NR/Baa1 | | $ | 404,012 |
| 1,000,000 | | North Carolina Medical Care Commission, Health System Revenue Bonds, 5.25% (Mission Health, Inc.)/(Original Issue Yield: 5.48%), 10/1/2026
| | AA/Aa3 | | | 1,056,300 |
| 1,000,000 | | North Carolina Medical Care Commission, Hospital Revenue Bonds (Series 2000), 5.50% (Northeast Medical Center)/(AMBAC INS)/(Original Issue Yield: 5.74%), 11/1/2025
| | AAA/Aaa | | | 1,094,610 |
| 1,000,000 | | North Carolina Medical Care Commission, Hospital Revenue Bonds (Series 2002A), 5.375% (Southeastern Regional Medical Center)/(Original Issue Yield: 5.48%), 6/1/2032
| | A/NR | | | 1,032,960 |
| 1,000,000 | | North Carolina Medical Care Commission, Hospital Revenue Bonds, 6.125% (Southeastern Regional Medical Center)/(Original Issue Yield: 6.25%), 6/1/2019
| | A/A3 | | | 1,081,840 |
| 685,000 | | North Carolina Medical Care Commission, Hospital Revenue Bonds, 5.50% (Maria Parham Medical Center)/(Radian Asset Assurance INS), 10/1/2018
| | AA/NR | | | 749,678 |
| 250,000 | | North Carolina Medical Care Commission, Retirement Facilities First Mortgage Revenue Bonds (Series 2002), 6.25% (Forest at Duke)/(Original Issue Yield: 6.35%), 9/1/2021
| | NR | | | 264,633 |
| 500,000 | | North Carolina Medical Care Commission, Retirement Facilities First Mortgage Revenue Bonds (Series 2003A), 6.375% (Givens Estates)/(Original Issue Yield: 6.50%), 7/1/2023
| | NR | | | 528,960 |
| 550,000 | | North Carolina Medical Care Commission, Retirement Facilities First Mortgage Revenue Bonds (Series 2004C), 6.00% (Cypress Glen)/(Original Issue Yield: 6.092%), 10/1/2033
| | NR | | | 567,562 |
| 500,000 | | North Carolina Medical Care Commission, Retirement Facilities First Mortgage Revenue Bonds (Series 2005A), 5.50% (United Methodist Retirement Homes)/(Original Issue Yield: 5.55%), 10/1/2035
| | NR | | | 499,680 |
| 1,000,000 | | North Carolina Municipal Power Agency No. 1, Electric Revenue Bonds (Series 1999B), 6.50% (Original Issue Yield: 6.73%), 1/1/2020
| | BBB+/A3 | | | 1,124,530 |
| 1,155,000 | 1 | North Carolina Municipal Power Agency No. 1, Electric Revenue Bonds, 10.50% (Escrowed In Treasuries COL), 1/1/2010
| | AAA/#Aaa | | | 1,397,458 |
| 1,200,000 | | Northern Hospital District of Surry County, NC, Health Care Facilities Revenue Refunding Bonds (Series 2001), 5.10% (Northern Hospital of Surry County)/(Radian Asset Assurance INS)/(Original Issue Yield: 5.242%), 10/1/2021
| | AA/NR | | | 1,251,312 |
| 1,080,000 | | Onslow, NC Water & Sewer Authority, Revenue Bonds, 5.00% (XL Capital Assurance Inc. INS), 6/1/2025
| | AAA/Aaa | | | 1,135,901 |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
| | | MUNICIPAL BONDS--continued | | | | | |
| | | North Carolina--continued | | | | | |
| $ | 1,200,000 | | Piedmont Triad Airport Authority, NC, Airport Revenue Bonds (Series 1999A), 5.875% (FSA INS)/(Original Issue Yield: 6.02%), 7/1/2019
| | AAA/Aaa | | $ | 1,336,188 |
| 1,000,000 | | Pitt County, NC, COP (Series 2000B), 5.50% (FSA INS)/(Original Issue Yield: 5.63%), 4/1/2025
| | AAA/Aaa | | | 1,088,670 |
| 1,500,000 | 1 | Pitt County, NC, Refunding Bonds, 5.25% (Pitt County Memorial Hospital)/(Escrowed In Treasuries COL)/(Original Issue Yield: 5.85%), 12/1/2021
| | NR/#Aaa | | | 1,573,170 |
| 2,000,000 | | Randolph County, NC, COP (Series 2000), 5.60% (FSA INS)/(Original Issue Yield: 5.77%), 6/1/2018
| | AAA/Aaa | | | 2,231,180 |
| 890,000 | | University of North Carolina System Pool, Revenue Bonds (Series A), 5.25% (University of North Carolina)/ (AMBAC INS), 4/1/2021
| | AAA/Aaa | | | 975,698 |
| 700,000 | | University of North Carolina System Pool, Revenue Bonds, 5.00% (University of North Carolina)/(AMBAC INS), 4/1/2024
| | NR/Aaa | | | 740,033 |
| 755,000 | | University of North Carolina System Pool, Revenue Bonds, 5.00% (University of North Carolina)/(AMBAC INS), 4/1/2029
| | NR/Aaa | | | 787,752 |
| 500,000 | | Wilmington, NC Water & Sewer System, Revenue Bonds (Series 1999), 5.625% (FSA INS)/(Original Issue Yield: 5.76%), 6/1/2018
| | NR/Aaa | | | 557,955 |
| 1,000,000 | | Winston-Salem, NC Water & Sewer System, Refunding Revenue Bonds, 5.00%, 6/1/2023
|
| AAA/Aa2
|
|
| 1,069,930
|
| | | TOTAL
|
|
|
|
| 51,797,984
|
| | | Puerto Rico--8.7% | | | | | |
| 1,500,000 | 2 | Puerto Rico Electric Power Authority, Drivers (Series 266), 8.8599% (FSA INS), 7/1/2015
| | AAA/NR | | | 1,964,565 |
| 1,000,000 | 2 | Puerto Rico Highway and Transportation Authority, Residual Interest Tax-Exempt Securities (Series PA 331A), 9.34301% (AMBAC INS), 1/1/2010
| | NR | | | 1,289,450 |
| 500,000 | | Puerto Rico Highway and Transportation Authority, Transportation Revenue Bonds (Series G), 5.00% (Original Issue Yield: 5.10%), 7/1/2033
| | A/Baa1 | | | 515,095 |
| 395,000 | | 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
| | NR/Baa3 | | | 427,520 |
| 1,000,000 | | Puerto Rico Public Finance Corp., Commonwealth Appropriation Bonds (Series 2001E), 5.75% (U.S. Treasury PRF 2/1/2007 @100)/(Original Issue Yield: 5.80%), 8/1/2030
|
| BBB+/Aaa
|
|
| 1,058,710
|
| | | TOTAL
|
|
|
|
| 5,255,340
|
| | | Virgin Islands--0.9% | | | | | |
| 500,000 | | University of the Virgin Islands, UT GO Bonds (Series A), 5.375% (Original Issue Yield: 5.43%), 6/1/2034
|
| BBB/NR
|
|
| 526,575
|
| | | TOTAL MUNICIPAL BONDS (IDENTIFIED COST $53,537,191)
|
|
|
|
| 57,579,899
|
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
| | | SHORT-TERM MUNICIPALS--3.6% | | | | | |
| | | North Carolina--1.4% | | | | | |
| $ | 860,000 | | Brunswick County, NC Industrial Facilities and PCFA (Series 1998), Weekly VRDNs (Turnage Properties LLC)/ (RBC Centura Bank LOC)
|
| NR/Aa3
|
| $
| 860,000
|
| | | Puerto Rico--2.2% | | | | | |
| 1,300,000 | | Puerto Rico Government Development Bank (GDB) Weekly VRDNs (MBIA Insurance Corp. INS)/(Credit Suisse First Boston LIQ)
|
| AAA/Aaa
|
|
| 1,300,000
|
| | | TOTAL SHORT-TERM MUNICIPALS (AT AMORTIZED COST)
|
|
|
|
| 2,160,000
|
| | | TOTAL MUNICIPAL INVESTMENTS--98.7%
(IDENTIFIED COST $55,697,191) 3
|
|
|
|
| 59,739,899
|
| | | OTHER ASSETS AND LIABILITIES - NET--1.3%
|
|
|
|
| 798,227
|
| | | TOTAL NET ASSETS--100%
|
|
|
| $
| 60,538,126
|
Securities subject to the federal alternative minimum tax (AMT) represent 16.5% of the Fund's portfolio as calculated based upon total portfolio market value.
1 Pledged as collateral to ensure the Fund is able to satisfy the obligations of its outstanding short futures contracts.
2 Denotes a restricted security, including securities purchased under Rule 144A of the Securities Act of 1933. These securities, all of which have been deemed liquid by criteria approved by the Fund's Board of Trustees, unless registered under the Act or exempted from registration, may only be sold to qualified institutional investors. At February 28, 2005, these securities amounted to $3,254,015 which represents 5.4% of total net assets.
3 The cost of investments for federal tax purposes amounts to $55,694,064.
Note: The categories of investments are shown as a percentage of total net assets at February 28, 2005.
The following acronyms are used throughout this portfolio:
| AMBAC | - --American Municipal Bond Assurance Corporation |
| COL | - --Collateralized |
| COP | - --Certificate of Participation |
| FHA | - --Federal Housing Administration |
| FNMA | - --Federal National Mortgage Association |
| FSA | - --Financial Security Assurance |
| GO | - --General Obligation |
| GTD | - --Guaranteed |
| HFA | - --Housing Finance Authority |
| IFA | - --Industrial Finance Authority |
| INS | - --Insured |
| LIQ | - --Liquidity Agreement |
| LOC | - --Letter of Credit |
| PCFA | - --Pollution Control Finance Authority |
| PRF | - --Prerefunded |
| TOBs | - --Tender Option Bonds |
| UT | - --Unlimited Tax |
| VRDNs | - --Variable Rate Demand Notes |
See Notes which are an integral part of the Financial Statements
Statement of Assets and Liabilities
February 28, 2005 (unaudited)
Assets:
| | | | | | | |
Total investments in securities, at value (identified cost $55,697,191)
| | | | | $ | 59,739,899 | |
Cash
| | | | | | 74,235 | |
Income receivable
| | | | | | 852,102 | |
Receivable for investments sold
| | | | | | 5,000 | |
Receivable for shares sold
| | | | | | 209,014 | |
Receivable for daily variation margin
|
|
|
|
|
| 50,625
|
|
TOTAL ASSETS
|
|
|
|
|
| 60,930,875
|
|
Liabilities:
| | | | | | | |
Payable for shares redeemed
| | $ | 311,276 | | | | |
Income distribution payable
| | | 71,007 | | | | |
Payable for Directors' /Trustees' fees
| | | 317 | | | | |
Payable for shareholder services fees (Note 5)
| | | 9,434 | | | | |
Accrued expenses
|
|
| 715
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
|
|
| 392,749
|
|
Net assets for 5,468,784 shares outstanding
|
|
|
|
| $
| 60,538,126
|
|
Net Assets Consist of:
| | | | | | | |
Paid-in capital
| | | | | $ | 57,690,255 | |
Net unrealized appreciation of investments and futures contracts
| | | | | | 4,089,847 | |
Accumulated net realized loss on investments, swap contracts, and futures contracts
| | | | | | (1,242,118 | ) |
Undistributed net investment income
|
|
|
|
|
| 142
|
|
TOTAL NET ASSETS
|
|
|
|
| $
| 60,538,126
|
|
Net Asset Value, Offering Price, and Redemption Proceeds Per Share:
| | | | | | | |
Net asset value per share ($60,538,126 ÷ 5,468,784 shares outstanding), no par value, unlimited shares authorized.
|
|
|
|
|
| $11.07
|
|
Offering price per share (100/95.50 of $11.07) 1
|
|
|
|
|
| $11.59
|
|
Redemption proceeds per share
|
|
|
|
|
| $11.07
|
|
1 See "What Do Shares Cost?" in the Prospectus.
See Notes which are an integral part of the Financial Statements
Statement of Operations
Six Months Ended February 28, 2005 (unaudited)
Investment Income:
| | | | | | | | | | | | |
Interest
|
|
|
|
|
|
|
|
|
| $
| 1,457,367
|
|
Expenses:
| | | | | | | | | | | | |
Investment adviser fee (Note 5)
| | | | | | $ | 114,018 | | | | | |
Administrative personnel and services fee (Note 5)
| | | | | | | 74,384 | | | | | |
Custodian fees
| | | | | | | 2,307 | | | | | |
Transfer and dividend disbursing agent fees and expenses
| | | | | | | 16,180 | | | | | |
Directors'/Trustees' fees
| | | | | | | 1,081 | | | | | |
Auditing fees
| | | | | | | 8,908 | | | | | |
Legal fees
| | | | | | | 3,018 | | | | | |
Portfolio accounting fees
| | | | | | | 23,913 | | | | | |
Distribution services fee (Note 5)
| | | | | | | 71,261 | | | | | |
Shareholder services fee (Note 5)
| | | | | | | 71,261 | | | | | |
Share registration costs
| | | | | | | 10,361 | | | | | |
Printing and postage
| | | | | | | 5,813 | | | | | |
Insurance premiums
| | | | | | | 3,838 | | | | | |
Miscellaneous
|
|
|
|
|
|
| 702
|
|
|
|
|
|
TOTAL EXPENSES
|
|
|
|
|
|
| 407,045
|
|
|
|
|
|
Waivers (Note 5):
| | | | | | | | | | | | |
Waiver of investment adviser fee
| | $ | (97,090 | ) | | | | | | | | |
Waiver of administrative personnel and services fee
| | | (12,112 | ) | | | | | | | | |
Waiver of distribution services fee
| | | (71,261 | ) | | | | | | | | |
Waiver of shareholder services fee
|
|
| (2,138
| )
|
|
|
|
|
|
|
|
|
TOTAL WAIVERS
|
|
|
|
|
|
| (182,601
| )
|
|
|
|
|
Net expenses
|
|
|
|
|
|
|
|
|
|
| 224,444
|
|
Net investment income
|
|
|
|
|
|
|
|
|
|
| 1,232,923
|
|
Realized and Unrealized Gain (Loss) on Investments and Futures Contracts:
| | | | | | | | | | | | |
Net realized loss on investments
| | | | | | | | | | | (19,704 | ) |
Net realized gain on futures contracts
| | | | | | | | | | | 10,578 | |
Net change in unrealized appreciation of investments
| | | | | | | | | | | 55,065 | |
Net change in unrealized appreciation on futures contracts
|
|
|
|
|
|
|
|
|
|
| 35,326
|
|
Net realized and unrealized gain on investments and futures contracts
|
|
|
|
|
|
|
|
|
|
| 81,265
|
|
Change in net assets resulting from operations
|
|
|
|
|
|
|
|
|
| $
| 1,314,188
|
|
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
|
| Six Months
Ended
(unaudited)
2/28/2005
|
|
|
|
Year Ended
8/31/2004
| |
Increase (Decrease) in Net Assets
| | | | | | | | |
Operations:
| | | | | | | | |
Net investment income
| | $ | 1,232,923 | | | $ | 2,877,050 | |
Net realized loss on investments, swap contracts and futures contracts
| | | (9,126 | ) | | | (592,321 | ) |
Net change in unrealized appreciation/depreciation of investments, swap contracts, and futures contracts.
|
|
| 90,391
|
|
|
| 2,124,703
|
|
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS
|
|
| 1,314,188
|
|
|
| 4,409,432
|
|
Distributions to Shareholders:
| | | | | | | | |
Distributions from net investment income
|
|
| (1,232,799
| )
|
|
| (2,875,892
| )
|
Share Transactions:
| | | | | | | | |
Proceeds from sale of shares
| | | 10,491,356 | | | | 16,771,898 | |
Net asset value of shares issued to shareholders in payment of distributions declared
| | | 843,375 | | | | 1,582,277 | |
Cost of shares redeemed
|
|
| (7,166,868
| )
|
|
| (46,028,695
| )
|
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS
|
|
| 4,167,863
|
|
|
| (27,674,520
| )
|
Change in net assets
|
|
| 4,249,252
|
|
|
| (26,140,980
| )
|
Net Assets:
| | | | | | | | |
Beginning of period
|
|
| 56,288,874
|
|
|
| 82,429,854
|
|
End of period (including undistributed net investment income of $142 and $18, respectively)
|
| $
| 60,538,126
|
|
| $
| 56,288,874
|
|
See Notes which are an integral part of the Financial Statements
Notes to Financial Statements
February 28, 2005 (unaudited)
1. ORGANIZATION
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 seven portfolios. The financial statements included herein are only those of Federated North Carolina Municipal Income Fund (the "Fund"), a non-diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The investment objective of the Fund is to provide current income exempt from federal regular income tax and the personal income taxes imposed by the state of North Carolina. Interest income from the Fund's investments may be subject to the federal alternative minimum tax for individuals and corporations. The Fund offers one class of shares: Class A Shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles (GAAP) in the United States of America.
Investment Valuation
Municipal bonds are valued by an independent pricing service, taking into consideration yield, liquidity, risk, credit quality, coupon, maturity, type of issue and any other factors or market data the pricing service deems relevant. Short-term securities are valued at the prices provided by an independent pricing service. However, short-term securities with remaining maturities of 60 days or less at the time of purchase may be valued at amortized cost, which approximates fair market value. Securities for which no quotations are readily available are valued at fair value as determined in accordance with procedures established by under general supervision of the Board of Trustees (the "Trustees").
Investment Income, Expenses, and Distributions
Interest income and expenses are accrued daily. Distributions to shareholders are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at fair value.
Premium 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 (the "Code") and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary.
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.
Swap Contracts
The Fund may enter into swap contracts. A swap is an exchange of cash payments between the Fund and another party, which is based on a specific financial index. The value of the swap is adjusted daily and the change in value is recorded as unrealized appreciation or depreciation. When a swap contract is closed, the Fund recognizes a gain or loss. The swap contracts entered into by the Fund are on a forward settling basis. For the six months ended February 28, 2005, the Fund had no realized gains on swap contracts.
Risks may arise upon entering into these agreements from the potential inability of the counterparties to meet the terms of their contract and from unanticipated changes in the value of the financial index on which the swap agreement is based. The Fund uses swaps for hedging purposes to reduce its exposure to interest rate fluctuations.
At February 28, 2005, the Fund had no open swap contracts.
Futures Contracts
The Fund periodically may sell bond interest rate futures contracts to manage duration, and to potentially reduce transaction costs. Upon entering into a bond interest rate futures contract with a broker, the Fund is required to deposit in a segregated account a specified amount of cash or U.S. government securities. Futures contracts are valued daily and unrealized gains or losses are recorded in a "variation margin" account. Daily, the Fund receives from or pays to the broker a specified amount of cash based upon changes in the variation margin account. When a contract is closed, the Fund recognizes a realized gain or loss. Futures contracts have market risks, including the risk that the change in the value of the contract may not correlate with changes in the value of the underlying securities. For the six months end February 28, 2005, the Fund had realized gains on futures contracts of $10,578.
At February 28, 2005, the Fund had outstanding futures contracts as set forth below:
Expiration Date
|
| Contracts
|
| Position
|
| Unrealized
Appreciation
|
June 2005
|
| 90 U.S. Treasury Note 10-Year Futures
|
| Short
|
| $47,139
|
Restricted Securities
Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. In some cases, the issuer of restricted securities 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 restricted securities may be resold in the secondary market in transactions exempt from registration. Such 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 general supervision of the Trustees.
Additional information on restricted securities, excluding securities purchased under Rule 144A that have been deemed liquid by the Trustees, held at February 28, 2005, is as follows:
Security
|
| Acquisition
Date
|
| Acquisition
Cost
|
Puerto Rico Electric Power Authority, Drivers (Series 266), 8.8599% (FSA INS), 7/1/2015
|
| 6/27/2002
|
| $1,855,590
|
Puerto Rico Highway and Transportation Authority, Residual Interest Tax-Exempt Securities (Series PA 331A), 9.34301% (AMBAC INS), 1/1/2010
|
| 7/22/2003
|
| $1,306,810
|
Use of Estimates
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.
Other
Investment transactions are accounted for on a trade date basis. Realized gains and losses from investment transactions are recorded on an identified cost basis.
3. SHARES OF BENEFICIAL INTEREST
The following table summarizes share activity:
|
| Six Months
Ended
2/28/2005
|
|
| Year Ended
8/31/2004
|
|
Shares sold
| | 946,493 | | | 1,509,133 | |
Shares issued to shareholders in payment of distributions declared
| | 76,222 | | | 142,350 | |
Shares redeemed
|
| (647,916
| )
|
| (4,108,095
| )
|
NET CHANGE RESULTING FROM SHARE TRANSACTIONS
|
| 374,799
|
|
| (2,456,612
| )
|
4. FEDERAL TAX INFORMATION
At February 28, 2005, the cost of investments for federal tax purposes was $55,694,064. The net unrealized appreciation of investments for federal tax purposes excluding any unrealized appreciation from futures contracts was $4,045,835. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $4,053,560 and net unrealized depreciation from investments for those securities having an excess of cost over value of $7,725.
At August 31, 2004, the Fund had a capital loss carryforward of $827,060 which will reduce the Fund's taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Code and thus will reduce the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal tax. Pursuant to the Code, such capital loss carryforward will expire as follows:
Expiration Year
|
| Expiration Amount
|
2008
|
| $332,559
|
2012
|
| $494,501
|
5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment adviser fee equal to 0.40% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion.
Administrative Fee
Federated 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 all Federated funds as specified below:
Maximum
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. FAS may voluntarily choose to waive any portion of its fee. FAS can modify or terminate this voluntary waiver at any time at its sole discretion.
Distribution Services Fee
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the net assets of the Fund's shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses up to 0.25% of average daily net assets, annually, to compensate FSC. FSC may voluntarily choose to waive any portion of its fee. FSC can modify or terminate this voluntary waiver at any time at its sole discretion. Rather than paying investment professionals directly, the Fund may pay fees to FSC and FSC will use the fees to compensate investment professionals. For the six months ended February 28, 2005, FSC did not retain any fees paid by the Fund.
Sales Charges
For the six months ended February 28, 2005, FSC retained $15,629 in sales charges from the sale of the Fund's Shares. See "What Do Shares Cost?" in the Prospectus.
Shareholder Services Fee
Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company (FSSC), the Fund will pay FSSC up to 0.25% of the average daily net assets of the Fund's shares for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion. Rather than paying investment professionals directly, the Fund may pay fees to FSSC and FSSC will use the fees to compensate investment professionals. For the six months ended February 28, 2005, FSSC did not retain any fees paid by the Fund.
Interfund Transactions
During the six months ended February 28, 2005, 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 $13,760,000 and $12,600,000, respectively.
