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
4000 Ericsson Drive
Warrendale, PA 15086-7561
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
(Notices should be sent to the Agent for Service)
Date of Fiscal Year End: 08/31/2012
Date of Reporting Period: Six months ended 02/29/2012
Item 1. Reports to Stockholders
| Semi-Annual Shareholder Report | ||
| February 29, 2012 | ||
| Share Class | Ticker |
| A | MMIFX |
Federated Michigan Intermediate Municipal Trust
Fund Established 1991
A Portfolio of Federated Municipal Securities Income Trust
Dear Valued Shareholder,
I am pleased to present the Semi-Annual Shareholder Report for your fund covering the period from September 1, 2011 through February 29, 2012. This report includes a complete listing of your fund's holdings, performance information and financial statements along with other important fund information.
In addition, our website, FederatedInvestors.com, offers easy access to Federated resources that include timely fund updates, economic and market insights from our investment strategists, and financial planning tools. We invite you to register to take full advantage of its capabilities.
Thank you for investing with Federated. I hope you find this information useful and look forward to keeping you informed.
Sincerely,
J. Christopher Donahue, President
May Lose Value No Bank GuaranteeCONTENTS
Portfolio of Investments Summary Table (unaudited)
At February 29, 2012, the Fund's sector composition1 was as follows:
| Sector Composition | Percentage of Total Net Assets |
| General Obligation — Local | 28.1% |
| Hospital | 20.4% |
| Education | 9.1% |
| Water & Sewer | 8.7% |
| Transportation | 8.5% |
| Special Tax | 6.2% |
| Industrial Development Bond/Pollution Control Revenue | 5.8% |
| General Obligation — State | 4.6% |
| Public Power | 3.7% |
| Multi-Family Housing | 2.1% |
| Other2 | 4.4% |
| Other Assets and Liabilities — Net3 | (1.6)% |
| TOTAL | 100.0% |
| 1 | Sector classifications, and the assignment of holdings to such sectors, are based upon the economic sector and/or revenue source of the underlying obligor, as determined by the Fund's Adviser. For securities that have been enhanced by a third-party, including bond insurers and banks, sector classifications are based upon the economic sector and/or revenue source of the underlying obligor, as determined by the Fund's Adviser. |
| 2 | For purposes of this table, sector classifications constitute 97.2% of the Fund's total net assets. Remaining sectors have been aggregated under the designation “Other.” |
| 3 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
February 29, 2012 (unaudited)
| Principal Amount | Value |
| MUNICIPAL BONDS – 98.6% |
| Michigan – 98.6% |
| $1,000,000 | Anchor Bay, MI School District, UT Refunding GO Bonds (Series 2012), 5.00% (Q-SBLF GTD), 5/1/2020 | 1,193,010 |
| 1,300,000 | Ann Arbor, MI Public School District, School Building & Site UT GO Bonds, 5.00% (National Public Finance Guarantee Corporation INS), 5/1/2019 | 1,452,789 |