General
Certain of the Officers and Trustees of the Fund are Officers and Directors or Trustees of the above companies.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations (and in-kind contributions), for the six months ended February 28, 2005, were as follows:
Purchases
|
| $
| 4,799,261
|
Sales
|
| $
| 1,563,436
|
7. CONCENTRATION OF CREDIT RISK
Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at February 28, 2005, 45.1% 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 16.2% of total investments.
8. LEGAL PROCEEDINGS
Beginning in October 2003, Federated Investors, Inc. and various subsidiaries thereof (including the advisers and distributor for various investment companies, collectively, "Federated"), along with various investment companies sponsored by Federated ("Funds") were named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland seeking damages of unspecified amounts. 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 engaged in illegal and improper trading practices including market timing and late trading in concert with certain institutional traders, which allegedly caused financial injury to the mutual fund shareholders. Federated and various Funds have also been named as defendants in several additional lawsuits, the majority of which are now pending in the United States District Court for the Western District of Pennsylvania, alleging, among other things, excessive advisory and Rule 12b-1 fees, and seeking damages of unspecified amounts. The Board of the Funds has retained the law firm of Dickstein Shapiro Morin & Oshinsky LLP to represent the Funds in these lawsuits. Federated and the Funds, and their respective counsel, are reviewing the allegations and will respond appropriately. Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these recent lawsuits and future potential similar suits is uncertain. Although we do not believe that these lawsuits will have a material adverse effect on the Funds, there can be no assurance that these suits, the ongoing adverse publicity and/or other developments resulting from the regulatory investigations will not result in increased Fund redemptions, reduced sales of Fund shares, or other adverse consequences for the Funds.
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
A description of the policies and procedures that the Fund uses to determine how to vote proxies 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 through Federated's website. Go to FederatedInvestors.com, select "Products," select the "Prospectuses and Regulatory Reports" link, then select the Fund to access the link to Form N-PX. This information is also available from the EDGAR database on the SEC's website 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 website 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 website at FederatedInvestors.com by clicking on "Portfolio Holdings" and selecting the name of the Fund, or by selecting the name of the Fund and clicking on "Portfolio Holdings." You must register on the website the first time you wish to access this information.
Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including 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 DELIVERY
In 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.
Federated
World-Class Investment Manager
Federated North Carolina Municipal Income Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
Cusip 313923500
G02671-04 (4/05)
Federated is a registered mark of Federated Investors, Inc. 2005 (c)Federated Investors, Inc.
Federated Investors
World-Class Investment Manager
Federated Ohio Municipal Income Fund
A Portfolio of Federated Municipal Securities Income Trust
Semi-Annual Shareholder Report
February 28, 2005
Class F Shares
FINANCIAL HIGHLIGHTS
SHAREHOLDER EXPENSE EXAMPLE
PORTFOLIO OF INVESTMENTS SUMMARY TABLES
FINANCIAL STATEMENTS
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
QUARTERLY PORTFOLIO SCHEDULE
Not FDIC Insured * May Lose Value * No Bank Guarantee
Financial Highlights
(For a Share Outstanding Throughout Each Period)
See Notes which are an integral part of the Financial Statements
Shareholder Expense Example
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; 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, 2004 to February 28, 2005.
ACTUAL EXPENSES
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 provided to enable you to compare the ongoing costs of investing in the Fund and 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.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchases or redemption payments. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Portfolio of Investments Summary Tables
At February 28, 2005, the Fund’s credit quality ratings composition1 was as follows:
S&P Long-Term Ratings as
Percentage of Total Investments2 | | Moody’s Long-Term Ratings as
Percentage of Total Investments2 |
| |
|
AAA | | 25.8% | | Aaa | | 38.6% |
| |
|
AA | | 16.1% | | Aa | | 9.8% |
| |
|
A | | 7.4% | | A | | 10.2% |
| |
|
BBB | | 8.7% | | Baa | | 9.1% |
| |
|
BB | | 2.7% | | Ba | | 0.0% |
| |
|
Not Rated by S&P | | 39.3% | | Not Rated by Moody’s | | 32.3% |
| |
|
TOTAL | | 100.0% | | TOTAL | | 100.0% |
| |
|
Portfolio of Investments
February 28, 2005 (unaudited)
Principal
Amount | | | | Credit
Rating | | | Value |
| | | MUNICIPAL BONDS—98.3% | | | | | |
| | | Ohio—91.5% | | | | | |
$ | 1,000,000 | | Akron, Bath & Copley, OH Joint Township, Hospital District Revenue Bonds (Series 2004A), 5.125% (Summa Health System)/(Radian Asset Assurance INS)/(Original Issue Yield: 5.38%), 11/15/2024 | | NR/Aa3 | | $ | 1,039,100 |
| 1,750,000 | | Akron, Bath & Copley, OH Joint Township, Hospital Facilities Revenue Bonds (Series 2004A), 5.25% (Summa Health System)/(Radian Asset Assurance INS)/(Original Issue Yield: 5.47%), 11/15/2031 | | NR/Aa3 | | | 1,835,382 |
| 1,000,000 | | Akron, OH, LT GO Bonds, 5.80% (Original Issue Yield: 5.95%), 11/1/2020 | | AA-/A1 | | | 1,128,640 |
| 1,000,000 | | Bay Village, OH City School District, School Improvement UT GO Bonds, 5.125% (Original Issue Yield: 5.16%), 12/1/2021 | | NR/Aa2 | | | 1,073,780 |
| 1,000,000 | | Cleveland, OH Waterworks, Revenue Bonds (Series 2002K), 5.25% (FGIC INS), 1/1/2021 | | AAA/Aaa | | | 1,114,300 |
| 530,000 | | Cleveland-Cuyahoga County, OH Port Authority, Bond Fund Program Development Revenue Bonds (Series 2004E), 5.60% (Port of Cleveland Bond Fund), 5/15/2025 | | NR/BBB+ | | | 533,222 |
| 470,000 | | Cleveland-Cuyahoga County, OH Port Authority, Development Revenue Bonds (Series 2001B), 6.50% (Port of Cleveland Bond Fund), 11/15/2021 | | NR/BBB+ | | | 492,499 |
| 500,000 | | Cleveland-Cuyahoga County, OH Port Authority, Development Revenue Bonds (Series 2002C), 5.95% (Port of Cleveland Bond Fund), 5/15/2022 | | NR/BBB+ | | | 520,630 |
| 1,000,000 | | 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 | | NR | | | 1,060,590 |
| 1,000,000 | | Columbus, OH City School District, School Facilities Construction & Improvement UT GO Bonds, 5.25% (FSA INS), 12/1/2024 | | AAA/Aaa | | | 1,092,920 |
| 1,610,000 | | Columbus, OH City School District, School Facilities Construction & Improvement UT GO Bonds, 5.00% (FGIC INS), 12/1/2024 | | AAA/Aaa | | | 1,697,391 |
| 1,000,000 | | Columbus, OH Tax Increment Financing, Tax Allocation Revenue Bonds (Series 2004A), 5.00% (Easton Project)/(AMBAC INS), 12/1/2024 | | AAA/Aaa | | | 1,050,980 |
| 1,000,000 | 1 | Delaware County, OH, Capital Facilities LT GO Bonds, 6.25%, 12/1/2020 | | AA+/Aa1 | | | 1,170,500 |
| 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 | | A/A2 | | | 1,045,020 |
| 1,500,000 | | Fairfield, OH Hospital Facilities, Revenue Bonds, 5.00% (Radian Asset Assurance INS)/(Original Issue Yield: 5.05%), 6/15/2028 | | AA/NR | | | 1,535,805 |
| | | MUNICIPAL BONDS—continued | | | | | |
| | | Ohio—continued | | | | | |
$ | 1,500,000 | | Franklin County, OH Health Care Facilities, Revenue Refunding Bonds, 5.50% (Ohio Presbyterian Retirement Services)/Original Issue Yield: 5.69%), 7/1/2021 | | BBB/NR | | $ | 1,500,915 |
| 750,000 | | Franklin County, OH, Revenue Refunding Bonds, 5.75% (Capitol South Community Urban Redevelopment Corp.), 6/1/2011 | | NR | | | 789,510 |
| 1,000,000 | | Greene County, OH, University Housing Revenue Bonds (Series 2002A), 5.50% (Marauder Development LLC at Central State University)/(American Capital Access INS)/(Original Issue Yield: 5.65%), 9/1/2027 | | A/NR | | | 1,038,020 |
| 1,000,000 | | Greene County, OH, University Housing Revenue Bonds (Series 2002A), 5.375% (Marauder Development LLC at Central State University)/(American Capital Access INS)/(Original Issue Yield: 5.55%), 9/1/2022 | | A/NR | | | 1,043,320 |
| 1,530,000 | | Hamilton County, OH Hospital Facilities Authority, Revenue Bonds (Series 2004J), 5.25% (Cincinnati Children’s Hospital Medical Center)/(FGIC INS), 5/15/2023 | | AAA/Aaa | | | 1,655,246 |
| 580,000 | | Hamilton County, OH Hospital Facilities Authority, Revenue Refunding & Improvement Bonds, 7.00% (Deaconess Hospital)/(Original Issue Yield: 7.046%), 1/1/2012 | | A-/A3 | | | 587,905 |
| 2,400,000 | | Hamilton County, OH Sewer System, Improvement Revenue Bonds (Series 2000A), 5.75% (Metropolitan Sewer District of Greater Cincinnati)/(MBIA Insurance Corp. LOC)/(Original Issue Yield: 5.78%), 12/1/2025 | | AAA/Aaa | | | 2,678,376 |
| 2,000,000 | | Hamilton County, OH, Subordinated Sales Tax Revenue Bonds (Series B), 5.25% (AMBAC INS)/(Original Issue Yield: 5.62%), 12/1/2032 | | NR/Aaa | | | 2,126,480 |
| 2,000,000 | | Hamilton, OH City School District, School Improvement UT GO Bonds (Series 1999A), 5.50% (Original Issue Yield: 5.75%), 12/1/2024 | | AA/NR | | | 2,202,800 |
| 1,000,000 | | Heath, OH City School District, School Improvement UT GO Bonds, (Series A), 5.50% (FGIC LOC)/(Original Issue Yield: 5.635%), 12/1/2027 | | NR/Aaa | | | 1,093,070 |
| 1,010,000 | | Kent State University, OH, General Receipts Revenue Bonds, 6.00% (AMBAC INS)/(Original Issue Yield: 6.09%), 5/1/2024 | | AAA/Aaa | | | 1,145,168 |
| 1,085,000 | | Kent, OH CSD, Refunding School Improvement UT GO Bonds, 5.00% (FSA INS), 12/1/2021 | | AAA/Aaa | | | 1,163,272 |
| 1,500,000 | | Lake, OH Local School District, UT GO Bonds, 5.75% (FGIC INS)/(Original Issue Yield: 5.90%), 12/1/2021 | | AAA/Aaa | | | 1,683,690 |
| 2,000,000 | | Licking Heights, OH Local School District, School Facilities Construction & Improvement UT GO Bonds (Series 2000A), 5.50% (FGIC INS)/(Original Issue Yield: 5.58%), 12/1/2024 | | NR/Aaa | | | 2,207,960 |
| 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 | | BBB/NR | | | 1,503,885 |
| 1,000,000 | | Lorain County, OH, Hospital Revenue Refunding & Improvement Bonds, 5.25% (Catholic Healthcare Partners)/(Original Issue Yield: 5.52%), 10/1/2033 | | AA-/A1 | | | 1,031,690 |
| | | MUNICIPAL BONDS—continued | | | | | |
| | | Ohio—continued | | | | | |
$ | 1,000,000 | | Lorain, OH City School District, UT GO Classroom Facilities Improvement Bonds (Series 2002), 5.25% (MBIA Insurance Corp. INS), 12/1/2020 | | AAA/Aaa | | $ | 1,099,590 |
| 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 | | NR/BBB+ | | | 1,582,305 |
| 1,000,000 | | Mahoning County, OH Hospital Facilities, Hospital Facilities Revenue Bonds (Series A), 6.00% (Forum Health Obligated Group)/(Original Issue Yield: 6.15%), 11/15/2032 | | BBB+/Baa1 | | | 1,070,290 |
| 1,000,000 | | Marion County, OH Hospital Authority, Hospital Refunding & Improvement Revenue Bonds (Series 1996), 6.375% (Community Hospital of Springfield)/(Original Issue Yield: 6.52%), 5/15/2011 | | BBB+/NR | | | 1,043,440 |
| 1,000,000 | | Medina County, OH Library District, UT GO Bonds, 5.25% (FGIC INS), 12/1/2023 | | AAA/Aaa | | | 1,087,830 |
| 1,000,000 | | Miami County, OH, Hospital Facilities Revenue Refunding & Improvement Bonds (Series 1996A), 6.375% (Upper Valley Medical Center, OH)/(Original Issue Yield: 6.62%), 5/15/2026 | | BBB+/Baa1 | | | 1,041,260 |
| 1,000,000 | | Moraine, OH Solid Waste Disposal Authority, Revenue Bonds, 6.75% (General Motors Corp.)/(Original Issue Yield: 6.80%), 7/1/2014 | | BBB-/Baa2 | | | 1,157,090 |
| 1,720,000 | | Ohio HFA, Residential Mortgage Revenue Bonds (Series 2002 A-1), 5.30% (GNMA GTD), 9/1/2022 | | NR/Aaa | | | 1,769,226 |
| 2,500,000 | | Ohio State Air Quality Development Authority, PCR Refunding Bonds (Series 2002A), 6.00% (Cleveland Electric Illuminating Co.), 12/1/2013 | | BB+/Baa3 | | | 2,650,925 |
| 1,000,000 | | Ohio State Higher Educational Facilities Commission, Higher Educational Facility Revenue Bonds, 5.125% (Oberlin College), 10/1/2024 | | AA/NR | | | 1,058,630 |
| 1,000,000 | | Ohio State Higher Educational Facilities Commission, Revenue Bonds (Series 2002B), 5.50% (Case Western Reserve University, OH), 10/1/2022 | | AA-/A1 | | | 1,115,350 |
| 1,000,000 | | Ohio State Higher Educational Facilities Commission, Revenue Bonds, 5.00% (University of Dayton)/(AMBAC INS), 12/1/2027 | | AAA/Aaa | | | 1,051,580 |
| 500,000 | | Ohio State Higher Educational Facilities Commission, Revenue Bonds, 5.50% (Baldwin-Wallace College), 12/1/2021 | | A-/NR | | | 536,895 |
| 1,070,000 | | Ohio State Higher Educational Facilities Commission, Revenue Bonds, 5.50% (Baldwin-Wallace College)/(Original Issue Yield: 5.53%), 12/1/2023 | | A-/NR | | | 1,138,951 |
| 610,000 | | Ohio State Higher Educational Facilities Commission, Revenue Bonds, 5.50% (Baldwin-Wallace College)/(Original Issue Yield: 5.61%), 12/1/2024 | | A-/NR | | | 647,424 |
| 2,000,000 | | Ohio State Higher Educational Facilities Commission, Revenue Bonds, 5.85% (John Carroll University, OH)/(Original Issue Yield: 6.05%), 4/1/2020 | | NR/A2 | | | 2,170,880 |
| | | MUNICIPAL BONDS—continued | | | | | |
| | | Ohio—continued | | | | | |
$ | 2,000,000 | | Ohio State University, General Receipts Revenue Bonds (Series 2003B), 5.25%, 6/1/2023 | | AA/Aa2 | | $ | 2,177,740 |
| 2,000,000 | | Ohio State Water Development Authority, PCR Bonds, 5.10%, 12/1/2022 | | AAA/Aaa | | | 2,119,440 |
| 315,000 | | Ohio State, Education Loan Revenue Bonds (Series 1997A), 5.85% (AMBAC INS), 12/1/2019 | | AAA/Aaa | | | 330,152 |
| 1,000,000 | | Ohio Waste Development Authority Solid Waste, Revenue Bonds (Series 2002), 4.85% TOBs (Waste Management, Inc.), Mandatory Tender 11/1/2007 | | BBB/NR | | | 1,028,960 |
| 1,620,000 | | Olentangy, OH Local School District, School Facilities Construction & Improvement UT GO Bonds (Series 2002A), 5.25%, 12/1/2021 | | AA/Aa2 | | | 1,772,134 |
| 1,835,000 | | Otsego, OH Local School District, Construction & Improvement UT GO Bonds, 5.00% (FSA INS)/(Original Issue Yield: 5.15%), 12/1/2028 | | NR/Aaa | | | 1,928,163 |
| 1,255,000 | | Ottawa & Glandorf, OH Local School District, School Facilities Construction & Improvement UT GO Bonds, 5.25% (MBIA Insurance Corp. INS), 12/1/2020 | | NR/Aaa | | | 1,380,011 |
| 1,000,000 | | Parma, OH, Hospital Improvement and Refunding Revenue Bonds, 5.375% (Parma Community General Hospital Association)/(Original Issue Yield: 5.45%), 11/1/2029 | | A-/NR | | | 1,026,540 |
| 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 | | NR | | | 500,305 |
| 500,000 | 2 | Port of Greater Cincinnati, OH Development Authority, Special Assessment Revenue Bonds, 6.30% (Cincinnati Mills), 2/15/2024 | | NR | | | 533,655 |
| 1,000,000 | | Portage County, OH Board of County Hospital Trustees, Hospital Revenue Bonds (Series 1999), 5.75% (Robinson Memorial Hospital)/(AMBAC INS)/(Original Issue Yield: 5.90%), 11/15/2019 | | AAA/Aaa | | | 1,114,890 |
| 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 | | NR/A2 | | | 1,600,980 |
| 2,000,000 | | Springboro, OH Community School District, School Improvement UT GO Bonds, 5.00% (MBIA Insurance Corp. INS)/(Original Issue Yield: 5.03%), 12/1/2032 | | AAA/Aaa | | | 2,084,900 |
| 1,000,000 | | Steubenville, OH, Hospital Facilities Revenue Refunding & Improvement Bonds, 6.375% (Trinity Health System Obligated Group)/(Original Issue Yield: 6.55%), 10/1/2020 | | NR/A3 | | | 1,105,770 |
| 500,000 | | Toledo-Lucas County, OH Port Authority, Revenue Bonds (Series 2004C), 6.375% (Northwest Ohio Bond Fund), 11/15/2032 | | NR/BBB+ | | | 521,070 |
| 1,500,000 | | Toledo-Lucas County, OH Port Authority, Revenue Bonds, 6.45% (CSX Corp.), 12/15/2021 | | NR/Baa2 | | | 1,703,115 |
| 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 | | NR/A- | | | 1,423,496 |
| 2,000,000 | | Tuscarawas County, OH, Hospital Facilities Revenue Bonds, 5.75% (Union Hospital)/(Radian Asset Assurance INS), 10/1/2026 | | AA/NR | | | 2,184,760 |
| | | MUNICIPAL BONDS—continued | | | | | |
| | | Ohio—continued | | | | | |
$ | 1,025,000 | | University of Cincinnati, OH, General Receipts Revenue Bonds (Series 2004D), 5.00% (AMBAC INS), 6/1/2026 | | AAA/Aaa | | $ | 1,078,054 |
| 1,000,000 | | Warrensville Heights, OH School District, UT GO Bonds, 5.75% (FGIC INS)/(Original Issue Yield: 5.83%), 12/1/2024 | | AAA/Aaa | | | 1,128,400 |
| 1,995,000 | | Waynesville, OH Health Care Facilities, Revenue Bonds (Series 2001A), 5.70% (Quaker Heights Project)/(GNMA GTD), 2/20/2043 | | NR/Aaa | | | 2,144,246 |
|
| | | TOTAL | | | | | 88,950,513 |
|
| | | Puerto Rico—6.5% | | | | | |
| 2,000,000 | 2 | Puerto Rico Electric Power Authority, Drivers (Series 266), 8.8599% (FSA INS), 7/1/2015 | | AAA/NR | | | 2,619,420 |
| 1,000,000 | 2 | Puerto Rico Highway and Transportation Authority, Residual Interest Tax-Exempt Securities (Series PA 331A), 9.34301% (AMBAC INS), 1/1/2010 | | NR | | | 1,289,450 |
| 1,000,000 | 2 | Puerto Rico Highway and Transportation Authority, Residual Interest Tax-Exempt Securities (Series PA 331B), 9.34301% (AMBAC INS), 1/1/2011 | | NR | | | 1,301,670 |
| 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 | | NR/Baa3 | | | 1,071,507 |
|
| | | TOTAL | | | | | 6,282,047 |
|
| | | Virgin Islands—0.3% | | | | | |
| 305,000 | | Virgin Islands HFA, SFM Revenue Refunding Bonds (Series A), 6.50% (GNMA COL)/(Original Issue Yield: 6.522%), 3/1/2025 | | AAA/NR | | | 311,350 |
|
| | | TOTAL MUNICIPAL BONDS
(IDENTIFIED COST $89,056,874) | | | | | 95,543,910 |
|
| | | SHORT-TERM MUNICIPALS—0.3% | | | | | |
| | | Ohio—0.3% | | | | | |
| 300,000 | | Hamilton County, OH Hospital Facilities Authority, (Series 1999A) Weekly VRDNs (Drake Center, Inc.)/(U.S. Bank, N.A. LOC) (at amortized cost) | | NR/VMIG1 | | | 300,000 |
|
| | | TOTAL MUNICIPAL INVESTMENTS—98.6%
(IDENTIFIED COST $89,356,874)3 | | | | | 95,843,910 |
|
| | | OTHER ASSETS AND LIABILITIES-NET—1.4% | | | | | 1,405,370 |
|
| | | TOTAL NET ASSETS—100% | | | | $ | 97,249,280 |
|
Note: The categories of investments are shown as a percentage of total net assets at February 28, 2005.