| 955,000 | Ann Arbor, MI, Court and Police Facilities LT GO Capital Improvement Bonds, 4.75%, 5/1/2025 | 1,076,992 |
| 1,125,000 | Armada, MI Area Schools, School Building & Site UT GO Bonds, 5.00% (National Public Finance Guarantee Corporation INS), 5/1/2021 | 1,233,810 |
| 1,000,000 | Avondale, MI School District, Refunding UT GO Bonds (Series 2009), 4.50% (Q-SBLF GTD)/(Assured Guaranty Corp. INS), 5/1/2018 | 1,150,790 |
| 1,000,000 | Battle Creek, MI School District, School Building & Site UT GO Bonds, 5.00% (Assured Guaranty Municipal Corp. INS), 5/1/2022 | 1,106,940 |
| 725,000 | Berkley, MI School District, Refunding UT GO Bonds (Series 2009), 5.00% (Q-SBLF GTD)/(Assured Guaranty Corp. INS), 5/1/2019 | 855,826 |
| 1,690,000 | Bishop, MI International Airport Authority, (Series 2010A), 4.50% (Assured Guaranty Municipal Corp. INS), 12/1/2023 | 1,859,659 |
| 1,000,000 | Brandon School District, MI, UT GO School Building and Site Bonds, 5.00% (Assured Guaranty Municipal Corp. INS), 5/1/2019 | 1,117,530 |
| 1,215,000 | Bridgeport Spaulding, MI Community School District, UT GO Bonds, 5.50% (United States Treasury PRF 5/1/2012@100), 5/1/2015 | 1,226,178 |
| 450,000 | Byron Center, MI Public Schools, School Building & Site UT GO Bonds, 5.00% (Q-SBLF GTD), 5/1/2021 | 536,278 |
| 100,000 | Canton Charter Township, MI, LT GO Bonds, 5.00% (Assured Guaranty Municipal Corp. INS), 4/1/2014 | 108,824 |
| 1,000,000 | Central Michigan University Board of Trustees, General Revenue Refunding Bonds (Series 2009), 5.00%, 10/1/2023 | 1,146,140 |
| 500,000 | Chippewa Valley, MI Schools, UT GO Refunding Bonds, 5.00% (Q-SBLF GTD)/(Assured Guaranty Municipal Corp. INS), 5/1/2014 | 546,915 |
| 570,000 | Coldwater, MI Electric Utility, Revenue Refunding Bonds, 4.50% (Syncora Guarantee, Inc. INS), 8/1/2013 | 596,020 |
| 1,250,000 | Coopersville, MI Public Schools, School Building & Site UT GO Bonds, 5.00% (Assured Guaranty Municipal Corp. INS), 5/1/2022 | 1,359,275 |
| 1,500,000 | Detroit, MI Sewage Disposal System, Revenue Refunding Bonds, 5.50% (National Public Finance Guarantee Corporation INS), 7/1/2016 | 1,697,745 |
| 1,000,000 | Detroit, MI Water Supply System, Revenue Bonds Series A, 5.00% (Assured Guaranty Municipal Corp. INS), 7/1/2015 | 1,104,940 |
| 1,000,000 | Detroit, MI Water Supply System, Senior Lien Revenue Bonds (Series 2005-B), 5.50% (Berkshire Hathaway Assurance Corp. INS), 7/1/2020 | 1,174,500 |
| Principal Amount | Value |
| $2,000,000 | Detroit, MI Water Supply System, Senior Lien Revenue Bonds (Series 2006A), 5.00% (Assured Guaranty Municipal Corp. INS), 7/1/2018 | 2,225,660 |
| 2,000,000 | Dickinson County, MI EDC, Refunding PCRBs (Series 2004A), 4.80% (International Paper Co.), 11/1/2018 | 2,086,160 |
| 1,000,000 | Eastern Michigan University Board of Regents, General Revenue Bonds (Series 2009C), 5.00% (Assured Guaranty Corp. INS)/(Q-SBLF GTD), 2/15/2023 | 1,137,780 |
| 250,000 | Essexville-Hampton, MI Public Schools, UT GO Refunding Bonds, 4.00% (Assured Guaranty Municipal Corp. INS), 5/1/2014 | 262,465 |
| 1,000,000 | Ferris State University, MI, General Revenue Bonds (Series 2009), 5.00% (Assured Guaranty Corp. INS), 10/1/2020 | 1,165,840 |
| 2,000,000 | Jackson County, MI Hospital Finance Authority, Hospital Revenue Refunding Bonds (Series 2006C), 5.00% (Allegiance Health)/(Assured Guaranty Corp. INS), 6/1/2026 | 2,229,480 |
| 1,000,000 | Jenison, MI Public Schools, School Building & Site Bonds (Series 2011B), 5.00%, 5/1/2021 | 1,182,780 |
| 2,130,000 | Kalamazoo, MI Hospital Finance Authority, Hospital Revenue Bonds (Series 2006), 5.00% (Bronson Methodist Hospital)/(Assured Guaranty Municipal Corp. INS), 5/15/2019 | 2,510,525 |
| 1,000,000 | Kalamazoo, MI Public Schools, Refunding Building & Site UT GO Bonds, 5.00% (Assured Guaranty Municipal Corp. INS), 5/1/2018 | 1,147,440 |
| 1,000,000 | Kalamazoo, MI Regional Educational Services Agency, UT GO School Building and Site Bonds, 5.00%, 5/1/2019 | 1,170,440 |
| 450,000 | Kalamazoo, MI Water Revenue, Revenue Refunding Bonds, 5.00% (AMBAC INS), 9/1/2014 | 497,858 |
| 510,000 | Kalamazoo, MI Water Revenue, Revenue Refunding Bonds, 5.00% (AMBAC INS), 9/1/2015 | 581,293 |
| 1,785,000 | Kent County, MI Airport Revenue, LT GO Airport Revenue Bonds (Series 2007), 5.00% (Gerald R. Ford International Airport), 1/1/2021 | 2,002,716 |
| 1,345,000 | Kent County, MI, Capital Improvement LT GO Bonds (Series 2004A), 5.00%, 12/1/2020 | 1,494,537 |
| 1,750,000 | Kent County, MI, LT GO Bonds (Series 2009), 5.00%, 1/1/2025 | 1,984,553 |
| 1,500,000 | Kent Hospital Finance Authority, MI, Revenue Refunding Bonds (Series 2011A), 5.00% (Spectrum Health), 11/15/2022 | 1,762,800 |
| 1,000,000 | Kentwood, MI Public Schools, Refunding UT GO Bonds (Series 2012), 4.00%, 5/1/2022 | 1,119,090 |
| 1,010,000 | Lake Superior State University, MI, General Revenue Refunding Bonds (Series 2012), 4.00% (Assured Guaranty Municipal Corp. INS), 11/15/2020 | 1,090,426 |
| 1,900,000 | Lansing, MI Board of Water & Light, Utility System Revenue Bonds (Series 2011A), 5.00%, 7/1/2024 | 2,245,629 |
| 1,000,000 | Lansing, MI School District, Refunding School Building & Site UT GO Bonds, 5.00% (Q-SBLF GTD), 5/1/2020 | 1,090,030 |
| Principal Amount | Value |
| $1,200,000 | Marysville, MI Public School District, School Building & Site UT GO Bonds (Series 2007), 5.00% (Assured Guaranty Municipal Corp. INS), 5/1/2022 | 1,328,328 |
| 1,000,000 | Michigan Municipal Bond Authority, Revenue Bonds (Series 2005B), 5.00% (Detroit, MI City School District)/(Assured Guaranty Municipal Corp. INS), 6/1/2015 | 1,078,960 |
| 1,000,000 | Michigan Municipal Bond Authority, Revenue Bonds (Series 2007B), 5.00% (AMBAC INS), 12/1/2013 | 1,040,010 |
| 1,525,000 | Michigan Municipal Bond Authority, Revenue Bonds, 5.00% (Clean Water Revolving Fund), 10/1/2017 | 1,862,711 |
| 1,000,000 | Michigan Public Power Agency, Combustion Turbine No. 1 Project Refunding Revenue Bonds (Series 2011A), 5.00% (Assured Guaranty Municipal Corp. INS), 1/1/2022 | 1,153,390 |
| 1,000,000 | Michigan State Building Authority, Facilities Program Revenue Bonds (Series 2009II), 5.00% (Assured Guaranty Corp. INS), 10/15/2022 | 1,155,550 |