The following acronyms are used throughout this portfolio:
AMBAC | —American Municipal Bond Assurance Corporation |
COL | —Collateralized |
CSD | —Central School District |
FGIC | —Financial Guaranty Insurance Company |
FSA | —Financial Security Assurance |
GNMA | —Government National Mortgage Association |
GO | —General Obligation |
GTD | —Guaranteed |
HFA | —Housing Finance Authority |
INS | —Insured |
LOC | —Letter of Credit |
LT | —Limited Tax |
PCR | —Pollution Control Revenue |
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
Statement of Assets and Liabilities
February 28, 2005 (unaudited)
Assets: | | | | | | | |
Total investments in securities, at value (identified cost $89,356,874) | | | | | $ | 95,843,910 | |
Cash | | | | | | 33,458 | |
Income receivable | | | | | | 1,308,754 | |
Receivable for daily variation margin | | | | | | 42,187 | |
Receivable for investments sold | | | | | | 440,000 | |
Receivable for shares sold | | | | | | 51,199 | |
|
TOTAL ASSETS | | | | | | 97,719,508 | |
|
Liabilities: | | | | | | | |
Payable for shares redeemed | | $ | 267,899 | | | | |
Income distribution payable | | | 168,772 | | | | |
Payable for Directors’/Trustees’ fee | | | 347 | | | | |
Payable for distribution services fee (Note 5) | | | 11,325 | | | | |
Payable for shareholder services fee (Note 5) | | | 18,642 | | | | |
Accrued expenses | | | 3,243 | | | | |
|
TOTAL LIABILITIES | | | | | | 470,228 | |
|
Net assets for 8,369,667 shares outstanding | | | | | $ | 97,249,280 | |
|
Net Assets Consist of: | | | | | | | |
Paid in capital | | | | | $ | 92,854,152 | |
Net unrealized appreciation of investments and futures contracts | | | | | | 6,526,318 | |
Accumulated net realized loss on investments, futures contracts and swap contracts | | | | | | (2,091,747 | ) |
Distributions in excess of net investment income | | | | | | (39,443 | ) |
|
TOTAL NET ASSETS | | | | | $ | 97,249,280 | |
|
Net Asset Value, Offering Price and Redemption Proceeds Per Share: | | | | | | | |
Net asset value per share ($97,249,280 ÷ 8,369,667 shares outstanding)
no par value, unlimited shares authorized | | | | | | $11.62 | |
|
Offering price per share (100/99.00 of $11.62)1 | | | | | | $11.74 | |
|
Redemption proceeds per share (99.00/100 of $11.62)1 | | | | | | $11.50 | |
|
See Notes which are an integral part of the Financial Statements
Statement of Operations
Six Months Ended February 28, 2005 (unaudited)
Investment Income: | | | | | | | | | | | | |
Interest | | | | | | | | | | $ | 2,495,778 | |
|
Expenses: | | | | | | | | | | | | |
Investment adviser fee (Note 5) | | | | | | $ | 191,918 | | | | | |
Administrative personnel and services fee (Note 5) | | | | | | | 74,384 | | | | | |
Custodian fees | | | | | | | 2,714 | | | | | |
Transfer and dividend disbursing agent fees and expenses | | | | | | | 25,729 | | | | | |
Directors’/Trustees’ fees | | | | | | | 1,209 | | | | | |
Auditing fees | | | | | | | 8,584 | | | | | |
Legal fees | | | | | | | 3,020 | | | | | |
Portfolio accounting fees | | | | | | | 24,370 | | | | | |
Distribution services fee (Note 5) | | | | | | | 191,918 | | | | | |
Shareholder services fee (Note 5) | | | | | | | 119,949 | | | | | |
Share registration costs | | | | | | | 10,608 | | | | | |
Printing and postage | | | | | | | 7,060 | | | | | |
Insurance premiums | | | | | | | 4,130 | | | | | |
Miscellaneous | | | | | | | 762 | | | | | |
|
TOTAL EXPENSES | | | | | | | 666,355 | | | | | |
|
Waivers (Note 5): | | | | | | | | | | | | |
Waiver of investment adviser fee | | $ | (100,322 | ) | | | | | | | | |
Waiver of administrative personnel and services fee | | | (11,917 | ) | | | | | | | | |
Waiver of distribution services fee | | | (119,949 | ) | | | | | | | | |
Waiver of shareholder services fee | | | (234 | ) | | | | | | | | |
|
TOTAL WAIVERS | | | | | | | (232,422 | ) | | | | |
|
Net expenses | | | | | | | | | | | 433,933 | |
|
Net investment income | | | | | | | | | | | 2,061,845 | |
|
Realized and Unrealized Gain (Loss) on Investments: | | | | | | | | | | | | |
Net realized gain on investments | | | | | | | | | | | 162,434 | |
Net realized loss on futures contracts | | | | | | | | | | | (7,177 | ) |
Net change in unrealized appreciation of investments | | | | | | | | | | | 787,147 | |
Net change in unrealized appreciation of futures contracts | | | | | | | | | | | 39,282 | |
|
Net realized and unrealized gain on investments, and futures contracts | | | | | | | | | | | 981,686 | |
|
Change in net assets resulting from operations | | | | | | | | | | | $3,043,531 | |
|
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
| | Six Months
Ended
(unaudited)
2/28/2005 | |
Year Ended
8/31/2004 |
Increase (Decrease) in Net Assets | | | | | | | | |
Operations: | | | | | | | | |
Net investment income | | $ | 2,061,845 | | | $ | 4,291,904 | |
Net realized gain (loss) on investments, futures contracts, and swap contracts | | | 155,257 | | | | (828,585 | ) |
Net change in unrealized appreciation/depreciation on investments, futures contracts and swap contracts | | | 826,429 | | | | 2,419,256 | |
|
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | | | 3,043,531 | | | | 5,882,575 | |
|
Distributions to Shareholders: | | | | | | | | |
Distributions from net investment income | | | (2,100,247 | ) | | | (4,263,196 | ) |
|
Share Transactions: | | | | | | | | |
Proceeds from sale of shares | | | 6,924,447 | | | | 12,734,977 | |
Net asset value of shares issued to shareholders in payment of distributions declared | | | 1,092,483 | | | | 2,111,168 | |
Cost of shares redeemed | | | (6,455,327 | ) | | | (18,095,309 | ) |
|
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | | | 1,561,603 | | | | (3,249,164 | ) |
|
Change in net assets | | | 2,504,887 | | | | (1,629,785 | ) |
|
Net Assets: | | | | | | | | |
Beginning of period | | | 94,744,393 | | | | 96,374,178 | |
|
End of period (including distributions in excess of net investment income of $(39,443) and $(1,041), respectively) | | $ | 97,249,280 | | | $ | 94,744,393 | |
|
See Notes which are an integral part of the Financial Statements
Notes to Financial Statements
February 28, 2005 (unaudited)
1. ORGANIZATION
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 seven 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. The investment objective of the Fund is to provide current income exempt from federal regular income tax (federal regular income tax does not include the federal alternative minimum tax) and the personal income taxes imposed by the State of Ohio and Ohio municipalities. Interest income from the Fund’s investments may be subject to the federal alternative minimum tax for individuals and corporations. The Fund offers one class of Shares: Class F Shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles (GAAP) in the United States of America.
Investment Valuation
Municipal bonds are valued by an independent pricing service, taking into consideration yield, liquidity, risk, credit quality, coupon, maturity, type of issue, and any other factors or market data the pricing service deems relevant. Short-term securities are valued at the prices provided by an independent pricing service. However, short-term securities with remaining maturities of 60 days or less at the time of purchase may be valued at amortized cost, which approximates fair market value. Securities for which no quotations are readily available are valued at fair value as determined in accordance with procedures established by and under general supervision of the Board of Trustees (the “Trustees”).
Investment Income, Expenses and Distributions
Interest income and expenses are accrued daily. Distributions to shareholders are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at fair value.
Premium 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 (the “Code”) and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary.
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
Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. In some cases, the issuer of restricted securities 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 restricted securities may be resold in the secondary market in transactions exempt from registration. Such 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 general supervision of the Trustees.
Additional information on restricted securities, excluding securities purchased under Rule 144A that have been deemed liquid by the Trustees, held at February 28, 2005, is as follows:
Security | | Acquisition Date | | Acquisition Cost |
|
Port of Greater Cincinnati, OH Development Authority,
Special Assessment Revenue Bonds, 6.30%
(Cincinnati Mills), 2/15/2024 | | 2/11/2004 | | $500,000 |
|
Puerto Rico Electric Power Authority, Drivers (Series 266),
8.8599% (FSA INS), 7/1/2015 | | 6/27/2002 | | $2,474,120 |
|
Puerto Rico Highway and Transportation Authority,
Residual Interest Tax-Exempt Securities (Series PA 331A),
9.34301% (AMBAC INS), 1/1/2010 | | 3/3/1998 | | $1,163,520 |
|
Puerto Rico Highway and Transportation Authority,
Residual Interest Tax-Exempt Securities (Series PA 331B),
9.34301% (AMBAC INS), 1/1/2011 | | 3/3/1998 | | $1,158,780 |
|
Swap Contracts
The Fund may enter into swap contracts. A swap is an exchange of cash payments between the Fund and another party, which is based on a specific financial index. The value of the swap is adjusted daily and the change in value is recorded as unrealized appreciation or depreciation. When a swap contract is closed, the Fund recognizes a realized gain or loss. The swap contracts entered into by the Fund are on a forward settling basis. For the six months ended February 28, 2005, the Fund had no realized gain/loss on swap contracts.
Risks may arise upon entering into these agreements from the potential inability of the counterparties to meet the terms of their contract and from unanticipated changes in the value of the financial index on which the swap agreement is based. The Fund uses swaps for hedging purposes to reduce its exposure to interest rate fluctuations.
At February 28, 2005, the Fund had no open swap contracts.
Futures Contracts
The Fund periodically may sell bond interest rate futures contracts to manage duration and to potentially reduce transaction costs. Upon entering into a bond interest rate futures contract with a broker, the Fund is required to deposit in a segregated account a specified amount of cash or U.S. government securities. Futures contracts are valued daily and unrealized gains or losses are recorded in a “variation margin” account. Daily, the Fund receives from or pays to the broker a specified amount of cash based upon changes in the variation margin account. When a contract is closed, the Fund recognizes a realized gain or loss. For the six months ended February 28, 2005, the Fund had realized losses on futures contracts of $7,177. Futures contracts have market risks, including the risk that the change in the value of the contract may not correlate with the changes in the value of the underlying securities.
At February 28, 2005, the Fund had outstanding futures contracts as set forth below:
Expiration Date | | Contracts to Receive | | Position | | Unrealized
Appreciation |
|
June 2005 | | 75 U.S. Treasury Notes 10 Yr Futures | | Short | | 39,282 |
|
Use of Estimates
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.
Other
Investment transactions are accounted for on a trade date basis. Realized gains and losses from investment transactions are recorded on an identified cost basis.
3. SHARES OF BENEFICIAL INTEREST
The following table summarizes share activity:
4. FEDERAL TAX INFORMATION
At February 28, 2005, the cost of investments for federal tax purposes was $89,356,774. The net unrealized appreciation of investments for federal tax purposes was $6,487,136. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $6,487,873 and net unrealized depreciation from investments for those securities having an excess of cost over value of $737.
At August 31, 2004, the Fund had a capital loss carryforward of $1,627,306 which will reduce the Fund’s taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Code and thus will reduce the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal tax. Pursuant to the Code, such capital loss carryforward will expire as follows:
5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
Federated Investment Management Company, the Fund’s investment adviser (the “Adviser”), receives for its services an annual investment adviser fee equal to 0.40% of the Fund’s average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion.
Administrative Fee
Federated 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 all Federated funds as specified below:
Maximum 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. FAS may voluntarily choose to waive any portion of its fee. FAS can modify or terminate this voluntary waiver at any time at its sole discretion.
Distribution Services Fee
The Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the Fund’s shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses of up to 0.40% of average daily net assets, annually, to compensate FSC. FSC may voluntarily choose to waive any portion of its fee. FSC can modify or terminate this voluntary waiver at any time at its sole discretion. Rather than paying investment professionals directly, the Fund may pay fees to FSC and FSC will use the fees to compensate investment professionals. For the six months ended February 28, 2005, FSC retained $71,969 of fees paid by the Fund.
Sales Charges
For the six months ended February 28, 2005, FSC retained $10,387 of contingent deferred sales charges relating to redemptions of Class F Shares. See “What do Shares Cost?” in the Prospectus.
Shareholder Services Fee
Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company (FSSC), the Fund will pay FSSC up to 0.25% of the average daily net assets of the Fund for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion. Rather than paying investment professionals directly, the Fund may pay fees to FSSC and FSSC will use the fees to compensate investment professionals. For the six months ended February 28, 2005, FSSC retained $6,269 of fees paid by the Fund.
Interfund Transactions
During the six months ended February 28, 2005, 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 $23,400,000 and $22,300,000, respectively.
General
Certain of the Officers and Trustees of the Fund are Officers and Directors or Trustees of the above companies.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations (and in-kind contributions), for the six months ended February 28, 2005, were as follows:
7. CONCENTRATION OF CREDIT RISK
Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at February 28, 2005, 47.1% 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 12.2% of total investments.
8. LEGAL PROCEEDINGS
Beginning in October 2003, Federated Investors, Inc. and various subsidiaries thereof (including the advisers and distributor for various investment companies, collectively, “Federated”), along with various investment companies sponsored by Federated (“Funds”) were named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland seeking damages of unspecified amounts. 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 engaged in illegal and improper trading practices including market timing and late trading in concert with certain institutional traders, which allegedly caused financial injury to the mutual fund shareholders. Federated and various Funds have also been named as defendants in several additional lawsuits, the majority of which are now pending in the United States District Court for the Western District of Pennsylvania, alleging, among other things, excessive advisory and rule 12b-1 fees, and seeking damages of unspecified amounts. The Board of the Funds has retained the law firm of Dickstein Shapiro Morin & Oshinsky LLP to represent the Funds in these lawsuits. Federated and the Funds, and their respective counsel, are reviewing the allegations and will respond appropriately. Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these recent lawsuits and future potential similar suits is uncertain. Although we do not believe that these lawsuits will have a material adverse effect on the Funds, there can be no assurance that these suits, the ongoing adverse publicity and/or other developments resulting from the regulatory investigations will not result in increased Fund redemptions, reduced sales of Fund shares, or other adverse consequences for the Funds.
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
A description of the policies and procedures that the Fund uses to determine how to vote proxies 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 through Federated’s website. Go to FederatedInvestors.com, select “Products,” select the “Prospectuses and Regulatory Reports” link, then select the Fund to access the link to Form N-PX. This information is also available from the EDGAR database on the SEC’s website 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 website at http://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 website at FederatedInvestors.com by clicking on “Portfolio Holdings” and selecting the name of the Fund, or by selecting the name of the Fund and clicking on “Portfolio Holdings.” You must register on the website the first time you wish to access this information.
Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including 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 DELIVERY
In 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.
Federated Investors
World-Class Investment Manager
Federated Ohio Municipal Income Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
Cusip 313923609
2032305 (4/05)
Federated is a registered mark of Federated Investors, Inc.
2005 ©Federated Investors, Inc.
Federated
World-Class Investment Manager
Federated Pennsylvania Municipal Income Fund
A Portfolio of Federated Municipal Securities Income Trust
SEMI-ANNUAL SHAREHOLDER REPORT
February 28, 2005
Class A Shares
Class B Shares
FINANCIAL HIGHLIGHTS
SHAREHOLDER EXPENSE EXAMPLE
PORTFOLIO OF INVESTMENTS SUMMARY TABLES
FINANCIAL STATEMENTS
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
QUARTERLY PORTFOLIO SCHEDULE
Not FDIC Insured * May Lose Value * No Bank Guarantee
Federated Investors 50 Years of Growth & Innovation
Financial Highlights - Class A Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited) | | | Year Ended August 31,
|
|
| 2/28/2005
|
|
| 2004
|
|
| 2003
|
|
| 2002
|
|
| 2001
|
|
| 2000
|
|
Net Asset Value, Beginning of Period
| | $11.71 | | | $11.51 | | | $11.70 | | | $11.52 | | | $11.09 | | | $11.19 | |
Income From Investment Operations:
| | | | | | | | | | | | | | | | | | |
Net investment income
| | 0.27 | | | 0.54 | | | 0.54 | | | 0.56 | 1 | | 0.57 | | | 0.55 | |
Net realized and unrealized gain (loss) on investments, futures contracts, and swap contracts
|
| 0.04
|
|
| 0.19
|
|
| (0.19
| )
|
| 0.18
| 1
|
| 0.42
|
|
| (0.11
| )
|
TOTAL FROM INVESTMENT OPERATIONS
| 0.31
|
|
| 0.73
|
|
| 0.35
|
|
| 0.74
|
|
| 0.99
|
|
| 0.44
|
|
Less Distributions:
| | | | | | | | | | | | | | | | | | |
Distributions from net investment income
|
| (0.27
| )
|
| (0.53
| )
|
| (0.54
| )
|
| (0.56
| )
|
| (0.56
| )
|
| (0.54
| )
|
Net Asset Value, End of Period
|
| $11.75
|
|
| $11.71
|
|
| $11.51
|
|
| $11.70
|
|
| $11.52
|
|
| $11.09
|
|
Total Return 2
|
| 2.67
| %
|
| 6.46
| %
|
| 3.04
| %
|
| 6.70
| %
|
| 9.18
| %
|
| 4.17
| %
|
| | | | | | | | | | | | | | | | | | |
Ratios to Average Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
| 0.75
| % 3
|
| 0.75
| %
|
| 0.75
| %
|
| 0.75
| %
|
| 0.75
| %
|
| 0.75
| %
|
Net investment income
|
| 4.62
| % 3
|
| 4.63
| %
|
| 4.58
| %
|
| 4.92
| % 1
|
| 5.09
| %
|
| 5.10
| %
|
Expense waiver/reimbursement 4
|
| 0.11
| % 3
|
| 0.10
| %
|
| 0.09
| %
|
| 0.09
| %
|
| 0.10
| %
|
| 0.12
| %
|
Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
| $204,703
|
|
| $200,023
|
|
| $210,429
|
|
| $205,870
|
|
| $194,407
|
|
| $193,608
|
|
Portfolio turnover
|
| 4
| %
|
| 9
| %
|
| 17
| %
|
| 18
| %
|
| 16
| %
|
| 23
| %
|
1 Effective September 1, 2001, the Fund adopted the provisions of the American Institute of Certified Public Accountants (AICPA) Audit and Accounting Guide for Investment Companies and began accreting discount on debt securities. For the year ended August 31, 2002, this change had no effect on the net investment income per share or the net realized and unrealized gain (loss) on investments per share, or the ratio of net investment income to average net assets. Per share, ratios, and supplemental data for the periods prior to September 1, 2001 have not been restated to reflect this change in presentation.
2 Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable.
3 Computed on an annualized basis.
4 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
Financial Highlights - Class B Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited) | | | Year Ended August 31,
|
|
| 2/28/2005
|
|
| 2004
|
|
| 2003
|
|
| 2002
|
|
| 2001
|
|
| 2000
|
|
Net Asset Value, Beginning of Period
| | $11.71 | | | 11.51 | | | $11.70 | | | $11.53 | | | $11.09 | | | $11.20 | |
Income From Investment Operations:
| | | | | | | | | | | | | | | | | | |
Net investment income
| | 0.23 | | | 0.45 | | | 0.45 | | | 0.47 | 1 | | 0.48 | | | 0.47 | |
Net realized and unrealized gain (loss) on investments, futures contracts, and swap contracts
|
| 0.04
|
|
| 0.19
|
|
| (0.19
| )
|
| 0.18
| 1
|
| 0.43
|
|
| (0.12
| )
|
TOTAL FROM INVESTMENT OPERATIONS
|
| 0.27
|
|
| 0.64
|
|
| 0.26
|
|
| 0.65
|
|
| 0.91
|
|
| 0.35
|
|
Less Distributions:
| | | | | | | | | | | | | | | | | | |
Distributions from net investment income
|
| (0.23
| )
|
| (0.44
| )
|
| (0.45
| )
|
| (0.48
| )
|
| (0.47
| )
|
| (0.46
| )
|
Net Asset Value, End of Period
|
| $11.75
|
|
| $11.71
|
|
| $11.51
|
|
| $11.70
|
|
| $11.53
|
|
| $11.09
|
|
Total Return 2
|
| 2.28
| %
|
| 5.65
| %
|
| 2.26
| %
|
| 5.79
| %
|
| 8.42
| %
|
| 3.29
| %
|
| | | | | | | | | | | | | | | | | | |
Ratios to Average Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
| 1.52
| % 3
|
| 1.52
| %
|
| 1.52
| %
|
| 1.52
| %
|
| 1.52
| %
|
| 1.52
| %
|
Net investment income
|
| 3.85
| % 3
|
| 3.85
| %
|
| 3.81
| %
|
| 4.15
| % 1
|
| 4.32
| %
|
| 4.34
| %
|
Expense waiver/reimbursement 4
|
| 0.09
| % 3
|
| 0.08
| %
|
| 0.07
| %
|
| 0.07
| %
|
| 0.08
| %
|
| 0.10
| %
|
Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
| $64,601
|
|
| $65,748
|
|
| $70,339
|
|
| $61,535
|
|
| $51,468
|
|
| $43,249
|
|
Portfolio turnover
|
| 4
| %
|
| 9
| %
|
| 17
| %
|
| 18
| %
|
| 16
| %
|
| 23
| %
|
1 Effective September 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount on debt securities. For the year ended August 31, 2002, this change had no effect on the net investment income per share, the net realized and unrealized gain (loss) on investments per share, or the ratio of the net investment income to average net assets. Per share, ratios, and supplemental data for the periods prior to September 1, 2001 have not been restated to reflect this change in presentation.
2 Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable.
3 Computed on an annualized basis.
4 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
Shareholder Expense Example
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; 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, 2004 to February 28, 2005.
ACTUAL EXPENSES
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 provided to enable you to compare the ongoing costs of investing in the Fund and 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.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase or redemption payments. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
|
| Beginning
Account Value
9/1/2004
|
| Ending
Account Value
2/28/2005
|
| Expenses Paid
During Period 1
|
Actual:
|
|
|
|
|
|
|
Class A Shares
|
| $1,000
|
| $1,026.70
|
| $3.77
|
Class B Shares
|
| $1,000
|
| $1,022.80
|
| $7.62
|
Hypothetical (assuming a 5% return before expenses):
|
|
|
|
|
|
|
Class A Shares
|
| $1,000
|
| $1,021.08
|
| $3.76
|
Class B Shares
|
| $1,000
|
| $1,017.26
|
| $7.60
|
1 Expenses are equal to the Fund's annualized expense ratios, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). The annualized expense ratios are as follows:
Class A Shares
|
| 0.75%
|
Class B Shares
|
| 1.52%
|
Portfolio of Investments Summary Tables
At February 28, 2005, the Fund's credit-quality ratings composition 1 was as follows:
S&P Long-Term Ratings as
Percentage of Total Investments 2
| | Moody's Long-Term Ratings as
Percentage of Total Investments 2
|
AAA
|
| 34.6%
| | Aaa
|
| 36.9%
|
AA
|
| 13.2%
| | Aa
|
| 7.4%
|
A
|
| 8.5%
| | A
|
| 2.8%
|
BBB
|
| 18.9%
| | Baa
|
| 9.1%
|
BB
|
| 1.6%
| | Ba
|
| 0.0%
|
B
|
| 1.1%
| | B
|
| 1.4%
|
Not Rated by S&P
|
| 22.1%
| | Not Rated by Moody's
|
| 42.4%
|
TOTAL
|
| 100.0%
| | TOTAL
|
| 100.0%
|
1 These tables depict the long-term, credit-quality ratings assigned to the Fund's portfolio holdings by Standard & Poor's (S&P) and Moody's Investors Service (Moody's), each of which is a nationally recognized statistical rating organization (NRSRO). These credit-quality ratings are shown without regard to gradations within a given rating category. For example, securities rated "A-" have been included in the "A" rated category. Holdings that are rated only by a different NRSRO than the one identified have been included in the "Not rated by..." category. Rated securities that have been prerefunded, but not rated again by the NRSRO, also have been included in the "Not rated by..." category. Rated securities include a security with an obligor and/or credit enhancer that has received a rating from an NRSRO with respect to a class of debt obligations that is comparable in priority and security with the security held by the Fund. Credit-quality ratings are an assessment of the risk that a security will default in payment and do not address other risks presented by the security. Please see the descriptions of credit-quality ratings in the Fund's Statement of Additional Information.