| 1,000,000 | Michigan State Building Authority, Revenue Refunding Bonds (Series 2009I), 5.25% (Assured Guaranty Corp. INS), 10/15/2024 | 1,149,490 |
| 2,000,000 | Michigan State Comprehensive Transportation Fund, Refunding Bonds (Series 2009), 5.25%, 5/15/2019 | 2,414,420 |
| 1,000,000 | Michigan State Department of Transportation, Grant Anticipation Bonds, 4.25% (Assured Guaranty Municipal Corp. INS), 9/15/2012 | 1,020,530 |
| 2,485,000 | Michigan State Department of Transportation, Grant Anticipation Bonds, 5.25% (Assured Guaranty Municipal Corp. INS), 9/15/2021 | 2,845,176 |
| 1,970,000 | Michigan State Financial Authority, Revenue Bonds (Series 2006A), 5.00% (Trinity Healthcare Credit Group), 12/1/2026 | 2,113,495 |
| 1,275,000 | Michigan State Hospital Finance Authority, Hospital Revenue & Refunding Bonds (Series 2007A), 5.00% (Oakwood Obligated Group), 7/15/2018 | 1,407,523 |
| 1,000,000 | Michigan State Hospital Finance Authority, Hospital Revenue and Refunding Bonds (Series 2006A), 5.00% (Henry Ford Health System, MI), 11/15/2021 | 1,076,100 |
| 1,000,000 | Michigan State Hospital Finance Authority, Hospital Revenue Bonds (Series 2006A), 5.00% (MidMichigan Obligated Group), 4/15/2026 | 1,042,060 |
| 1,300,000 | Michigan State Hospital Finance Authority, Refunding Revenue Bonds (Series 2002A), 5.50% (Crittenton Hospital Medical Center), 3/1/2016 | 1,316,055 |
| 1,000,000 | Michigan State Hospital Finance Authority, Refunding Revenue Bonds (Series 2010 F-3), 2.625% TOBs (Ascension Health Credit Group), Mandatory Tender 6/30/2014 | 1,043,810 |
| 750,000 | Michigan State Hospital Finance Authority, Refunding Revenue Bonds, 5.00% (Sparrow Obligated Group, MI), 11/15/2022 | 810,322 |
| 690,000 | Michigan State Hospital Finance Authority, Revenue Bonds (Series 1993P), 5.375% (Sisters of Mercy Health System)/(United States Treasury COL)/(Original Issue Yield: 5.55%), 8/15/2014 (National Public Financing Guarantee Corporation INS) | 729,937 |
| Principal Amount | Value |
| $2,000,000 | Michigan State Hospital Finance Authority, Revenue Bonds (Series 2005C), 5.00% (McLaren Health Care Corp.), 8/1/2020 | 2,139,560 |
| 2,000,000 | Michigan State Hospital Finance Authority, Revenue Bonds (Series 2010B), 5.00% (Ascension Health Credit Group), 11/15/2024 | 2,289,740 |
| 250,000 | Michigan State Hospital Finance Authority, Revenue Refunding Bonds (Series A), 5.00% (Henry Ford Health System, MI), 11/15/2014 | 270,688 |
| 500,000 | Michigan State Hospital Finance Authority, Revenue Refunding Bonds (Series A), 5.00% (Henry Ford Health System, MI), 11/15/2025 | 525,765 |
| 1,000,000 | Michigan State Hospital Finance Authority, Revenue Refunding Bonds (Series A), 5.00% (Oakwood Obligated Group), 7/15/2025 | 1,043,140 |
| 250,000 | Michigan State Hospital Finance Authority, Revenue Refunding Bonds, 5.00% (Sparrow Obligated Group, MI), 11/15/2012 | 257,417 |
| 2,000,000 | Michigan State Housing Development Authority, MFH Revenue Bonds (Series 2010A), 4.375%, 10/1/2025 | 2,080,560 |