These tables depict the long-term, credit-quality ratings as assigned only by the NRSRO identified in each table. Of the portfolio's total investments,12.0% do not have long-term ratings by either of these NRSROs.
2 Percentages are based on total investments, which may differ from the Fund's total net assets used in computing the percentages in the Portfolio of Investments which follows.
Portfolio of Investments
February 28, 2005 (unaudited)
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | MUNICIPAL BONDS--99.6% | | | | | | |
| | | Pennsylvania--97.7% | | | | | | |
| $ | 1,300,000 | | Allegheny County Redevelopment Authority, Revenue Bonds, 5.60% (Pittsburgh Mills), 7/1/2023
| | NR | | $ | 1,368,419 | |
| 1,500,000 | | Allegheny County Redevelopment Authority, Tax Increment Bonds (Series 2000A), 6.30% (Waterfront Project), 12/15/2018
| | NR/NR/A- | | | 1,671,045 | |
| 4,250,000 | | Allegheny County, PA Airport Authority, Airport Revenue Refunding Bonds (Series 1999), 6.125% (Pittsburgh International Airport)/(FGIC INS), 1/1/2017
| | AAA/Aaa | | | 4,729,357 | |
| 2,500,000 | | Allegheny County, PA HDA, Health System Revenue Bonds (Series 2000B), 9.25% (West Penn Allegheny Health System)/(Original Issue Yield: 9.70%), 11/15/2030
| | B/B1 | | | 2,895,750 | |
| 2,000,000 | | Allegheny County, PA HDA, Refunding Revenue Bonds (Series 1998A), 5.125% (South Hills Health System)/(Original Issue Yield: 5.34%), 5/1/2023
| | NR/Baa1 | | | 1,890,620 | |
| 950,000 | | Allegheny County, PA HDA, Refunding Revenue Bonds, 6.625% (Allegheny General Hospital)/(Escrowed In U.S. Treasuries COL), 7/1/2009
| | AAA/Aaa | | | 1,027,577 | |
| 2,000,000 | | Allegheny County, PA HDA, Revenue Bonds, 5.50% (Catholic Health East)/(Original Issue Yield: 5.60%), 11/15/2032
| | A/A2 | | | 2,060,100 | |
| 1,500,000 | | Allegheny County, PA HDA, Revenue Bonds, 5.375% (Ohio Valley General Hospital, PA)/(Original Issue Yield: 5.50%), 1/1/2018
| | NR/Baa1 | | | 1,505,265 | |
| 4,000,000 | | Allegheny County, PA HDA, Revenue Bonds, (Series 1997A), 5.60% (UPMC Health System)/(MBIA Insurance Corp. INS)/ (Original Issue Yield: 5.85%), 4/1/2017
| | AAA/Aaa | | | 4,277,600 | |
| 1,000,000 | | Allegheny County, PA Higher Education Building Authority, Revenue Bonds (Series 2002A), 5.95% (Chatham College)/ (Original Issue Yield: 5.97%), 3/1/2032
| | BBB/NR | | | 1,034,920 | |
| 1,000,000 | | Allegheny County, PA Higher Education Building Authority, Revenue Bonds (Series 2002B), 5.25% (Chatham College)/ (Original Issue Yield: 5.35%), 11/15/2016
| | BBB/NR | | | 1,023,770 | |
| 575,000 | 1 | Allegheny County, PA IDA, Cargo Facilities Lease Revenue Bonds (Series 1999), 6.00% (AFCO Cargo PIT LLC Project), 9/1/2009
| | NR | | | 561,183 | |
| 1,000,000 | 1 | Allegheny County, PA IDA, Cargo Facilities Lease Revenue Bonds (Series 1999), 6.625% (AFCO Cargo PIT LLC Project)/(Original Issue Yield: 6.75%), 9/1/2024
| | NR | | | 947,820 | |
| 3,185,000 | | Allegheny County, PA IDA, Environmental Improvement Refunding Revenue Bonds (Series 1998), 5.50% (Marathon Oil Corp.), 12/1/2029
| | BBB+/Baa1 | | | 3,292,812 | |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | MUNICIPAL BONDS--continued | | | | | | |
| | | Pennsylvania--continued | | | | | | |
| $ | 1,250,000 | | Allegheny County, PA IDA, Environmental Improvement Refunding Revenue Bonds (Series 1998), 5.60% (Marathon Oil Corp.), 9/1/2030
| | BBB+/Baa1 | | $ | 1,303,075 | |
| 1,500,000 | | Allegheny County, PA IDA, Health Care Facilities Revenue Refunding Bonds (Series 1998), 5.75% (Presbyterian SeniorCare-Westminister Place Project), 1/1/2023
| | NR | | | 1,345,605 | |
| 935,000 | | Allegheny County, PA IDA, Lease Revenue Bonds (Series 2001), 6.60% (Residential Resources Inc. Project)/ (Original Issue Yield: 6.75%), 9/1/2031
| | NR/NR/BBB- | | | 983,844 | |
| 3,000,000 | | Allegheny County, PA Port Authority, Special Revenue Transportation Bonds (Series 1999), 6.00% (MBIA Insurance Corp. INS)/(Original Issue Yield: 6.05%), 3/1/2019
| | AAA/Aaa | | | 3,376,860 | |
| 515,000 | | Allegheny County, PA Residential Finance Agency, SFM Revenue Bonds (Series 2001KK-1), 5.375% (GNMA GTD), 5/1/2022
| | NR/Aaa | | | 539,488 | |
| 515,000 | | Allegheny County, PA Residential Finance Agency, SFM Revenue Bonds (Series FF-1), 5.90% (GNMA COL), 5/1/2020
| | NR/Aaa | | | 548,187 | |
| 1,835,000 | | Allentown, PA Area Hospital Authority, Revenue Bonds (Series B), 6.75% (Sacred Heart Hospital of Allentown), 11/15/2015
| | BB+/Baa3 | | | 1,927,117 | |
| 2,000,000 | | Bethlehem, PA Area Vocational-Technical School Authority, Guaranteed Lease Revenue Bonds (Series 1999), 5.50% (Bethlehem Area Vocational-Technical School)/ (U.S. Treasury PRF)/(Original Issue Yield: 5.55%), 9/1/2020
| | NR/Aaa | | | 2,213,360 | |
| 4,250,000 | | Bradford County, PA IDA, Solid Waste Disposal Refunding Revenue Bonds (Series 2005A), 4.70% (International Paper Co.), 3/1/2019
| | BBB/Baa2 | | | 4,224,117 | |
| 4,250,000 | | Bradford County, PA IDA, Solid Waste Disposal Revenue Bonds (Series A), 6.60% (International Paper Co.), 3/1/2019
| | BBB/Baa2 | | | 4,345,965 | |
| 1,000,000 | | Bucks County, PA Community College Authority, College Building Revenue Bonds (Series 1996), 5.50% (Original Issue Yield: 5.70%), 6/15/2017
| | NR/Aa2 | | | 1,055,410 | |
| 750,000 | | Bucks County, PA IDA, Revenue Bonds (Series 2002A), 6.00% (Pennswood Village)/(Original Issue Yield: 6.12%), 10/1/2027
| | BBB+/NR | | | 791,797 | |
| 500,000 | | Bucks County, PA IDA, Revenue Bonds (Series 2002A), 6.00% (Pennswood Village)/(Original Issue Yield: 6.16%), 10/1/2034
| | BBB+/NR | | | 525,675 | |
| 1,000,000 | | Bucks County, PA IDA, Solid Waste Revenue Bonds, 4.90% TOBs (Waste Management, Inc.), Mandatory Tender 2/1/2008
| | BBB/NR | | | 1,029,760 | |
| 1,750,000 | | Carbon County, PA IDA, Refunding Revenue Bonds, 6.65% (Panther Creek Partners Project)/(BNP Paribas SA and Union Bank of California LOCs), 5/1/2010
| | BBB-/NR | | | 1,894,812 | |
| 1,100,000 | | Chester County, PA HEFA, Mortgage Refunding Revenue Bonds, 5.50% (Tel Hai Obligated Group Project)/(Original Issue Yield: 5.60%), 6/1/2025
| | BBB-/NR | | | 1,064,679 | |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | MUNICIPAL BONDS--continued | | | | | | |
| | | Pennsylvania--continued | | | | | | |
| $ | 1,500,000 | | Clarion County, PA Hospital Authority, Revenue Refunding Bonds, (Series 1997), 5.75% (Clarion County Hospital)/ (Original Issue Yield: 5.95%), 7/1/2017
| | BBB-/NR | | $ | 1,464,300 | |
| 1,575,000 | | Commonwealth of Pennsylvania, GO UT Bonds, 6.00% (Original Issue Yield: 6.15%), 7/1/2007
| | AA/Aa2 | | | 1,693,030 | |
| 1,000,000 | | Crawford County, PA Hospital Authority, Senior Living Facilities Revenue Bonds (Series 1999), 6.125% (Wesbury United Methodist Community Obligated Group)/(Original Issue Yield: 6.32%), 8/15/2019
| | NR/NR/BBB- | | | 1,034,710 | |
| 1,250,000 | | Cumberland County, PA Municipal Authority, College Revenue Bonds (Series A), 5.50% (Dickinson College)/ (AMBAC INS)/(Original Issue Yield: 5.70%), 11/1/2025
| | NR/Aaa | | | 1,364,825 | |
| 1,000,000 | | Cumberland County, PA Municipal Authority, Retirement Community Revenue Bonds (Series 2002A), 7.125% (Wesley Affiliated Services, Inc. Obligated Group)/(Original Issue Yield: 7.40%), 1/1/2025
| | NR | | | 1,045,510 | |
| 2,800,000 | | Delaware County, PA Authority, College Revenue Bonds (Series 1999), 5.75% (Cabrini College)/(Radian Asset Assurance INS)/(Original Issue Yield: 5.95%), 7/1/2019
| | AA/NR | | | 3,006,640 | |
| 2,650,000 | | Delaware County, PA Authority, College Revenue Refunding Bonds (Series 1998A), 5.375% (Neumann College)/(Original Issue Yield: 5.48%), 10/1/2018
| | BBB-/NR | | | 2,718,052 | |
| 1,000,000 | | Delaware River Joint Toll Bridge Commission, Pennsylvania-New Jersey Bridge System Revenue Bonds (Series 2003), 5.25%, 7/1/2020
| | A-/A2 | | | 1,081,970 | |
| 1,500,000 | | Delaware River Port Authority, Revenue Bonds (Series 1999), 6.00% (FSA INS), 1/1/2019
| | AAA/Aaa | | | 1,681,560 | |
| 2,000,000 | | Delaware River Port Authority, Revenue Bonds, 6.00% (FSA INS), 1/1/2018
| | AAA/Aaa | | | 2,242,080 | |
| 10,000,000 | | Delaware Valley, PA Regional Finance Authority, Local Government Revenue Bonds (Series 1997B), 5.60% (AMBAC INS), 7/1/2017
| | AAA/Aaa | | | 11,414,800 | |
| 1,000,000 | 1 | Delaware Valley, PA Regional Finance Authority, Residual Interest Tax-Exempt Securities (PA-1029), 9.80466%, 7/1/2017
| | NR | | | 1,301,280 | |
| 4,100,000 | | Erie County, PA Hospital Authority, Health Facilities Revenue Bonds (Series 1999), 5.90% (St. Mary's Home of Erie)/(Radian Asset Assurance INS)/(Original Issue Yield: 6.05%), 8/15/2019
| | AA/NR | | | 4,454,404 | |
| 570,000 | | Erie, PA Higher Education Building Authority, College Revenue Refunding Bonds (Series 2004B), 5.00% (Mercyhurst College)/(Original Issue Yield: 5.11%), 3/15/2023
| | BBB/NR | | | 572,867 | |
| 2,660,000 | | Greater Nanticoke, PA Area School District, UT GO Bonds, 5.50% (U.S. Treasury PRF)/(Original Issue Yield: 5.62%), 10/15/2005 (@100)
| | AAA/Aaa | | | 2,713,865 | |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | MUNICIPAL BONDS--continued | | | | | | |
| | | Pennsylvania--continued | | | | | | |
| $ | 2,000,000 | | Indiana County, PA IDA, Refunding Revenue Bonds, 5.00% (Indiana University of PA)/(AMBAC INS), 11/1/2029
| | AAA/Aaa | | $ | 2,088,000 | |
| 800,000 | | Jeannette Health Services Authority, PA, Hospital Revenue Bonds (Series A of 1996), 6.00% (Jeannette District Memorial Hospital)/(Original Issue Yield: 6.15%), 11/1/2018
| | BB-/NR | | | 770,544 | |
| 1,000,000 | | Lancaster County, PA Hospital Authority, Health Center Revenue Bonds (Series 2001), 5.875% (Willow Valley Retirement Communities)/(Original Issue Yield: 5.95%), 6/1/2031
| | A-/NR | | | 1,050,210 | |
| 1,000,000 | | Lancaster County, PA Hospital Authority, Revenue Bonds, 5.50% (Lancaster General Hospital)/(Original Issue Yield: 5.63%), 3/15/2026
| | A/NR | | | 1,052,370 | |
| 2,000,000 | | Lancaster County, PA, UT GO Bonds, (Series A), 5.80% (FGIC INS)/(Original Issue Yield: 5.84%), 5/1/2015
| | NR/Aaa | | | 2,258,500 | |
| 250,000 | | Lancaster, PA IDA, Revenue Bonds (Series 2000A), 7.60% (Garden Spot Villiage Project)/(Original Issue Yield: 7.70%), 5/1/2022
| | NR | | | 264,067 | |
| 1,000,000 | | Lawrence County, PA IDA, Senior Health and Housing Facilities Revenue Bonds, 7.50% (Shenango Presbyterian SeniorCare Obligated Group)/(Original Issue Yield: 7.75%), 11/15/2031
| | NR | | | 1,006,360 | |
| 1,000,000 | | Lebanon County, PA Health Facilities Authority, Hospital Revenue Bonds, 5.80% (Good Samaritan Hospital)/(Original Issue Yield: 5.92%), 11/15/2022
| | BBB+/Baa1 | | | 1,055,790 | |
| 2,000,000 | | Lehigh County, PA General Purpose Authority, Hospital Revenue Bonds, 5.25% (St. Lukes Hospital of Bethlehem)/ (Original Issue Yield: 5.42%), 8/15/2023
| | BBB/Baa2 | | | 2,046,460 | |
| 1,000,000 | | Lehigh-Northampton Airport Authority, Revenue Bonds, 6.00% (Lehigh Valley Airport System)/(MBIA Insurance Corp. INS)/(Original Issue Yield: 6.02%), 5/15/2025
| | NR/Aaa | | | 1,105,840 | |
| 1,000,000 | | Luzerne County, PA, UT GO Bonds, 5.625% (FGIC INS)/ (Original Issue Yield: 5.78%), 12/15/2021
| | AAA/Aaa | | | 1,079,910 | |
| 945,000 | | Lycoming County PA Authority, Hospital Lease Revenue Bonds (Series B), 6.50% (Divine Providence Hospital, PA)/(Original Issue Yield: 6.70%), 7/1/2022
| | NR | | | 947,929 | |
| 1,000,000 | | Lycoming County PA Authority, Hospital Revenue Bonds, 5.50% (Divine Providence Hospital, PA)/(AMBAC INS)/ (Original Issue Yield: 5.90%), 11/15/2022
| | AAA/NR | | | 1,037,060 | |
| 1,000,000 | | Monroe County, PA Hospital Authority, Hospital Revenue Bonds (Series 2002A), 5.50% (Pocono Medical Center)/ (Radian Asset Assurance INS)/(Original Issue Yield: 5.60%), 1/1/2022
| | AA/NR | | | 1,067,970 | |
| 2,360,000 | | Monroe County, PA Hospital Authority, Hospital Revenue Bonds, 5.125% (Pocono Medical Center)/(U.S. Treasury PRF)/ (Original Issue Yield: 5.40%), 7/1/2015
| | AAA/Aaa | | | 2,534,192 | |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | MUNICIPAL BONDS--continued | | | | | | |
| | | Pennsylvania--continued | | | | | | |
| $ | 1,000,000 | | Monroe County, PA Hospital Authority, Revenue Bonds, 6.00% (Pocono Medical Center)/(Original Issue Yield: 6.17%), 1/1/2043
| | BBB+/NR | | $ | 1,057,140 | |
| 1,250,000 | | Montgomery County, PA Higher Education & Health Authority Hospital, Revenue Bonds, 7.25% (Philadelphia Geriatric Center)/(Original Issue Yield: 7.472%), 12/1/2024
| | NR | | | 1,330,625 | |
| 1,000,000 | | Montgomery County, PA IDA, Fixed Rate Mortgage Revenue Bonds (Series 2005), 6.25% (Whitemarsh Continuing Care Retirement Community)/(Original Issue Yield: 6.375%), 2/1/2035
| | NR | | | 1,017,690 | |
| 2,250,000 | | Montgomery County, PA IDA, Retirement Community Revenue Bonds (Series 1996B), 5.75% (Adult Communities Total Services, Inc.)/(Original Issue Yield: 5.98%), 11/15/2017
| | BBB+/NR | | | 2,363,265 | |
| 1,000,000 | | Montgomery County, PA IDA, Retirement Community Revenue Refunding Bonds (Series 1996A), 5.875% (Adult Communities Total Services, Inc.)/(Original Issue Yield: 6.125%), 11/15/2022
| | BBB+/NR | | | 1,040,130 | |
| 1,000,000 | | Mount Lebanon, PA Hospital Authority, Revenue Bonds (Series 2002A), 5.625% (St. Clair Memorial Hospital)/ (Original Issue Yield: 5.75%), 7/1/2032
| | A-/NR | | | 1,040,430 | |
| 500,000 | | Mt. Pleasant Borough, PA Business District Authority, Hospital Revenue Bonds (Series 1997), 5.75% (Frick Hospital)/(Original Issue Yield: 5.85%), 12/1/2017
| | BBB/NR | | | 514,085 | |
| 2,300,000 | | Mt. Pleasant Borough, PA Business District Authority, Hospital Revenue Bonds (Series 1997), 5.75% (Frick Hospital)/(Original Issue Yield: 5.90%), 12/1/2027
| | BBB/NR | | | 2,315,640 | |
| 1,000,000 | | North Hills, PA School District, GO Bonds, (Series 2000), 5.50% (FGIC INS)/(Original Issue Yield: 5.576%), 7/15/2024
| | AAA/Aaa | | | 1,119,110 | |
| 1,075,000 | | North Penn, PA School District, Refunding Revenue Bonds, 6.20% (Escrowed In Treasuries COL), 3/1/2007
| | NR/Aaa | | | 1,120,333 | |
| 1,000,000 | | Northumberland County PA IDA, Facilities Revenue Bonds (Series 2002B), 5.50% (NHS Youth Service, Inc.)/(American Capital Access INS)/(Original Issue Yield: 5.80%), 2/15/2033
| | A/NR | | | 1,042,030 | |
| 3,000,000 | | Norwin, PA School District, UT GO Bonds, 6.00% (FGIC INS)/ (Original Issue Yield: 6.12%), 4/1/2024
| | AAA/Aaa | | | 3,412,080 | |
| 1,000,000 | | Pennsylvania Convention Center Authority, Revenue Bonds, 6.70% (Escrowed In Treasuries COL)/(Original Issue Yield: 6.843%), 9/1/2016
| | AAA/Aaa | | | 1,220,970 | |
| 1,000,000 | | Pennsylvania EDFA, Exempt Facilities Revenue Bonds (Series 1997B), 6.125% (National Gypsum Co.), 11/1/2027
| | NR | | | 1,048,890 | |
| 1,000,000 | | Pennsylvania EDFA, Exempt Facilities Revenue Bonds (Series 2003A), 6.75% (Reliant Energy, Inc.), 12/1/2036
| | NR/B1 | | | 1,069,970 | |
| 2,500,000 | | Pennsylvania EDFA, Resource Recovery Revenue Bonds (Series A), 6.40% (Northampton Generating), 1/1/2009
| | BBB-/NR | | | 2,528,650 | |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | MUNICIPAL BONDS--continued | | | | | | |
| | | Pennsylvania--continued | | | | | | |
| $ | 2,000,000 | | Pennsylvania EDFA, Revenue Bonds (Series 1998A), 5.25% (Northwestern Human Services, Inc.)/(Original Issue Yield: 5.668%), 6/1/2028
| | BB+/NR | | $ | 1,644,180 | |
| 1,000,000 | | Pennsylvania EDFA, Revenue Bonds (Series 2000), 5.90% (Dr. Gertrude A. Barber Center, Inc.)/(Radian Asset Assurance INS), 12/1/2030
| | AA/NR | | | 1,088,910 | |
| 1,000,000 | | Pennsylvania EDFA, Solid Waste Disposal Revenue Bonds (Series 2004A), 4.70% TOBs (Waste Management, Inc.), Mandatory Tender 11/1/2014
| | BBB/NR | | | 1,004,190 | |
| 1,000,000 | | Pennsylvania HFA, SFM Revenue Bonds (Series 2001-72A), 5.25%, 4/1/2021
| | AA+/Aa2 | | | 1,039,930 | |
| 745,000 | | Pennsylvania HFA, SFM Revenue Bonds, (Series 62A), 5.50%, 10/1/2022
| | AA+/Aa2 | | | 776,432 | |
| 845,000 | | Pennsylvania HFA, SFM Revenue Bonds (Series 67A), 5.85%, 10/1/2018
| | AA+/Aa2 | | | 860,886 | |
| 2,590,000 | | Pennsylvania State Higher Education Assistance Agency, Capital Acquisition Revenue Bonds, 6.125% (MBIA Insurance Corp. INS), 12/15/2019
| | AAA/Aaa | | | 2,995,076 | |
| 2,000,000 | | Pennsylvania State Higher Education Facilities Authority, College and University Revenue Bonds, 5.625% (University of the Arts)/(Radian Asset Assurance INS)/(Original Issue Yield: 5.78%), 3/15/2025
| | AA/NR | | | 2,146,220 | |
| 1,000,000 | | Pennsylvania State Higher Education Facilities Authority, Refunding Revenue Bonds, 5.25% (St. Joseph's University)/(Radian Asset Assurance INS), 12/15/2017
| | AA/NR | | | 1,080,130 | |
| 1,940,000 | | Pennsylvania State Higher Education Facilities Authority, Refunding Revenue Bonds, 5.50% (St. Joseph's University)/(Radian Asset Assurance INS), 12/15/2015
| | AA/NR | | | 2,138,016 | |
| 2,000,000 | | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds (Series 1996), 7.20% (Thiel College)/ (U.S. Treasury PRF), 5/15/2026
| | NR | | | 2,146,280 | |
| 1,500,000 | | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds (Series 2001A), 6.00% (UPMC Health System)/(Original Issue Yield: 6.10%), 1/15/2022
| | A+/NR | | | 1,671,390 | |
| 1,330,000 | | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds (Series 2003A), 5.25% (Clarion University Foundation, Inc.)/(XL Capital Assurance Inc. INS), 7/1/2018
| | AAA/Aaa | | | 1,440,483 | |
| 1,490,000 | | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds (Series 2003AA1), 5.25% (Dickinson College)/(Radian Asset Assurance INS), 11/1/2018
| | AA/NR | | | 1,598,189 | |
| 1,350,000 | | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds (Series 2004A), 5.25% (Philadelphia University)/(Original Issue Yield: 5.32%), 6/1/2032
| | BBB/Baa2 | | | 1,342,912 | |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | MUNICIPAL BONDS--continued | | | | | | |
| | | Pennsylvania--continued | | | | | | |
| $ | 1,160,000 | | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds (Series AA2), 5.25% (Lycoming College)/(Radian Asset Assurance INS), 11/1/2024
| | AA/NR | | $ | 1,226,967 | |
| 2,000,000 | | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds (Series N), 5.875% (MBIA Insurance Corp. INS)/(Original Issue Yield: 5.913%), 6/15/2021
| | AAA/Aaa | | | 2,086,480 | |
| 750,000 | | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds, 5.00% (Widener University), 7/15/2039
| | BBB+/NR | | | 759,233 | |
| 1,000,000 | | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds, 5.25% (Widener University)/(Original Issue Yield: 5.42%), 7/15/2024
| | BBB+/NR | | | 1,040,850 | |
| 3,150,000 | | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds, 4.65% (Philadelphia College of Osteopathic Medicine)/(Original Issue Yield: 4.77%), 12/1/2028
| | A/NR | | | 3,151,197 | |
| 450,000 | | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds, 5.25% (Lycoming College)/(Radian Asset Assurance INS), 11/1/2027
| | AA/Aa3 | | | 476,208 | |
| 2,000,000 | | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds, 5.25% (St. Joseph's University)/(Radian Asset Assurance INS), 12/15/2018
| | AA/NR | | | 2,154,420 | |
| 1,250,000 | | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds, 5.25% (Ursinus College)/(Radian Asset Assurance INS), 1/1/2027
| | AA/NR | | | 1,321,650 | |
| 2,495,000 | | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds, 6.25% (Philadelphia University)/(Radian Asset Assurance INS), 6/1/2024
| | AA/NR | | | 2,809,021 | |
| 1,500,000 | | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds, (Series A), 6.00% (UPMC Health System)/(Original Issue Yield: 6.16%), 1/15/2031
| | A+/NR | | | 1,646,625 | |
| 1,500,000 | | Pennsylvania State Higher Education Facilities Authority, Student Housing Revenue Bonds (Series 2003A), 5.00% (California University of Pennsylvania)/(American Capital Access INS)/(Original Issue Yield: 5.08%), 7/1/2023
| | A/NR | | | 1,520,025 | |
| 1,500,000 | | Pennsylvania State Higher Education Facilities Authority, University Revenue Bonds (Series 1997), 5.45% (University of the Arts)/(Radian Asset Assurance INS)/(Original Issue Yield: 5.58%), 3/15/2017
| | AA/NR | | | 1,537,500 | |
| 1,500,000 | | Pennsylvania State IDA, Economic Development Revenue Bonds (Series 2002), 5.50% (AMBAC INS), 7/1/2020
| | AAA/Aaa | | | 1,681,530 | |
| 3,000,000 | | Pennsylvania State IDA, Economic Development Revenue Bonds, 5.50% (AMBAC INS), 7/1/2013
| | AAA/Aaa | | | 3,396,120 | |
| 650,000 | | Pennsylvania State Public School Building Authority, Revenue Bonds, 5.00% (Lehigh Career & Technical Institute)/(FGIC INS), 10/1/2022
| | NR/Aaa | | | 689,273 | |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | MUNICIPAL BONDS--continued | | | | | | |
| | | Pennsylvania--continued | | | | | | |
| $ | 1,500,000 | | Pennsylvania State University, Revenue Bonds, 5.00%, 9/1/2029
| | AA/Aa2 | | $ | 1,570,560 | |
| 2,120,000 | | Philadelphia, PA Authority for Industrial Development, Lease Revenue Bonds (Series 2001B), 5.50% (FSA INS), 10/1/2021
| | AAA/Aaa | | | 2,358,246 | |
| 3,000,000 | | Philadelphia, PA Authority for Industrial Development, Revenue Bonds (Series 2001B), 5.25% (Philadelphia Corporation for Aging Project)/(AMBAC INS)/(Original Issue Yield: 5.43%), 7/1/2023
| | AAA/Aaa | | | 3,205,290 | |
| 1,655,000 | | Philadelphia, PA Hospitals & Higher Education Facilities Authority, Hospital Revenue Bonds (Series 1997), 5.75% (Jeanes Hospital, PA)/(Original Issue Yield: 5.80%), 7/1/2008
| | BBB/Baa2 | | | 1,725,966 | |
| 1,100,000 | | Philadelphia, PA Redevelopment Authority, Multifamily Housing Refunding Revenue Bonds (Series 1998), 5.45% (Woodstock Mutual Homes, Inc.)/(FHA INS)/(Original Issue Yield: 5.468%), 2/1/2023
| | NR/Aa2 | | | 1,132,791 | |
| 2,000,000 | | Philadelphia, PA Redevelopment Authority, Revenue Bonds (Series 2002A), 5.50% (FGIC INS), 4/15/2018
| | AAA/Aaa | | | 2,232,360 | |
| 950,000 | | Philadelphia, PA Redevelopment Authority, Revenue Bonds (Series 2002A), 5.50% (FGIC INS), 4/15/2019
| | AAA/Aaa | | | 1,060,371 | |
| 1,250,000 | | Philadelphia, PA Redevelopment Authority, Revenue Bonds (Series 2003A), 5.50% (Beech Student Housing Complex)/ (American Capital Access INS), 7/1/2019
| | A/NR | | | 1,336,525 | |
| 1,000,000 | | Philadelphia, PA Redevelopment Authority, Revenue Bonds (Series 2003A), 5.625% (Beech Student Housing Complex)/ (American Capital Access INS), 7/1/2023
| | A/NR | | | 1,063,780 | |
| 1,000,000 | | Philadelphia, PA School District, UT GO Bonds (Series 2002B), 5.625% (FGIC INS), 8/1/2022
| | AAA/Aaa | | | 1,101,780 | |
| 9,500,000 | | Philadelphia, PA, Airport Revenue Bonds (Series 1997B), 5.50% (Philadelphia Airport System)/(AMBAC INS)/ (Original Issue Yield: 5.65%), 6/15/2017
| | AAA/Aaa | | | 10,052,805 | |
| 480,000 | | Philadelphia, PA, Revenue Bonds, 10.875% (U.S. Treasury PRF), 7/1/2008
| | NR/Aaa | | | 493,958 | |
| 2,880,000 | | Pittsburgh, PA Public Parking Authority, Parking Revenue Bonds (Series 2000), 6.00% (AMBAC INS)/(Original Issue Yield: 6.02%), 12/1/2020
| | AAA/Aaa | | | 3,246,480 | |
| 765,000 | | Pittsburgh, PA Urban Redevelopment Authority, Mortgage Revenue Bonds (Series 1997A), 6.15%, 10/1/2016
| | AAA/Aa1 | | | 801,804 | |
| 355,000 | | Pittsburgh, PA Urban Redevelopment Authority, Mortgage Revenue Bonds (Series 1997C), 5.35%, 10/1/2009
| | AAA/Aa1 | | | 372,452 | |
| 1,075,000 | | Pittsburgh, PA Urban Redevelopment Authority, Mortgage Revenue Bonds (Series 1997C), 5.90%, 10/1/2022
| | AAA/Aa1 | | | 1,123,988 | |
| 2,855,000 | | Pittsburgh, PA, LT GO Bonds (Series 1999A), 5.75% (FGIC INS)/(Original Issue Yield: 5.852%), 9/1/2019
| | AAA/Aaa | | | 3,145,154 | |
Principal
Amount
| ��
|
|
| Credit
Rating
|
|
| Value
|
|
| | | MUNICIPAL BONDS--continued | | | | | | |
| | | Pennsylvania--continued | | | | | | |
| $ | 5,000,000 | 1 | Pittsburgh, PA, Residual Interest Tax-Exempt Securities (Series PA 961), 9.30466% (AMBAC INS), 9/1/2015
| | NR | | $ | 5,945,300 | |
| 1,500,000 | | Pittsburgh, PA, UT GO Bonds (Series 1999A), 5.75% (FGIC INS)/(Original Issue Yield: 5.94%), 9/1/2024
| | AAA/Aaa | | | 1,652,445 | |
| 2,950,000 | | Pottsville, PA Hospital Authority, Hospital Revenue Bonds, 5.625% (Pottsville Hospital and Warne Clinic)/(Original Issue Yield: 5.75%), 7/1/2024
| | BBB-/NR | | | 2,809,875 | |
| 2,165,000 | | Radnor Township, PA, UT GO Bonds (Series 2004AA), 5.125%, 7/15/2027
| | NR/Aa1 | | | 2,298,148 | |
| 2,040,000 | | Riverside, PA School District, UT GO Bonds, 5.50% (FGIC INS)/(Original Issue Yield: 5.57%), 10/15/2020
| | AAA/Aaa | | | 2,286,840 | |
| 1,500,000 | | Sayre, PA, Health Care Facilities Authority, Revenue Bonds (Series 2002A), 5.75% (Guthrie Healthcare System, PA)/ (Original Issue Yield: 5.90%), 12/1/2021
| | A-/NR | | | 1,609,680 | |
| 1,000,000 | | Sayre, PA, Health Care Facilities Authority, Revenue Bonds (Series 2002A), 5.875% (Guthrie Healthcare System, PA)/ (Original Issue Yield: 6.00%), 12/1/2031
| | A-/NR | | | 1,061,950 | |
| 1,000,000 | | Scranton, PA, UT GO Bonds (Series 2001C), 7.10% (U.S. Treasury PRF)/(Original Issue Yield: 7.35%), 9/1/2031
| | NR | | | 1,201,140 | |
| 935,000 | | Shaler, PA School District Authority, GO UT Bonds, 6.25% (Escrowed In Treasuries COL), 4/15/2008
| | AAA/NR | | | 982,975 | |
| 2,000,000 | | Somerset County, PA Hospital Authority, Hospital Refunding Revenue Bonds (Series 1997B), 5.375% (Somerset Community Hospital)/(Radian Asset Assurance INS)/ (Original Issue Yield: 5.68%), 3/1/2017
| | AA/NR | | | 2,082,380 | |
| 3,000,000 | | Southcentral Pennsylvania General Authority, Revenue Bonds (Series 2001), 5.625% (Wellspan Health Obligated Group), 5/15/2026
| | NR/Aa3 | | | 3,211,290 | |
| 2,000,000 | | Southeastern, PA Transportation Authority, Special Revenue Bonds, 5.375% (FGIC INS)/(Original Issue Yield: 5.70%), 3/1/2017
| | AAA/Aaa | | | 2,132,540 | |
| 500,000 | | St. Mary Hospital Authority, PA, Health System Revenue Bonds (Series 2004A), 5.00% (Catholic Health East)/ (Original Issue Yield: 5.15%), 11/15/2021
| | A/A2 | | | 515,295 | |
| 1,000,000 | | St. Mary Hospital Authority, PA, Health System Revenue Bonds (Series 2004B), 5.375% (Catholic Health East)/ (Original Issue Yield: 5.42%), 11/15/2034
| | A/A2 | | | 1,043,830 | |
| 1,000,000 | | St. Mary Hospital Authority, PA, Health System Revenue Bonds (Series 2004B), 5.50% (Catholic Health East), 11/15/2024
| | A/A2 | | | 1,059,820 | |
| 1,000,000 | 1 | Susquehanna, PA Area Regional Airport Authority, Airport Facilities Revenue Bonds (Series 1999), 5.50% (Aero Harrisburg)/(Original Issue Yield: 5.85%), 1/1/2024
| | NR | | | 906,660 | |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | MUNICIPAL BONDS--continued | | | | | | |
| | | Pennsylvania--continued | | | | | | |
| $ | 1,245,000 | | Union County, PA Higher Educational Facilities Financing Authority, Revenue Bonds (Series 2002A), 5.25% (Bucknell University), 4/1/2021
| | NR/Aa3 | | $ | 1,358,818 | |
| 1,665,000 | | Union County, PA Higher Educational Facilities Financing Authority, Revenue Bonds (Series 2002A), 5.25% (Bucknell University), 4/1/2022
| | NR/Aa3 | | | 1,813,002 | |
| 1,250,000 | | Union County, PA Hospital Authority, Revenue Bonds, 5.25% (Evangelical Community Hospital)/(Radian Asset Assurance INS), 8/1/2024
| | AA/Aa3 | | | 1,315,925 | |
| 1,000,000 | | Warren County, PA Hospital Authority, Revenue Bonds (Series A), 7.00% (Warren General Hospital, PA)/(Original Issue Yield: 7.101%), 4/1/2019
| | BBB/NR | | | 1,025,900 | |
| 400,000 | | Washington County, PA Authority, Lease Revenue Bonds, 7.875% (Escrowed In U.S. Treasuries COL), 12/15/2018
| | AAA/Aaa | | | 560,740 | |
| 1,885,000 | | West Shore, PA Area Hospital Authority, Revenue Bonds, 6.15% (Holy Spirit Hospital), 1/1/2020
| | BBB+/NR | | | 2,045,150 | |
| 1,000,000 | | West Shore, PA Area Hospital Authority, Revenue Bonds, 6.25% (Holy Spirit Hospital)/(Original Issue Yield: 6.30%), 1/1/2032
| | BBB+/NR | | | 1,071,890 | |
| 1,000,000 | 2 | West View, PA Municipal Authority, Special Obligation Bonds, 9.50% (Escrowed In U.S. Treasuries COL), 11/15/2014
| | AAA/Aaa | | | 1,335,280 | |
| 1,000,000 | | Westmoreland County, PA IDA, Health Care Facility Revenue Bonds (Series 2000B), 8.00% (Redstone Presbyterian Seniorcare Obligated Group)/(Original Issue Yield: 8.25%), 11/15/2023
| | NR | | | 1,075,450 | |
| 205,000 | | Westmoreland County, PA Municipal Authority, Special Obligation Bonds, 9.125% (Escrowed In U.S. Treasuries COL), 7/1/2010
|
| AAA/Aaa
|
|
| 229,241
|
|
| | | TOTAL
|
|
|
|
| 262,978,319
|
|
| | | Puerto Rico--1.9% | | | | | | |
| 2,000,000 | 1 | Puerto Rico Electric Power Authority, Drivers (Series 266), 8.8599% (FSA INS), 7/1/2015
| | AAA/NR | | | 2,619,420 | |
| 1,000,000 | 1 | Puerto Rico Highway and Transportation Authority, Residual Interest Tax-Exempt Securities (Series PA 331A), 9.34301% (AMBAC INS), 1/1/2010
| | NR | | | 1,289,450 | |
| 1,000,000 | 1 | Puerto Rico Highway and Transportation Authority, Residual Interest Tax-Exempt Securities (Series PA 331B), 9.34301% (AMBAC INS), 1/1/2011
|
| NR
|
|
| 1,301,670
|
|
| | | TOTAL
|
|
|
|
| 5,210,540
|
|
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | MUNICIPAL BONDS--continued | | | | | | |
| | | Virgin Islands--0.0% | | | | | | |
| $ | 50,000 | | Virgin Islands HFA, SFM Revenue Refunding Bonds (Series A), 5.80% (GNMA COL), 3/1/2005
|
| AAA/NR
|
| $
| 50,011
|
|
| | | TOTAL MUNICIPAL BONDS
(IDENTIFIED COST $251,757,976)
|
|
|
|
| 268,238,870
|
|
| | | SHORT-TERM MUNICIPALS--0.9% | | | | | | |
| | | Pennsylvania--0.8% | | | | | | |
| 1,700,000 | | Philadelphia, PA Authority for Industrial Development Daily VRDNs (Newcourtland Elder Services)/(PNC Bank, N.A. LOC)
| | NR/A1 | | | 1,700,000 | |
| 400,000 | | Philadelphia, PA Hospitals & Higher Education Facilities Authority, (Series 2005A) Daily VRDNs (Children's Hospital of Philadelphia)/(Fleet National Bank LIQ)
|
| AA/Aa2
|
|
| 400,000
|
|
| | | TOTAL
|
|
|
|
| 2,100,000
|
|
| | | Puerto Rico--0.1% | | | | | | |
| 300,000 | | Puerto Rico Government Development Bank (GDB) Weekly VRDNs (MBIA Insurance Corp. INS)/(Credit Suisse First Boston LIQ)
|
| AAA/Aaa
|
|
| 300,000
|
|
| | | TOTAL SHORT-TERM MUNICIPALS
(AT AMORTIZED COST)
|
|
|
|
| 2,400,000
|
|
| | | TOTAL MUNICIPAL INVESTMENTS--100.5%
(IDENTIFIED COST $254,157,976) 3
|
|
|
|
| 270,638,870
|
|
| | | OTHER ASSETS AND LIABILITIES - NET--(0.5%)
|
|
|
|
| (1,335,025
| )
|
| | | TOTAL NET ASSET--100%
|
|
|
| $
| 269,303,845
|
|
Securities that are subject to the federal alternative minimum tax (AMT) represent 15.4% of the Fund's portfolio as calculated based upon total portfolio market value.
1 Denotes a restricted security, including securities purchased under Rule 144A of the Securities Act of 1933. These securities, all of which have been deemed liquid by criteria approved by the Fund's Board of Trustees, unless registered under the Act or exempted from registration, may only be sold to qualified institutional investors. At February 28, 2005, these securities amounted to $14,872,783 which represents 5.5% of total net assets.
2 Pledged as collateral to ensure the Fund is able to satisfy the obligations of its outstanding short futures contract.
3 The cost of investments for federal tax purposes amounts to $254,133,243.
Note: The categories of investments are shown as a percentage of total net assets at February 28, 2005.
The following acronyms are used throughout this portfolio:
| AMBAC | - --American Municipal Bond Assurance Corporation |
| COL | - --Collateralized |
| EDFA | - --Economic Development Financing Authority |
| FGIC | - --Financial Guaranty Insurance Company |
| FHA | - --Federal Housing Administration |
| FSA | - --Financial Security Assurance |
| GNMA | - --Government National Mortgage Association |
| GO | - --General Obligation |
| GTD | - --Guaranteed |
| HDA | - --Hospital Development Authority |
| HEFA | - --Health and Education Facilities Authority |
| HFA | - --Housing Finance Authority |
| IDA | - --Industrial Development Authority |
| INS | - --Insured |
| LIQ | - --Liquidity Agreement |
| LOC(s) | - --Letter(s) of Credit |
| LT | - --Limited Tax |
| PRF | - --Prerefunded |
| 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
Statement of Assets and Liabilities
February 28, 2005 (unaudited)
Assets:
| | | | | | | |
Total investments in securities, at value (identified cost $254,157,976)
| | | | | $ | 270,638,870 | |
Income receivable
| | | | | | 4,026,654 | |
Receivable for shares sold
| | | | | | 193,837 | |
Receivable for futures variation margin
|
|
|
|
|
| 84,375
|
|
TOTAL ASSETS
|
|
|
|
|
| 274,943,736
|
|
Liabilities:
| | | | | | | |
Payable for investments purchased
| | $ | 4,251,110 | | | | |
Payable for shares redeemed
| | | 805,418 | | | | |
Income distribution payable
| | | 457,050 | | | | |
Payable for Directors'/Trustees' fees
| | | 496 | | | | |
Payable for distribution service fees (Note 5)
| | | 37,480 | | | | |
Payable for shareholder service fees (Note 5)
| | | 48,950 | | | | |
Payable to Bank
| | | 825 | | | | |
Accrued expenses
|
|
| 38,562
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
|
|
| 5,639,891
|
|
Net assets for 22,914,076 shares outstanding
|
|
|
|
| $
| 269,303,845
|
|
Net Assets Consist of:
| | | | | | | |
Paid-in capital
| | | | | $ | 261,290,307 | |
Net unrealized appreciation of investments and futures contracts
| | | | | | 16,559,458 | |
Accumulated net realized loss on investments, futures contracts and swap contracts
| | | | | | (8,563,906 | ) |
Undistributed net investment income
|
|
|
|
|
| 17,986
|
|
TOTAL NET ASSETS
|
|
|
|
| $
| 269,303,845
|
|
Net Asset Value, Offering Price and Redemption Proceeds Per Share
| | | | | | | |
Class A Shares:
| | | | | | | |
Net asset value per share ($204,703,025 ÷ 17,417,670 shares outstanding) no par value, unlimited shares authorized
|
|
|
|
|
| $11.75
|
|
Offering price per share (100/95.50 of $11.75) 1
|
|
|
|
|
| $12.30
|
|
Redemption proceeds per share
|
|
|
|
|
| $11.75
|
|
Class B Shares:
| | | | | | | |
Net asset value per share ($64,600,820 ÷ 5,496,406 shares outstanding) no par value, unlimited shares authorized
|
|
|
|
|
| $11.75
|
|
Offering price per share
|
|
|
|
|
| $11.75
|
|
Redemption proceeds per share (94.50/100 of $11.75) 1
|
|
|
|
|
| $11.10
|
|
1 See "What Do Shares Cost?" in the Prospectus.
See Notes which are an integral part of the Financial Statements
Statement of Operations
Six Months Ended February 28, 2005 (unaudited)
Investment Income:
| | | | | | | | | | | | |
Interest
|
|
|
|
|
|
|
|
|
| $
| 7,136,167
|
|
Expenses:
| | | | | | | | | | | | |
Investment adviser fee (Note 5)
| | | | | | $ | 531,046 | | | | | |
Administrative personnel and services fee (Note 5)
| | | | | | | 106,607 | | | | | |
Custodian fees
| | | | | | | 7,071 | | | | | |
Transfer and dividend disbursing agent fees and expenses
| | | | | | | 65,717 | | | | | |
Directors'/Trustees' fees
| | | | | | | 1,823 | | | | | |
Auditing fees
| | | | | | | 8,667 | | | | | |
Legal fees
| | | | | | | 3,009 | | | | | |
Portfolio accounting fees
| | | | | | | 47,088 | | | | | |
Distribution services fee--Class B Shares (Note 5)
| | | | | | | 243,232 | | | | | |
Shareholder services fee--Class A Shares (Note 5)
| | | | | | | 250,827 | | | | | |
Shareholder services fee--Class B Shares (Note 5)
| | | | | | | 81,077 | | | | | |
Share registration costs
| | | | | | | 27,500 | | | | | |
Printing and postage
| | | | | | | 10,037 | | | | | |
Insurance premiums
| | | | | | | 4,697 | | | | | |
Miscellaneous
|
|
|
|
|
|
| 2,109
|
|
|
|
|
|
TOTAL EXPENSES
|
|
|
|
|
|
| 1,390,507
|
|
|
|
|
|
Waivers (Note 5):
| | | | | | | | | | | | |
Waiver of investment adviser fee
| | $ | (113,062 | ) | | | | | | | | |
Waiver of administrative personnel and services fee
| | | (5,443 | ) | | | | | | | | |
Waiver of shareholder services fee--Class A Shares
|
|
| (20,066
| )
|
|
|
|
|
|
|
|
|
TOTAL WAIVERS
|
|
|
|
|
|
| (138,571
| )
|
|
|
|
|
Net expenses
|
|
|
|
|
|
|
|
|
|
| 1,251,936
|
|
Net investment income
|
|
|
|
|
|
|
|
|
|
| 5,884,231
|
|
Realized and Unrealized Gain (Loss) on Investments and Futures Contracts:
| | | | | | | | | | | | |
Net realized gain on investments
| | | | | | | | | | | 33,969 | |
Net realized loss on futures contracts
| | | | | | | | | | | (14,353 | ) |
Net change in unrealized appreciation of investments
| | | | | | | | | | | 846,183 | |
Net change in unrealized appreciation of futures contracts
|
|
|
|
|
|
|
|
|
|
| 78,564
|
|
Net realized and unrealized gain on investments and futures contracts
|
|
|
|
|
|
|
|
|
|
| 944,363
|
|
Change in net assets resulting from operations
|
|
|
|
|
|
|
|
|
| $
| 6,828,594
|
|
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
|
|
| Six Months
Ended
(unaudited)
2/28/2005
|
|
|
|
Year Ended
8/31/2004
|
|
Increase (Decrease) in Net Assets
| | | | | | | | |
Operations:
| | | | | | | | |
Net investment income
| | $ | 5,884,231 | | | $ | 12,190,240 | |
Net realized gain (loss) on investments, futures contracts and swap contracts
| | | 19,616 | | | | (2,462,047 | ) |
Net change in unrealized appreciation/depreciation of investments, futures contracts, and swap contracts
|
|
| 924,747
|
|
|
| 7,154,292
|
|
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS
|
|
| 6,828,594
|
|
|
| 16,882,485
|
|
Distributions to Shareholders:
| | | | | | | | |
Distributions from net investment income
| | | | | | | | |
Class A Shares
| | | (4,644,086 | ) | | | (9,314,438 | ) |
Class B Shares
|
|
| (1,247,318
| )
|
|
| (2,613,590
| )
|
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS
|
|
| (5,891,404
| )
|
|
| (11,928,028
| )
|
Share Transactions:
| | | | | | | | |
Proceeds from sale of shares
| | | 16,973,300 | | | | 45,948,540 | |
Net asset value of shares issued to shareholders in payment of distributions declared
| | | 3,185,225 | | | | 6,331,273 | |
Cost of shares redeemed
|
|
| (17,562,979
| )
|
|
| (72,231,286
| )
|
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS
|
|
| 2,595,546
|
|
|
| (19,951,473
| )
|
Change in net assets
|
|
| 3,532,736
|
|
|
| (14,997,016
| )
|
Net Assets:
| | | | | | | | |
Beginning of period
|
|
| 265,771,109
|
|
|
| 280,768,125
|
|
End of period (including undistributed net investment income of $17,986 and $25,159, respectively)
|
| $
| 269,303,845
|
|
| $
| 265,771,109
|
|
See Notes which are an integral part of the Financial Statements
Notes to Financial Statements
February 28, 2005 (unaudited)
1. ORGANIZATION
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 seven portfolios. The financial statements included herein are only those of the Federated Pennsylvania Municipal Income Fund (the "Fund"), a non-diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The investment objective of the Fund is to provide current income exempt from federal regular income tax (federal regular income tax does not include the federal alternative minimum tax) and the personal income taxes imposed by the state of Pennsylvania and Pennsylvania municipalities. Interest income from the Fund's investments may be subject to the federal alternative minimum tax for individuals and corporations. The Fund offers two classes of shares: Class A Shares and Class B Shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles (GAAP) in the United States of America.
Investment Valuation
Municipal bonds are valued by an independent pricing service, taking into consideration yield, liquidity, risk, credit quality, coupon, maturity, type of issue, and any other factors or market data the pricing service deems relevant. Short-term securities are valued at the prices provided by an independent pricing service. However, short-term securities with remaining maturities of 60 days or less at the time of purchase may be valued at amortized cost, which approximates fair market value. Securities for which no quotations are readily available are valued at fair value as determined in accordance with procedures established by and under general supervision of the Board of Trustees (the "Trustees").
Investment Income, Gains and Losses, Expenses, and Distributions
Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at fair value. Investment income, realized and unrealized gains and losses, and certain fund-level expenses are allocated to each class based on relative average daily net assets, except that each class bears certain expenses unique to that class such as distribution and shareholder services fees. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.
Premium 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 (the "Code") and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary.
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.
Swap Contracts
The Fund may enter into swap contracts. A swap is an exchange of cash payments between the Fund and another party, which is based on a specific financial index. The value of the swap is adjusted daily and the change in value is recorded as unrealized appreciation or depreciation. When a swap contract is closed, the Fund recognizes a realized gain or loss. The swap contracts entered into by the Fund are on a forward settling basis. For the six months ended February 28, 2005, the Fund had no realized gain (loss) on swap contracts.
Risks may arise upon entering into these agreements from the potential inability of the counterparties to meet the terms of their contract and from unanticipated changes in the value of the financial index on which the swap agreement is based. The Fund uses swaps for hedging purposes to reduce its exposure to interest rate fluctuations.
At February 28, 2005, the Fund had no open swap contracts.
Futures Contracts
The Fund periodically may sell bond interest rate futures contracts to manage duration, and to potentially reduce transaction costs. Upon entering into a bond interest rate futures contract with a broker, the Fund is required to deposit in a segregated account a specified amount of cash or U.S. government securities. Futures contracts are valued daily and unrealized gains or losses are recorded in a "variation margin" account. Daily, the Fund receives from or pays to the broker a specified amount of cash based upon changes in the variation margin account. When a contract is closed, the Fund recognizes a realized gain or loss. Futures contracts have market risks, including the risk that the change in the value of the contract may not correlate with the changes in the value of the underlying securities. For the six months ended February 28, 2005, the Fund had realized losses on future contracts of $14,353.
At February 28, 2005, the Fund had the following open futures contracts:
Expiration Date
|
| Contracts
to Receive
|
| Position
|
| Unrealized
Appreciation
|
June 2005
|
| 150 U.S. Treasury 10-Year Futures
|
| Short
|
| $78,564
|
Restricted Securities
Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. In some cases, the issuer of restricted securities 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 restricted securities may be resold in the secondary market in transactions exempt from registration. Such 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 general supervision of the Trustees.
Additional information on restricted securities, excluding securities purchased under Rule 144A that have been deemed liquid by the Trustees, held at February 28, 2005, is as follows:
Security
|
| Acquisition
Date
|
| Acquisition
Cost
|
Allegheny County, PA IDA, Cargo Facilities Lease Revenue Bonds (Series 1999), 6.00% (AFCO Cargo PIT LLC Project), 9/1/2009
|
| 9/23/1999
|
| $ 575,000
|
Allegheny County, PA IDA, Cargo Facilities Lease Revenue Bonds (Series 1999), 6.625% (AFCO Cargo PIT LLC Project)/(Original Issue Yield: 6.75%), 9/1/2024
|
| 9/23/1999
|
| $ 984,950
|
Delaware Valley, PA Regional Finance Authority, Residual Interest Tax-Exempt Securities (PA-1029), 9.80466%, 7/1/2017
|
| 6/18/2002
|
| $1,226,540
|
Pittsburgh, PA, Residual Interest Tax-Exempt Securities (Series PA 961), 9.30466% (AMBAC INS), 9/1/2015
|
| 1/16/2002
|
| $5,849,200
|
Susquehanna, PA Area Regional Airport Authority, Airport Facilities Revenue Bonds (Series 1999), 5.50% (Aero Harrisburg)/(Original Issue Yield: 5.85%), 1/1/2024
|
| 4/14/1999
|
| $ 954,500
|
Puerto Rico Electric Power Authority, Drivers (Series 266), 8.8599% (FSA INS), 7/1/2015
|
| 6/27/2002
|
| $2,474,120
|
Puerto Rico Highway and Transportation Authority, Residual Interest Tax-Exempt Securities (Series PA 331A), 9.34301% (AMBAC INS), 1/1/2010
|
| 3/3/1998
|
| $1,163,520
|
Puerto Rico Highway and Transportation Authority, Residual Interest Tax-Exempt Securities (Series PA 331B), 9.34301% (AMBAC INS), 1/1/2011
|
| 3/3/1998
|
| $1,158,780
|
Use of Estimates
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.
Other
Investment transactions are accounted for on a trade date basis. Realized gains and losses from investment transactions are recorded on an identified cost basis.
3. SHARES OF BENEFICIAL INTEREST
The following table summarizes share activity:
|
| Six Months Ended
2/28/2005
|
| Year Ended
8/31/2004
|
Class A Shares:
|
| Shares
|
|
|
| Amount
|
|
| Shares
|
|
|
| Amount
|
|
Shares sold
| | 1,323,265 | | | $ | 15,585,351 | | | 3,429,994 | | | $ | 40,251,587 | |
Shares issued to shareholders in payment of distributions declared
| | 204,743 |
|
| | 2,409,760 |
|
| 405,085 |
|
| | 4,737,780 |
|
Shares redeemed
|
| (1,189,894
| )
|
|
| (14,006,557
| )
|
| (5,042,726
| )
|
|
| (59,139,421
| )
|
NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS
|
| 338,114
|
|
| $
| 3,988,554
|
|
| (1,207,647
| )
|
| $
| (14,150,054
| )
|
| | | | | | | | | | | | | | |
|
| Six Months Ended
2/28/2005
|
| Year Ended
8/31/2004
|
Class B Shares:
|
| Shares
|
|
|
| Amount
|
|
| Shares
|
|
|
| Amount
|
|
Shares sold
| | 117,889 | | | $ | 1,387,949 | | | 485,452 | | | $ | 5,696,953 | |
Shares issued to shareholders in payment of distributions declared
| | 65,886 |
|
|
| 775,465 |
|
| 136,271 |
|
|
| 1,593,493 |
|
Shares redeemed
|
| (302,064
| )
|
|
| (3,556,422
| )
|
| (1,120,327
| )
|
|
| (13,091,865
| )
|
NET CHANGE RESULTING FROM CLASS B SHARE TRANSACTIONS
|
| (118,289
| )
|
| $
| (1,393,008
| )
|
| (498,604
| )
|
| $
| (5,801,419
| )
|
NET CHANGE RESULTING FROM SHARE TRANSACTIONS
|
| 219,825
|
|
| $
| 2,595,546
|
|
| (1,706,251
| )
|
| $
| (19,951,473
| )
|
4. FEDERAL TAX INFORMATION
At February 28, 2005, the cost of investments for federal tax purposes was $254,133,243. The net unrealized appreciation of investments for federal tax purposes was $16,505,627. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $17,257,053 and net unrealized depreciation from investments for those securities having an excess of cost over value of $751,426.
At August 31, 2004, the Fund had a capital loss carryforward of $6,383,165 which will reduce the Fund's taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Code and thus will reduce the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal tax. Pursuant to the Code, such capital loss carryforward will expire as follows:
Expiration Year
|
| Expiration Amount
|
2008
|
| $1,170,431
|
2009
|
| $2,804,527
|
2010
|
| $2,171,230
|
2012
|
| $ 236,977
|
5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment adviser fee equal to 0.40% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion.
Administrative Fee
Federated 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 all Federated funds as specified below:
Maximum
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. FAS may voluntarily choose to waive any portion of its fee. FAS can modify or terminate this voluntary waiver at any time at its sole discretion.
Distribution Services Fee
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the Fund's Class A Shares and Class B Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses according to the following schedule annually, to compensate FSC:
Share Class Name
|
| Percentage of Average Daily
Net Assets of Class
|
Class A Shares
|
| 0.40%
|
Class B Shares
|
| 0.75%
|
FSC may voluntarily choose to waive any portion of its fee. FSC can modify or terminate this voluntary waiver at any time at its sole discretion. Rather than paying investment professionals directly, the Fund may pay fees to FSC and FSC will use the fees to compensate investment professionals. For the six months ended February 28, 2005, FSC did not retain any fees paid by the Fund.
For the six months ended February 28, 2005, Class A Shares did not incur a distribution services fee.
Sales Charges
For the six months ended February 28, 2005, FSC retained $20,248 in sales charges from the sale of Class A Shares. FSC also retained $5,228 of contingent deferred sales charges relating to redemptions of Class A Shares. See "What do Shares Cost?" in the Prospectus.
Shareholder Services Fee
Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company (FSSC), the Fund will pay FSSC up to 0.25% of the average daily net assets of the Fund's Class A Shares and Class B Shares for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion. Rather than paying investment professionals directly, the Fund may pay fees to FSSC and FSSC will use the fees to compensate investment professionals. For the six months ended February 28, 2005, FSSC retained $24,057 of fees paid by the Fund.
Interfund Transactions
During the six months ended February 28, 2005, 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 $34,700,000 and 33,200,000, respectively.
General
Certain of the Officers and Trustees of the Fund are Officers and Directors or Trustees of the above companies.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations (and in-kind contributions), for the six months ended February 28, 2005, were as follows:
Purchases
|
| $
| 16,231,883
|
Sales
|
| $
| 11,552,442
|
7. CONCENTRATION OF CREDIT RISK
Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at February 28, 2005, 50.5% 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 17.0% of total investments.
8. LEGAL PROCEEDINGS
Beginning in October 2003, Federated Investors, Inc. and various subsidiaries thereof (including the advisers and distributor for various investment companies, collectively, "Federated"), along with various investment companies sponsored by Federated (Funds) were named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland seeking damages of unspecified amounts. 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 engaged in illegal and improper trading practices including market timing and late trading in concert with certain institutional traders, which allegedly caused financial injury to the mutual fund shareholders. Federated and various Funds have also been named as defendants in several additional lawsuits, the majority of which are now pending in the United States District Court for the Western District of Pennsylvania, alleging, among other things, excessive advisory and Rule 12b-1 fees, and seeking damages of unspecified amounts. The Board of the Funds has retained the law firm of Dickstein Shapiro Morin & Oshinsky LLP to represent the Funds in these lawsuits. Federated and the Funds, and their respective counsel, are reviewing the allegations and will respond appropriately. Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these recent lawsuits and future potential similar suits is uncertain. Although we do not believe that these lawsuits will have a material adverse effect on the Funds, there can be no assurance that these suits, the ongoing adverse publicity and/or other developments resulting from the regulatory investigations will not result in increased Fund redemptions, reduced sales of Fund shares, or other adverse consequences for the Funds.
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
A description of the policies and procedures that the Fund uses to determine how to vote proxies 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 through Federated's website. Go to FederatedInvestors.com, select "Products," select the "Prospectuses and Regulatory Reports" link, then select the Fund to access the link to Form N-PX. This information is also available from the EDGAR database on the SEC's website 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 website 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 website at FederatedInvestors.com by clicking on "Portfolio Holdings" and selecting the name of the Fund, or by selecting the name of the Fund and clicking on "Portfolio Holdings." You must register on the website the first time you wish to access this information.
Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including 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 DELIVERY
In 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.
Federated
World-Class Investment Manager
Federated Pennsylvania Municipal Income Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
Cusip 313923708
Cusip 313923807
2032304 (4/05)
Federated is a registered mark of Federated Investors, Inc. 2005 (c)Federated Investors, Inc.
Federated Investors
World-Class Investment Manager
Federated Vermont Municipal Income Fund
A Portfolio of Federated Municipal Securities Income Trust
SEMI-ANNUAL SHAREHOLDER REPORT
February 28, 2005
Class A Shares
FINANCIAL HIGHLIGHTS
SHAREHOLDER EXPENSE EXAMPLE
PORTFOLIO OF INVESTMENTS SUMMARY TABLES
FINANCIAL STATEMENTS
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
QUARTERLY PORTFOLIO SCHEDULE
Federated Investors 50 Years of Growth & Innovation
Not FDIC Insured * May Lose Value * No Bank Guarantee
Financial Highlights
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited) | | | Year Ended August 31, |
| | 2/28/2005 | | | 2004 | 1 | | 2003 | 1 | | 2002 | 1 | | 2001 | 1,2 |
|
Net Asset Value, Beginning of Period | | $10.15 | | | $10.10 | | | $10.27 | | | $10.22 | | | $10.00 | |
| | | | | | | | | | | | | | | |
Income From Investment Operations: | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Net investment income | | 0.16 | | | 0.32 | | | 0.34 | | | 0.38 | | | 0.37 | |
| | | | | | | | | | | | | | | |
Net realized and unrealized
gain (loss) on investments | | (0.10 | ) | | 0.06 | | | (0.17 | ) | | 0.05 | | | 0.22 | |
|
TOTAL FROM INVESTMENT OPERATIONS | | 0.06 | | | 0.38 | | | 0.17 | | | 0.43 | | | 0.59 | |
|
Less Distributions: | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Distributions from net
investment income | | (0.16 | ) | | (0.32 | ) | | (0.34 | ) | | (0.38 | ) | | (0.37 | ) |
| | | | | | | | | | | | | | | |
Distributions from net
realized gain on investments | | (0.04 | ) | | (0.01 | ) | | -- | | | -- | | | -- | |
|
TOTAL DISTRIBUTIONS | | (0.20 | ) | | (0.33 | ) | | (0.34 | ) | | (0.38 | ) | | (0.37 | ) |
|
Net Asset Value, End of Period | | $10.01 | | | $10.15 | | | $10.10 | | | $10.27 | | | $10.22 | |
|
Total Return3 | | 0.56 | % | | 3.75 | % | | 1.74 | % | | 4.33 | % | | 6.00 | % |
|
| | | | | | | | | | | | | | | |
Ratios to Average Net Assets: | | | | | | | | | | | | | | | |
|
Expenses | | 0.80 | %4 | | 0.78 | % | | 0.84 | % | | 0.81 | % | | 0.91 | %4 |
|
Net investment income | | 3.20 | %4 | | 3.14 | % | | 3.30 | % | | 3.75 | % | | 3.96 | %4 |
|
Expense waiver/reimbursement5 | | 0.56 | %4 | | 0.43 | % | | 0.26 | % | | 0.30 | % | | 0.46 | %4 |
|
Supplemental Data: | | | | | | | | | | | | | | | |
|
Net assets, end of period (000 omitted) | | $64,520 | | | $71,015 | | | $80,497 | | | $82,132 | | | $86,924 | |
|
Portfolio turnover | | 27 | % | | 25 | % | | 20 | % | | 7 | % | | 11 | % |
|
1 Note that the Fund is a newly created portfolio of Federated Municipal Securities Income Trust (Trust), and is the successor to the Banknorth Vermont Municipal Bond Fund (Former Fund). The Former Fund was reorganized into the Fund on August 27, 2004. The Fund had no investment operations prior to the date of the reorganization. The Former Fund was established on October 2, 2000. The Former Fund was the successor to a portfolio of assets of CF Vermont Tax Exempt Fund (Common Trust Fund), a common trust fund managed by the Former Fund’s investment adviser, Banknorth Investment Advisors. The Common Trust Fund’s portfolio of assets was transferred to the Former Fund on October 2, 2000 in exchange for the Former Fund’s shares. Please see the Fund’s prospectus, statement of additional information and annual report for further information regarding the reorganization, Former Fund and Common Trust Fund.
2 Reflects operations for the period from October 2, 2000 (date of initial public investment) to August 31, 2001.
3 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.
4 Computed on an annualized basis.
5 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
Shareholder Expense Example
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; 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, 2004 to February 28, 2005.
Actual Expenses
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 provided to enable you to compare the ongoing costs of investing in the Fund and 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.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sale charges (loads) on purchase or redemption payments. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
| | Beginning
Account Value
9/1/2004 | | Ending
Account Value
2/28/2005 | | Expenses Paid
During Period1 |
|
Actual | | $1,000 | | $1,005.60 | | $3.98 |
|
Hypothetical (assuming a 5% return before expenses) | | $1,000 | | $1,020.83 | | $4.01 |
|
1 Expenses are equal to the Fund’s annualized expense ratio of 0.80%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Portfolio of Investments Summary Tables
At February 28, 2005, the Fund’s credit quality ratings composition1 was
as follows:
S&P Long-Term Ratings as
Percentage of Total Investments2 | | Moody’s Long-Term Ratings as
Percentage of Total Investments2 |
| |
|
AAA | | 41.0% | | Aaa | | 53.4% |
| |
|
AA | | 21.1% | | Aa | | 25.9% |
| |
|
A | | 2.5% | | A | | 6.5% |
| |
|
BBB | | 0.2% | | Baa | | 0.0% |
| |
|
Not Rated by S&P | | 35.2% | | Not Rated by Moody’s | | 14.2% |
| |
|
TOTAL | | 100.0% | | total | | 100.0% |
| |
|
1 These tables depict the long-term credit-quality ratings assigned to the Fund’s portfolio holdings by Standard & Poor’s (S&P) and Moody’s Investors Service (Moody’s), each of which is a nationally recognized statistical rating organization (NRSRO). These credit-quality ratings are shown without regard to gradations within a given rating category. For example, securities rated “A-” have been included in the “A” rated category. Holdings that are rated only by a different NRSRO than the one identified have been included in the “Not rated by…” category. Rated securities that have been prerefunded, but not rated again by the NRSRO, also have been included in the “Not rated by…” category. Rated securities include a security with an obligor and/or credit enhancer that has received a rating from an NRSRO with respect to a class of debt obligations that is comparable in priority and security with the security held by the Fund. Credit-quality ratings are an assessment of the risk that a security will default in payment and do not address other risks presented by the security. Please see the descriptions of credit-quality ratings in the Fund’s Statement of Additional Information.
These tables depict the long-term credit-quality ratings as assigned only by the NRSRO identified in each table. Of the portfolio’s total investments, 11.5% do not have long-term ratings by either of these NRSROs.
2 Percentages are based on total investments, which may differ from the Fund’s total net assets used in computing the percentages in the Portfolio of Investments which follows.
Portfolio of Investments
February 28, 2005 (unaudited)
Principal
Amount | |
| | Credit
Rating | | | Value |
|
| | | MUNICIPAL BONDS--98.8% | | | | | |
| | | Guam--1.5% | | | | | |
$ | 835,000 | | Guam Airport Authority, General Revenue Bonds (Series 2003B), 5.25% (MBIA Insurance Corp. INS), 10/1/2015 | | AAA/Aaa | | $ | 928,837 |
| | | |
|
| | | Puerto Rico--11.3% | | | | | |
| 800,000 | | Commonwealth of Puerto Rico, Public Improvement GO Bonds (Series 2005A), 5.00% (FSA INS), 7/1/2018 | | AAA/Aaa | | | 871,248 |
| | | |
| | | | | |
| 2,000,000 | | Commonwealth of Puerto Rico, UT GO Bonds, 5.50% (MBIA Insurance Corp. INS), 7/1/2009 | | AAA/Aaa | | | 2,207,600 |
| | | |
| | | | | |
| 900,000 | | Puerto Rico Electric Power Authority, Refunding Revenue Bonds (Series 2004PP), 5.00% (FGIC INS), 7/1/2024 | | AAA/Aaa | | | 959,049 |
| | | |
| | | | | |
| 2,000,000 | | Puerto Rico HFA, Capital Fund Program Revenue Bonds, 5.00%, 12/1/2016 | | AA/Aa3 | | | 2,147,200 |
| | | |
| | | | | |
| 1,000,000 | | Puerto Rico Industrial, Tourist, Educational, Medical & Environmental Control Facilities Financing Authority, Revenue Bonds, 5.00% (Inter American University of Puerto Rico)/(MBIA Insurance Corp. INS), 10/1/2017 | | AAA/NR | | | 1,092,730 |
| | | |
|
| | | TOTAL | | | | | 7,277,827 |
| | | |
|
| | | Vermont--85.0% | | | | | |
| 565,000 | | Burlington, VT Airport, Revenue Bonds, (Series A), 3.625% (MBIA Insurance Corp. INS)/(Original Issue Yield: 3.76%), 7/1/2017 | | NR/Aaa | | | 541,569 |
| | | |
| | | | | |
| 1,250,000 | | Burlington, VT Airport, Revenue Bonds, (Series A), 5.00% (MBIA Insurance Corp. INS), 7/1/2023 | | NR/Aaa | | | 1,322,763 |
| | | |
| | | | | |
| 490,000 | | Burlington, VT Electric Authority, Revenue Bonds, (Series A), 4.00% (FSA INS), 7/1/2015 | | NR/Aaa | | | 493,979 |
| | | |
| | | | | |
| 510,000 | | Burlington, VT Electric Authority, Revenue Bonds, (Series A), 4.00% (FSA INS), 7/1/2016 | | NR/Aaa | | | 510,173 |
| | | |
| | | | | |
| 300,000 | | Burlington, VT Waterworks System, Revenue Refunding Bonds, (Series A), 4.65% (FGIC INS)/(Original Issue Yield: 4.70%), 7/1/2006 | | AAA/Aaa | | | 308,508 |
| | | |
| | | | | |
| 150,000 | | Burlington, VT Waterworks System, Revenue Refunding Bonds, (Series A), 4.75% (FGIC INS)/(Original Issue Yield: 4.80%), 7/1/2007 | | AAA/Aaa | | | 157,049 |
| | | |
| | | | | |
| 300,000 | | Burlington, VT Waterworks System, Revenue Refunding Bonds, (Series A), 4.80% (FGIC INS)/(Original Issue Yield: 4.85%), 7/1/2008 | | AAA/Aaa | | | 313,392 |
| | | |
| | | | | |
| 800,000 | | Burlington, VT, (Series A), 5.10%, 12/1/2005 | | NR/Aa3 | | | 817,088 |
| | | |
| | | | | |
| 210,000 | | Burlington, VT, UT GO Bond, (Series A), 4.00% (Original Issue Yield: 4.13%), 11/1/2017 | | NR/Aa3 | | | 211,440 |
| | | |
| | | | | |
| 785,000 | | Burlington, VT, UT GO Bonds, 5.20%, 12/1/2006 | | NR/Aa3 | | | 800,802 |
| | | |
| | | | | |
| 185,000 | | Burlington, VT, UT GO Bonds, (Series A), 3.75% (Original Issue Yield: 3.83%), 11/1/2014 | | NR/Aa3 | | | 186,740 |
| | | |
| | | | | |
| 190,000 | | Burlington, VT, UT GO Bonds, (Series A), 3.75% (Original Issue Yield: 3.93%), 11/1/2015 | | NR/Aa3 | | | 190,723 |
| | | |
| | | | | |
| | | MUNICIPAL BONDS--continued | | | | | |
| | | Vermont--continued | | | | | |
$ | 200,000 | | Burlington, VT, UT GO Bonds, (Series A), 4.00% (Original Issue Yield: 4.03%), 11/1/2016 | | NR/Aa3 | | $ | 202,700 |
| | | |
| | | | | |
| 220,000 | | Burlington, VT, UT GO Bonds, (Series A), 4.00% (Original Issue Yield: 4.22%), 11/1/2018 | | NR/Aa3 | | | 219,875 |
| | | |
| | | | | |
| 170,000 | | Burlington, VT, UT GO Public Improvement Bonds, (Series A), 3.50% (Original Issue Yield: 3.60%), 11/1/2012 | | NR/Aa3 | | | 171,111 |
| | | |
| | | | | |
| 155,000 | | Burlington, VT, UT GO Public Improvement Bonds, (Series A), 3.50%, 11/1/2010 | | NR/Aa3 | | | 158,344 |
| | | |
| | | | | |
| 90,000 | | Burlington, VT, UT GO Public Improvement Bonds, (Series A), 3.50%, 11/1/2011 | | NR/Aa3 | | | 91,343 |
| | | |
| | | | | |
| 125,000 | | Burlington, VT, UT GO Public Improvement Bonds, (Series A), 3.60% (Original Issue Yield: 3.72%), 11/1/2013 | | NR/Aa3 | | | 125,714 |
| | | |
| | | | | |
| 110,000 | | Chittenden, VT Solid Waste District, UT GO Bonds, (Series A), 2.50% (AMBAC INS), 1/1/2007 | | AAA/Aaa | | | 110,067 |
| | | |
| | | | | |
| 100,000 | | Chittenden, VT Solid Waste District, UT GO Refunding Bonds, (Series A), 3.30% (AMBAC INS)/(Original Issue Yield: 3.32%), 1/1/2010 | | AAA/Aaa | | | 101,679 |
| | | |
| | | | | |
| 310,000 | | Chittenden, VT Solid Waste District, UT GO Refunding Bonds, (Series A), 3.40% (AMBAC INS)/(Original Issue Yield: 3.52%), 1/1/2011 | | AAA/Aaa | | | 314,678 |
| | | |
| | | | | |
| 205,000 | | Chittenden, VT Solid Waste District, UT GO Refunding Bonds, (Series A), 3.50% (AMBAC INS)/(Original Issue Yield: 3.62%), 1/1/2012 | | AAA/Aaa | | | 207,548 |
| | | |
| | | | | |
| 90,000 | | Fair Haven, VT Union High School District, UT GO Bonds, 5.00% (AMBAC INS)/(Original Issue Yield: 5.05%), 12/1/2005 | | AAA/Aaa | | | 91,846 |
| | | |
| | | | | |
| 90,000 | | Fair Haven, VT Union High School District, UT GO Bonds, 5.05% (AMBAC INS)/(Original Issue Yield: 5.15%), 12/1/2006 | | AAA/Aaa | | | 91,725 |
| | | |
| | | | | |
| 25,000 | �� | Norwich, VT School District, UT GO Bonds, 4.50% (AMBAC INS), 7/15/2009 | | AAA/Aaa | | | 26,634 |
| | | |
| | | | | |
| 520,000 | | St. Johnsbury, VT School District, UT GO Bonds, 4.55% (AMBAC INS), 9/1/2006 | | NR/Aaa | | | 536,214 |
| | | |
| | | | | |
| 500,000 | | St. Johnsbury, VT School District, UT GO Bonds, 4.50% (AMBAC INS), 9/1/2005 | | NR/Aaa | | | 505,820 |
| | | |
| | | | | |
| 515,000 | | St. Johnsbury, VT School District, UT GO Bonds, 4.65% (AMBAC INS), 9/1/2007 | | NR/Aaa | | | 540,374 |
| | | |
| | | | | |
| 520,000 | | St. Johnsbury, VT School District, UT GO Bonds, 4.80% (AMBAC INS), 9/1/2008 | | NR/Aaa | | | 555,381 |
| | | |
| | | | | |
| 340,000 | | Swanton Village, VT Electric System, Revenue Refunding Bonds, 5.75% (MBIA Insurance Corp. INS)/(Original Issue Yield: 5.85%), 12/1/2019 | | AAA/Aaa | | | 372,297 |
| | | |
| | | | | |
| 500,000 | | University of Vermont & State Agricultural College, Revenue Bonds, 4.20% (AMBAC INS)/(Original Issue Yield: 4.25%), 10/1/2012 | | AAA/Aaa | | | 524,335 |
| | | |
| | | | | |
| 250,000 | | University of Vermont & State Agricultural College, Revenue Bonds, 5.25% (AMBAC INS), 10/1/2021 | | AAA/Aaa | | | 273,308 |
| | | |
| | | | | |
| 1,150,000 | | University of Vermont & State Agricultural College, Revenue Bonds, 5.25% (AMBAC INS), 10/1/2023 | | AAA/Aaa | | | 1,248,762 |
| | | |
| | | | | |
| | | MUNICIPAL BONDS--continued | | | | | |
| | | Vermont--continued | | | | | |
$ | 500,000 | | University of Vermont & State Agricultural College, Revenue Bonds, 5.50% (AMBAC INS), 10/1/2018 | | AAA/Aaa | | $ | 560,660 |
| | | |
| | | | | |
| 500,000 | | University of Vermont & State Agricultural College, Revenue Bonds, 5.50% (AMBAC INS), 10/1/2019 | | AAA/Aaa | | | 560,660 |
| | | |
| | | | | |
| 2,660,000 | | Vermont Educational and Health Buildings Financing Agency, Refunding Revenue Bonds (Series 2004A), 5.00% (Fletcher Allen Health Care)/(FGIC INS), 12/1/2023 | | AAA/Aaa | | | 2,843,061 |
| | | |
| | | | | |
| 3,000 | | Vermont Educational and Health Buildings Financing Agency, Revenue Bond, 1.96% TOBs (Middlebury College), Optional Tender 11/1/2005, Maturity 11/1/2027 | | AA/NR | | | 2,989 |
| | | |
| | | | | |
| 1,100,000 | | Vermont Educational and Health Buildings Financing Agency, Revenue Bonds (Series 2002A), 5.00% (Middlebury College)/(Original Issue Yield: 5.20%), 11/1/2032 | | AA/Aa3 | | | 1,139,270 |
| | | |
| | | | | |
| 50,000 | | Vermont Educational and Health Buildings Financing Agency, Revenue Bonds, 3.25% (St. Michael's College)/(Original Issue Yield: 3.33%), 10/1/2009 | | A-/A3 | | | 49,978 |
| | | |
| | | | | |
| 100,000 | | Vermont Educational and Health Buildings Financing Agency, Revenue Bonds, 3.60% (St. Michael's College)/(Original Issue Yield: 3.68%), 10/1/2010 | | A-/A3 | | | 101,008 |
| | | |
| | | | | |
| 140,000 | | Vermont Educational and Health Buildings Financing Agency, Revenue Bonds, 3.875% (St. Michael's College)/(Original Issue Yield: 3.93%), 10/1/2011 | | A-/A3 | | | 142,733 |
| | | |
| | | | | |
| 195,000 | | Vermont Educational and Health Buildings Financing Agency, Revenue Bonds, 4.00% (St. Michael's College)/(Original Issue Yield: 4.10%), 10/1/2012 | | A-/A3 | | | 198,643 |
| | | |
| | | | | |
| 125,000 | | Vermont Educational and Health Buildings Financing Agency, Revenue Bonds, 4.125% (St. Michael's College)/(Original Issue Yield: 4.23%), 10/1/2013 | | A-/A3 | | | 127,629 |
| | | |
| | | | | |
| 385,000 | | Vermont Educational and Health Buildings Financing Agency, Revenue Bonds, 4.25% (St. Michael's College)/(Original Issue Yield: 4.35%), 10/1/2014 | | A-/A3 | | | 393,050 |
| | | |
| | | | | |
| 370,000 | | Vermont Educational and Health Buildings Financing Agency, Revenue Bonds, 4.375% (St. Michael's College)/(Original Issue Yield: 4.45%), 10/1/2015 | | A-/A3 | | | 378,236 |
| | | |
| | | | | |
| 770,000 | | Vermont Educational and Health Buildings Financing Agency, Revenue Bonds, 5.30% (Middlebury College)/(Original Issue Yield: 5.45%), 11/1/2008 | | AA/Aa3 | | | 818,302 |
| | | |
| | | | | |
| 190,000 | | Vermont Educational and Health Buildings Financing Agency, Revenue Bonds, 5.375% (Middlebury College)/(Original Issue Yield: 5.93%), 11/1/2026 | | AA/Aa3 | | | 200,667 |
| | | |
| | | | | |
| 140,000 | | Vermont Educational and Health Buildings Financing Agency, Revenue Bonds, 5.40% (St. Michael's College)/(U.S. Treasury COL)/(Original Issue Yield: 5.45%), 4/1/2005 | | A-/NR | | | 140,427 |
| | | |
| | | | | |
| 400,000 | | Vermont Educational and Health Buildings Financing Agency, Revenue Bonds, (Series A), 4.00% (Middlebury College)/(Original Issue Yield: 4.13%), 11/1/2013 | | AA/Aa3 | | | 414,108 |
| | | |
| | | | | |
| | | MUNICIPAL BONDS--continued | | | | | |
| | | Vermont--continued | | | | | |
$ | 65,000 | | Vermont Educational and Health Buildings Financing Agency, Revenue Bonds, (Series A), 5.30% (Fletcher Allen Health Care)/(AMBAC INS)/(Original Issue Yield: 5.32%), 12/1/2008 | | AAA/Aaa | | $ | 70,098 |
| | | |
| | | | | |
| 55,000 | | Vermont Educational and Health Buildings Financing Agency, Revenue Bonds, (Series A), 5.30% (Fletcher Allen Health Care)/(AMBAC INS)/(Original Issue Yield: 5.38%), 12/1/2009 | | AAA/Aaa | | | 59,872 |
| | | |
| | | | | |
| 4,485,000 | 1 | Vermont Educational and Health Buildings Financing Agency, Revenue Bonds, (Series1999 A), 3.57% (Marlboro College), 4/1/2019 | | NR | | | 4,228,099 |
| | | |
| | | | | |
| 60,000 | | Vermont Educational and Health Buildings Financing Agency, Revenue Refunding Bonds, 4.40% (Central Vermont Hospital & Nursing Home)/(AMBAC INS)/(Original Issue Yield: 4.55%), 11/15/2005 | | AAA/Aaa | | | 60,879 |
| | | |
| | | | | |
| 605,000 | | Vermont Educational and Health Buildings Financing Agency, Revenue Refunding Bonds, (Series 1996), 4.50% (Central Vermont Hospital & Nursing Home)/(AMBAC INS)/(Original Issue Yield: 4.65%), 11/15/2006 | | AAA/Aaa | | | 623,459 |
| | | |
| | | | | |
| 200,000 | | Vermont Educational and Health Buildings Financing Agency, Revenue Refunding Bonds, (Series 1996), 4.625% (Central Vermont Hospital & Nursing Home)/(AMBAC INS)/(Original Issue Yield: 4.75%), 11/15/2007 | | AAA/Aaa | | | 209,094 |
| | | |
| | | | | |
| 760,000 | 1,2 | Vermont HFA, Revenue Bonds, Cabot Commons Limited Partnership, 2.75% (Vermont HFA MFH), 3/15/2005 | | NR | | | 759,833 |
| | | |
| | | | | |
| 225,000 | 1,2 | Vermont HFA, Revenue Bonds, Colonial West Limited Partnership, 2.75% (Vermont HFA MFH), 5/30/2005 | | NR | | | 224,525 |
| | | |
| | | | | |
| 2,123,000 | 1,2 | Vermont HFA, Revenue Bonds, Mountainview Street Jay Housing Limited Partnership, 2.75% (Vermont HFA MFH), 4/30/2005 | | NR | | | 2,119,688 |
| 105,000 | | Vermont HFA, Revenue Bonds, (Series 11A), 4.70% (Vermont HFA SFM)/(FSA INS), 11/1/2005 | | AAA/Aaa | | | 106,233 |
| | | |
| | | | | |
| 145,000 | | Vermont HFA, Revenue Bonds, (Series 11A), 4.85% (Vermont HFA SFM)/(FSA INS), 11/1/2006 | | AAA/Aaa | | | 145,413 |
| | | |
| | | | | |
| 105,000 | | Vermont HFA, Revenue Bonds, (Series 11A), 4.95% (Vermont HFA SFM)/(FSA INS), 11/1/2007 | | AAA/Aaa | | | 105,334 |
| | | |
| | | | | |
| 145,000 | | Vermont HFA, Revenue Bonds, (Series 11A), 5.05% (Vermont HFA SFM)/(FSA INS), 11/1/2008 | | AAA/Aaa | | | 145,525 |
| | | |
| | | | | |
| 185,000 | | Vermont HFA, Revenue Bonds, (Series 11A), 5.15% (Vermont HFA SFM)/(FSA INS), 11/1/2009 | | AAA/Aaa | | | 185,718 |
| | | |
| | | | | |
| 110,000 | | Vermont HFA, Revenue Bonds, (Series 12B), 5.50% (Vermont HFA SFM)/(FSA INS), 11/1/2008 | | AAA/Aaa | | | 110,107 |
| | | |
| | | | | |
| 140,000 | | Vermont HFA, Revenue Bonds, (Series 12B), 5.60% (Vermont HFA SFM)/(FSA INS), 11/1/2009 | | AAA/Aaa | | | 140,164 |
| | | |
| | | | | |
| 65,000 | | Vermont HFA, Revenue Bonds, (Series 5), 6.875% (Vermont HFA SFM), 11/1/2016 | | A+/A1 | | | 65,675 |
| | | |
| | | | | |
| 110,000 | | Vermont HFA, Revenue Bonds, (Series 9), 4.55% (Vermont HFA SFM)/(MBIA Insurance Corp. INS), 5/1/2008 | | AAA/Aaa | | | 113,772 |
| | | |
| | | | | |
| | | MUNICIPAL BONDS--continued | | | | | |
| | | Vermont--continued | | | | | |
$ | 25,000 | | Vermont HFA, Revenue Bonds, (Series 9), 5.00% (Vermont HFA SFM)/(MBIA Insurance Corp. INS), 5/1/2005 | | AAA/Aaa | | $ | 25,087 |
| | | |
| | | | | |
| 10,000 | | Vermont HFA, Revenue Bonds, (Series 9), 5.10% (Vermont HFA SFM)/(MBIA Insurance Corp. INS), 5/1/2006 | | AAA/Aaa | | | 10,195 |
| | | |
| | | | | |
| 205,000 | | Vermont HFA, Revenue Bonds, (Series A), 4.45% (Vermont HFA MFH)/(HUD Section 8 INS), 2/15/2008 | | AA-/NR | | | 209,912 |
| | | |
| | | | | |
| 130,000 | | Vermont HFA, Revenue Bonds, (Series A), 4.55% (Vermont HFA MFH)/(HUD Section 8 INS), 2/15/2009 | | AA-/NR | | | 133,155 |
| | | |
| | | | | |
| 1,000,000 | | Vermont Municipal Bond Bank, Revenue Bonds, (Series 1), 4.40% (FSA INS)/(Original Issue Yield: 4.45%), 12/1/2007 | | AAA/Aaa | | | 1,045,080 |
| | | |
| | | | | |
| 1,500,000 | | Vermont Municipal Bond Bank, Revenue Bonds, (Series 1), 4.30% (FSA INS)/(Original Issue Yield: 4.40%), 12/1/2006 | | AAA/Aaa | | | 1,545,375 |
| | | |
| | | | | |
| 860,000 | | Vermont Municipal Bond Bank, Revenue Bonds, (Series 1), 4.60% (MBIA Insurance Corp. INS)/(Original Issue Yield: 4.65%), 12/1/2007 | | NR/Aaa | | | 903,310 |
| | | |
| | | | | |
| 100,000 | | Vermont Municipal Bond Bank, Revenue Bonds, (Series 1), 4.80% (MBIA Insurance Corp. INS)/(Original Issue Yield: 4.95%), 12/1/2008 | | AAA/Aaa | | | 106,734 |
| | | |
| | | | | |
| 2,000,000 | | Vermont Municipal Bond Bank, Revenue Bonds, (Series 1), 5.375% (MBIA Insurance Corp. INS)/(Original Issue Yield: 5.44%), 12/1/2016 | | AAA/Aaa | | | 2,213,160 |
| | | |
| | | | | |
| 1,000,000 | | Vermont Municipal Bond Bank, Revenue Bonds, (Series 2), 5.00% (MBIA Insurance Corp. INS), 12/1/2017 | | NR/Aaa | | | 1,080,890 |
| | | |
| | | | | |
| 1,000,000 | | Vermont Municipal Bond Bank, Revenue Bonds, (Series 2), 5.00% (MBIA Insurance Corp. INS), 12/1/2018 | | NR/Aaa | | | 1,076,810 |
| | | |
| | | | | |
| 250,000 | | Vermont Municipal Bond Bank, Revenue Bonds, (Series I), 3.80% (Original Issue Yield: 3.86%), 12/1/2011 | | NR/Aa3 | | | 256,913 |
| | | |
| | | | | |
| 250,000 | | Vermont Municipal Bond Bank, Revenue Bonds, (Series I), 3.90% (AMBAC INS)/(Original Issue Yield: 3.96%), 12/1/2012 | | AAA/Aaa | | | 256,835 |
| | | |
| | | | | |
| 250,000 | | Vermont Municipal Bond Bank, Revenue Bonds, (Series I), 4.00% (AMBAC INS)/(Original Issue Yield: 4.07%), 12/1/2013 | | AAA/Aaa | | | 255,380 |
| | | |
| | | | | |
| 340,000 | | Vermont Municipal Bond Bank, Revenue Bonds, (Series a), 4.80% (MBIA Insurance Corp. INS)/(Original Issue Yield: 4.85%), 12/1/2009 | | NR/Aaa | | | 366,340 |
| | | |
| | | | | |
| 500,000 | | Vermont Municipal Bond Bank, Revenue Refunding Bonds, (Series 1), 3.90% (MBIA Insurance Corp. INS)/(Original Issue Yield: 3.92%), 12/1/2013 | | NR/Aaa | | | 510,460 |
| | | |
| | | | | |
| 165,000 | | Vermont Municipal Bond Bank, Revenue Refunding Bonds, (Series 2), 4.30% (FSA INS)/(Original Issue Yield: 4.40%), 12/1/2006 | | AAA/Aaa | | | 169,991 |
| | | |
| | | | | |
| 665,000 | | Vermont Municipal Bond Bank, Revenue Refunding Bonds, (Series 2), 4.40% (FSA INS)/(Original Issue Yield: 4.45%), 12/1/2007 | | AAA/Aaa | | | 694,978 |
| | | |
| | | | | |
| 500,000 | | Vermont Municipal Bond Bank, Revenue Refunding Bonds, (Series 2), 5.20% (AMBAC INS)/(Original Issue Yield: 5.30%), 12/1/2007 | | AAA/Aaa | | | 520,460 |
| | | |
| | | | | |
| 50,000 | | Vermont Municipal Bond Bank, Revenue Refunding Bonds, (Series I), 3.30% (MBIA Insurance Corp. INS)/(Original Issue Yield: 3.42%), 12/1/2010 | | NR/Aaa | | | 50,422 |
| | | |
| | | | | |
| 1,000,000 | | Vermont Public Power Supply Authority, Revenue Refunding Bonds, (Series D), 4.50% (AMBAC INS), 7/1/2005 | | AAA/Aaa | | | 1,007,830 |
| | | |
| | | | | |
| | | MUNICIPAL BONDS--continued | | | | | |
| | | Vermont--continued | | | | | |
$ | 840,000 | | Vermont Public Power Supply Authority, Revenue Refunding Bonds, (Series E), 5.00% (MBIA Insurance Corp. INS), 7/1/2011 | | AAA/Aaa | | $ | 920,825 |
| | | |
| | | | | |
| 500,000 | | Vermont Public Power Supply Authority, Revenue Refunding Bonds, (Series E), 5.25% (MBIA Insurance Corp. INS), 7/1/2015 | | AAA/Aaa | | | 562,635 |
| | | |
| | | | | |
| 945,000 | | Vermont State Student Assistance Corp., Revenue Bonds, 5.00% (Original Issue Yield: 5.08%), 3/1/2034 | | NR/A2 | | | 971,356 |
| | | |
| | | | | |
| 1,665,000 | | Vermont State Student Assistance Corp., Revenue Bonds, 5.00% (Original Issue Yield: 5.03%), 3/1/2026 | | NR/A2 | | | 1,727,254 |
| | | |
| | | | | |
| 1,830,000 | | Vermont State, Refunding UT GO Bonds (Series 2004A), 5.00%, 2/1/2015 | | AA+/Aa1 | | | 2,028,756 |
| | | |
| | | | | |
| 2,050,000 | | Vermont State, UT GO Bonds, 4.00%, 3/1/2022 | | AA+/Aa1 | | | 2,009,062 |
| | | |
| | | | | |
| 500,000 | | Vermont State, UT GO Bonds, (Series A), 4.40% (Original Issue Yield: 4.45%), 1/15/2007 | | AA+/Aa1 | | | 517,260 |
| | | |
| | | | | |
| 250,000 | | Vermont State, UT GO Bonds, (Series A), 4.75% (Original Issue Yield: 4.87%), 8/1/2020 | | AA+/Aa1 | | | 261,028 |
| | | |
| | | | | |
| 1,600,000 | | Vermont State, UT GO Bonds, (Series A), 5.00% (United States Treasury PRF, 1/15/2006 @102), 1/15/2008 | | AA+/Aa1 | | | 1,667,840 |
| | | |
| | | | | |
| 1,300,000 | | Vermont State, UT GO Bonds, (Series A), 5.00% (United States Treasury PRF, 1/15/2006 @102)/(Original Issue Yield: 5.10%), 1/15/2010 | | AA+/Aa1 | | | 1,355,120 |
| | | |
| | | | | |
| 500,000 | | Vermont State, UT GO Bonds, (Series C), 4.60% (Original Issue Yield: 4.75%), 1/15/2013 | | AA+/Aa1 | | | 528,180 |
| | | |
|
| | | TOTAL | | | | | 54,857,523 |
| | | |
|
| | | Virgin Islands--1.0% | | | | | |
| 500,000 | | Virgin Islands Public Finance Authority, Gross Receipt Tax Revenue Bonds, 5.00% (Virgin Islands)/(FSA INS), 10/1/2014 | | AAA/Aaa | | | 553,985 |
| | | |
| | | | | |
| 100,000 | | Virgin Islands Public Finance Authority, Senior Lien Revenue Bonds (Series 2004A), 5.25% (Virgin Islands Matching Fund), 10/1/2024 | | BBB/NR | | | 105,986 |
| | | |
|
| | | TOTAL | | | | | 659,971 |
| | | |
|
| | | TOTAL MUNICIPAL INVESTMENTS--98.8%
(IDENTIFIED COST $62,675,100)3 | | | | | 63,724,158 |
| | | |
|
| | | OTHER ASSETS AND LIABILITIES-NET--1.2% | | | | | 796,265 |
| | | |
|
| | | TOTAL NET ASSETS--100% | | | | $ | 64,520,423 |
| | | |
|
Securities that are subject to the federal alternative minimum tax (AMT) represent 7.2% of the Fund’s portfolio as calculated based upon total portfolio market value.
1 Denotes a restricted security, including securities purchased under Rule 144A of the Securities Act of 1933. These securities, unless registered under the Act or exempted from registration, may only be sold to qualified institutional investors. At February 28, 2005, these securities amounted to $7,332,145 which represents 11.4% of total net assets.
2 Denotes a restricted security, including securities purchased under Rule 144A that have been deemed liquid by criteria approved by the fund’s Board of Trustees. At February 28, 2005, these securities amounted to $3,104,046 which represents 4.8% of total net assets.
3 The cost of investments for federal tax purposes amounts to $62,675,100.
Note: The categories of investments are shown as a percentage of total net assets at February 28, 2005.
The following acronyms are used throughout this portfolio:
AMBAC | --American Municipal Bond Assurance Corporation |
COL | --Collateralized |
FGIC | --Financial Guaranty Insurance Company |
FSA | --Financial Security Assurance |
GO | --General Obligation |
HFA | --Housing Finance Authority |
INS | --Insured |
MFH | --Multi Family Housing |
PRF | --Prerefunded |
SFM | --Single Family Mortgage |
TOBs | --Tender Option Bonds |
UT | --Unlimited Tax |
See Notes which are an integral part of the Financial Statements
Statement of Assets and Liabilities
February 28, 2005 (unaudited)
Assets: | | | | | | |
| | | | | | |
Total investments in securities, at value (identified cost $62,675,100) | | | | | $ | 63,724,158 |
| | | | | | |
Cash | | | | | | 64,000 |
| | | | | | |
Income receivable | | | | | | 700,254 |
| | | | | | |
Receivable for investments sold | | | | | | 2,277,808 |
|
TOTAL ASSETS | | | | | | 66,766,220 |
|
Liabilities: | | | | | | |
| | | | | | |
Payable for investments purchased | | $ | 2,050,000 | | | |
| | | | | | |
Payable for shares redeemed | | | 126 | | | |
| | | | | | |
Income distribution payable | | | 179,809 | | | |
| | | | | | |
Payable for shareholder services fee (Note 5) | | | 12,528 | | | |
| | | | | | |
Payable for Directors’/Trustees’ fees | | | 943 | | | |
| | | | | | |
Accrued expenses | | | 2,391 | | | |
|
TOTAL LIABILITIES | | | | | | 2,245,797 |
|
Net assets for 6,446,949 shares outstanding | | | | | $ | 64,520,423 |
|
Net Assets Consist of: | | | | | | |
| | | | | | |
Paid-in capital | | | | | $ | 63,431,113 |
| | | | | | |
Net unrealized appreciation of investments | | | | | | 1,049,058 |
| | | | | | |
Accumulated net realized gain on investments | | | | | | 40,246 |
| | | | | | |
Undistributed net investment income | | | | | | 6 |
|
TOTAL NET ASSETS | | | | | $ | 64,520,423 |
|
Net Asset Value, Offering Price and Redemption Proceeds Per Share: | | | | | | |
| | | | | | |
Net Asset Value Per Share ($64,520,423 ÷ 6,446,949 shares outstanding),
no par value, unlimited shares authorized | | | | | | $10.01 |
|
Offering Price Per Share (100/95.50 of $10.01)1 | | | | | | $10.48 |
|
Redemption Proceeds Per Share | | | | | | $10.01 |
|
1 See “What Do Shares Cost?” in the Prospectus.
See Notes which are an integral part of the Financial Statements
Statement of Operations
Six Months Ended February 28, 2005 (unaudited)
Investment Income: | | | | | | | | | | | | |
| | | | | | | | | | | | |
Interest | | | | | | | | | | $ | 1,338,006 | |
|
Expenses: | | | | | | | | | | | | |
| | | | | | | | | | | | |
Investment adviser fee (Note 5) | | | | | | $ | 133,627 | | | | | |
| | | | | | | | | | | | |
Administrative personnel and services fee (Note 5) | | | | | | | 74,384 | | | | | |
| | | | | | | | | | | | |
Custodian fees | | | | | | | 3,607 | | | | | |
| | | | | | | | | | | | |
Transfer and dividend disbursing agent fees and expenses | | | | | | | 13,115 | | | | | |
| | | | | | | | | | | | |
Directors’/Trustees’ fees | | | | | | | 1,136 | | | | | |
| | | | | | | | | | | | |
Auditing fees | | | | | | | 8,297 | | | | | |
| | | | | | | | | | | | |
Legal fees | | | | | | | 3,130 | | | | | |
| | | | | | | | | | | | |
Portfolio accounting fees | | | | | | | 26,909 | | | | | |
| | | | | | | | | | | | |
Distribution services fee (Note 5) | | | | | | | 83,517 | | | | | |
| | | | | | | | | | | | |
Shareholder services fee (Note 5) | | | | | | | 83,517 | | | | | |
| | | | | | | | | | | | |
Share registration costs | | | | | | | 9,920 | | | | | |
| | | | | | | | | | | | |
Printing and postage | | | | | | | 9,796 | | | | | |
| | | | | | | | | | | | |
Insurance premiums | | | | | | | 4,047 | | | | | |
| | | | | | | | | | | | |
Miscellaneous | | | | | | | 494 | | | | | |
|
TOTAL EXPENSES | | | | | | | 455,496 | | | | | |
|
Waivers (Note 5): | | | | | | | | | | | | |
| | | | | | | | | | | | |
Waiver of investment adviser fee | | $ | (91,025 | ) | | | | | | | | |
| | | | | | | | | | | | |
Waiver of administrative personnel and services fee | | | (12,063 | ) | | | | | | | | |
| | | | | | | | | | | | |
Waiver of distribution services fee | | | (83,517 | ) | | | | | | | | |
|
TOTAL WAIVERS | | | | | | | (186,605 | ) | | | | |
|
Net expenses | | | | | | | | | | | 268,891 | |
|
Net investment income | | | | | | | | | | | 1,069,115 | |
|
Realized and Unrealized Gain (Loss) on Investments: | | | | | | | | | | | | |
| | | | | | | | | | | | |
Net realized gain on investments | | | | | | | | | | | 173,798 | |
| | | | | | | | | | | | |
Net change in unrealized appreciation of investments | | | | | | | | | | | (853,852 | ) |
|
Net realized and unrealized loss on investments | | | | | | | | | | | (680,054 | ) |
|
Change in net assets resulting from operations | | | | | | | | | | $ | 389,061 | |
|
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
| | | Six Months
Ended
(unaudited)
2/28/2005 | | | |
Year Ended
8/31/2004 | |
|
Increase (Decrease) in Net Assets | | | | | | | | |
| | | | | | | | |
Operations: | | | | | | | | |
| | | | | | | | |
Net investment income | | $ | 1,069,115 | | | $ | 2,407,441 | |
| | | | | | | | |
Net realized gain on investments | | | 173,798 | | | | 242,028 | |
| | | | | | | | |
Net change in unrealized appreciation/depreciation of investments | | | (853,852 | ) | | | 229,527 | |
|
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | | | 389,061 | | | | 2,878,996 | |
|
Distributions to Shareholders: | | | | | | | | |
| | | | | | | | |
Distributions from net investment income | | | (1,067,312 | ) | | | (2,415,172 | ) |
| | | | | | | | |
Distributions from net realized gains | | | (236,002 | ) | | | (93,477 | ) |
|
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | | | (1,303,314 | ) | | | (2,508,649 | ) |
|
Share Transactions: | | | | | | | | |
| | | | | | | | |
Proceeds from sale of shares | | | 3,207,868 | | | | 5,732,692 | |
| | | | | | | | |
Net asset value of shares issued to shareholders in payment of distributions declared | | | 8,681 | | | | 943 | |
| | | | | | | | |
Cost of shares redeemed | | | (8,797,201 | ) | | | (15,585,894 | ) |
|
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | | | (5,580,652 | ) | | | (9,852,259 | ) |
|
Change in net assets | | | (6,494,905 | ) | | | (9,481,912 | ) |
|
Net Assets: | | | | | | | | |
| | | | | | | | |
Beginning of period | | | 71,015,328 | | | | 80,497,240 | |
|
End of period (including undistributed (distributions in excess of) net investment income of $6 and $(1,797), respectively) | | $ | 64,520,423 | | | $ | 71,015,328 | |
|
See Notes which are an integral part of the Financial Statements
Notes to Financial Statements
February 28, 2005 (unaudited)
1. ORGANIZATION
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 seven portfolios. The financial statements included herein are only those of Federated Vermont Municipal Income Fund (the “Fund”) a non-diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder’s interest is limited to the portfolio in which shares are held. The investment objective of the Fund is to provide current income which is exempt from federal regular income tax and the personal income taxes imposed by the state of Vermont and Vermont municipalities. Interest income from the Fund's investments may be subject to the federal alternative minimum tax for individuals and corporations.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles (GAAP) in the United States of America.
Investment Valuation
Municipal bonds are valued by an independent pricing service, taking into consideration yield, liquidity, risk, credit quality, coupon, maturity, type of issue, and any other factors or market data the pricing service deems relevant. Short-term securities are valued at the prices provided by an independent pricing service. However, short-term securities with remaining maturities of 60 days or less at the time of purchase may be valued at amortized cost, which approximates fair market value. Investments in other open-end regulated investment companies are valued at net asset value. Securities for which no quotations are readily available are valued at fair value as determined in accordance with procedures established by and under general supervision of the Board of Trustees (the “Trustees”).
Investment Income, Expenses and Distributions
Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at fair value.
Premium and Discount Amortization
All premiums and discounts on fixed income securities are amortized/accreted.
Federal Taxes
It is the Fund’s policy to comply with the Subchapter M provision of the Internal Revenue Code (the “Code”) and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary.
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
Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. In some cases, the issuer of restricted securities 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 restricted securities may be resold in the secondary market in transactions exempt from registration. Such 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 general supervision of the Trustees.
Additional information on restricted securities, excluding securities purchased under Rule 144A that have been deemed liquid by the Trustees, held at February 28, 2005, is as follows:
Security | | Acquisition Date | | Acquisition Cost |
|
Vermont Educational and Health Buildings Financing Agency, Revenue Bonds, Series1999 A, 3.57% (Marlboro College), 4/1/2019 | | 3/22/1999 | | $4,485,089 |
|
Vermont HFA, Revenue Bonds, Cabot Commons Limited Partnership, 2.75% (Vermont HFA MFH), 3/15/2005 | | 7/7/2004 | | $760,000 |
|
Vermont HFA, Revenue Bonds, Colonial West Limited Partnership, 2.75% (Vermont HFA MFH), 5/30/2005 | | 5/5/2004 | | $225,000 |
|
Vermont HFA, Revenue Bonds, Mountainview Street Jay Housing Limited Partnership, 2.75% (Vermont HFA MFH), 4/30/2005 | | 10/15/2003 | | $2,123,000 |
|
Use of Estimates
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.
Other
Investment transactions are accounted for on a trade date basis. Realized gains and losses from investment transactions are recorded on an identified cost basis.
3. SHARES OF BENEFICIAL INTEREST
The following table summarizes share activity:
| | Six Months
Ended
2/28/2005 | | | Year Ended
8/31/2004 | |
|
Shares sold | | 318,485 | | | 561,431 | |
| | | | | | |
Shares issued to shareholders in payment of distributions declared | | 864 | | | 93 | |
| | | | | | |
Shares redeemed | | (871,863 | ) | | (1,529,255 | ) |
|
NET CHANGE RESULTING FROM SHARE TRANSACTIONS | | (552,514 | ) | | (967,731 | ) |
|
4. FEDERAL TAX INFORMATION
At February 28, 2005, the cost of investments for federal tax purposes was $62,675,100. The net unrealized appreciation of investments for federal tax purposes was $1,049,058. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $1,404,165 and net unrealized depreciation from investments for those securities having an excess of cost over value of $355,107.
5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
Federated Investment Management Company, the Fund’s investment adviser (the “Adviser”), receives for its services an annual investment adviser fee equal to 0.40% of the Fund’s average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion.
Administrative Fee
Federated 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 all Federated funds as specified below:
Maximum
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. FAS may voluntarily choose to waive any portion of its fee. FAS can modify or terminate this voluntary waiver at any time at its sole discretion.
Distribution Services Fee
The Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the Fund’s shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses of up to 0.25% of average daily net assets, annually, to compensate FSC. FSC may voluntarily choose to waive any portion of its fee. FSC can modify or terminate this voluntary waiver at any time at its sole discretion. Rather than paying investment professionals directly, the Fund may pay fees to FSC and FSC will use the fees to compensate investment professionals. For the six months ended February 28, 2005, FSC did not retain any fees paid by the Fund.
Shareholder Services Fee
Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company (FSSC), the Fund will pay FSSC up to 0.25% of the average daily net assets of the Fund’s Shares for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion. Rather than paying investment professionals directly, the Fund may pay fees to FSSC and FSSC will use the fees to compensate investment professionals. For the six months ended February 28, 2005, FSSC did not retain any fees paid by the Fund.
General
Certain of the Officers and Trustees of the Fund are Officers and Directors or Trustees of the above companies.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations (and in-kind contributions), for the six months ended February 28, 2005, were as follows:
|
Purchases | | $ | 17,616,249 |
|
Sales | | $ | 22,877,953 |
|
7. CONCENTRATION OF CREDIT RISK
Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at February 28, 2005, 55.7% 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 22.6% of total investments.
8. LEGAL PROCEEDINGS
Beginning in October 2003, Federated Investors, Inc. and various subsidiaries thereof (including the advisers and distributor for various investment companies, collectively, “Federated”), along with various investment companies sponsored by Federated (“Funds”) were named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland seeking damages of unspecified amounts. 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 engaged in illegal and improper trading practices including market timing and late trading in concert with certain institutional traders, which allegedly caused financial injury to the mutual fund shareholders. Federated and various Funds have also been named as defendants in several additional lawsuits, the majority of which are now pending in the United States District Court for the Western District of Pennsylvania, alleging, among other things, excessive advisory and Rule 12b-1 fees, and seeking damages of unspecified amounts. The Board of the Funds has retained the law firm of Dickstein Shapiro Morin & Oshinsky LLP to represent the Funds in these lawsuits. Federated and the Funds, and their respective counsel, are reviewing the allegations and will respond appropriately. Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these recent lawsuits and future potential similar suits is uncertain. Although we do not believe that these lawsuits will have a material adverse effect on the Funds, there can be no assurance that these suits, the ongoing adverse publicity and/or other developments resulting from the regulatory investigations will not result in increased Fund redemptions, reduced sales of Fund shares, or other adverse consequences for the Funds.
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
A description of the policies and procedures that the Fund uses to determine how to vote proxies 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 through Federated’s website. Go to FederatedInvestors.com, select “Products,” select the “Prospectuses and Regulatory Reports” link, then select the Fund to access the link to Form N-PX. This information is also available from the EDGAR database on the SEC’s website 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 website 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 website at FederatedInvestors.com by clicking on “Portfolio Holdings” and selecting the name of the Fund, or by selecting the name of the Fund and clicking on “Portfolio Holdings.” You must register on the website the first time you wish to access this information.
Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including 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 DELIVERY
In 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.
Federated Investors
World-Class Investment Manager
Federated Vermont Municipal Income Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
Cusip 313923872
32272 (4/05)
Federated is a registered mark of Federated Investors, Inc.
2005 ©Federated Investors, Inc.
Item 2. Code of Ethics
Not Applicable
Item 3. Audit Committee Financial Expert
Not Applicable
Item 4. Principal Accountant Fees and Services
Not Applicable
Item 5. Audit Committee of Listed Registrants
Not Applicable
Item 6. Schedule of Investments
Not Applicable
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies
Not Applicable
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not Applicable
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers
Not Applicable
Item 10. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 11. Controls and Procedures
(a) The registrant's President and Treasurer have concluded that the
registrant's disclosure controls and procedures (as defined in rule
30a-3(c) under the Act) are effective in design and operation and are
sufficient to form the basis of the certifications required by Rule 30a-(2)
under the Act, based on their evaluation of these disclosure controls and
procedures within 90 days of the filing date of this report on Form N-CSR.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in rule 30a-3(d) under the Act) during the last
fiscal quarter that have materially affected, or are reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
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 J. Thomas, Principal Financial Officer
(insert name and title)
Date April 19, 2005
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, Principal Executive Officer
Date April 19, 2005
By /S/ Richard J. Thomas, Principal Financial Officer
Date April 19, 2005