| 195,000 | Michigan State Housing Development Authority, MFH Revenue Bonds (Series B), 4.00% (Assured Guaranty Municipal Corp. INS), 10/1/2012 | 197,157 |
| 145,000 | Michigan State Housing Development Authority, MFH Revenue Bonds (Series B), 4.00% (Assured Guaranty Municipal Corp. INS)/(GO of Authority LOC), 4/1/2012 | 145,273 |
| 210,000 | Michigan State Housing Development Authority, MFH Revenue Bonds (Series B), 4.05% (Assured Guaranty Municipal Corp. INS), 10/1/2013 | 214,985 |
| 100,000 | Michigan State Housing Development Authority, MFH Revenue Bonds (Series B), 4.05% (Assured Guaranty Municipal Corp. INS), 4/1/2013 | 101,691 |
| 1,000,000 | Michigan State Strategic Fund, LO Refunding Revenue Bonds, 7.00% (Detroit Edison Co.)/(AMBAC INS), 5/1/2021 | 1,304,290 |
| 820,000 | Michigan State Strategic Fund, Revenue Bonds (Series 2004), 5.00% (NSF International), 8/1/2013 | 855,842 |
| 2,000,000 | Michigan State Strategic Fund, Revenue Bonds, 4.25% TOBs (Republic Services, Inc.), Mandatory Tender 4/1/2014 | 2,049,180 |
| 130,000 | Michigan State Strategic Fund, Revenue Bonds, 5.30% (Porter Hills Presbyterian Village, Inc.)/(Original Issue Yield: 5.422%), 7/1/2018 | 130,160 |
| 1,000,000 | Michigan State Strategic Fund, Solid Disposal LT Obligation Refunding Revenue Bonds (Series 2002), 4.625% (Waste Management, Inc.), 12/1/2012 | 1,027,200 |
| 2,600,000 | Michigan State Trunk Line, Refunding Revenue Bonds (Series 2009), 5.00%, 11/1/2020 | 3,149,692 |
| 1,000,000 | Michigan State Trunk Line, Revenue Bonds, 5.00% (FGIC and National Public Finance Guarantee Corporation INS), 11/1/2014 | 1,118,870 |
| 1,000,000 | Michigan State Trunk Line, Revenue Bonds, 5.00% (National Public Finance Guarantee Corporation INS), 9/1/2014 | 1,112,170 |
| 500,000 | Michigan State Trunk Line, State Trunk Line Fund Bonds (Series 2011), 5.00%, 11/15/2022 | 614,870 |
| 500,000 | Michigan State Trunk Line, State Trunk Line Fund Bonds (Series 2011), 5.00%, 11/15/2023 | 609,000 |
| Principal Amount | Value |
| $2,000,000 | Michigan State, Environmental Program & Refunding UT GO Bonds (Series 2008A), 5.00%, 5/1/2016 | 2,319,240 |
| 1,000,000 | Michigan Strategic Fund, LT Obligation Refunding Revenue Bonds (Series 2008ET-2), 5.50% TOBs (Detroit Edison Co.), Mandatory Tender 8/1/2016 | 1,158,200 |
| 1,000,000 | Michigan Strategic Fund, LT Obligation Revenue Bonds (Series 2011), 5.25% (Michigan State), 10/15/2022 | 1,169,120 |
| 2,000,000 | Michigan Technological University Board of Control, General Revenue & Revenue Refunding Bonds (Series 2008), 5.25% (Assured Guaranty Corp. INS), 10/1/2018 | 2,408,540 |
| 500,000 | Northview Michigan Public School District, Refunding UT GO Bonds, 5.00% (Assured Guaranty Municipal Corp. INS), 5/1/2019 | 585,220 |
| 1,000,000 | Oakland County, MI EDC, Revenue Refunding Bonds, 4.00% (Cranbrook Educational Community), 11/1/2021 | 1,078,950 |
| 525,000 | Ovid Elsie, MI Area Schools, UT GO Refunding Bonds, 4.00% (Q-SBLF GTD)/(Assured Guaranty Municipal Corp. INS), 5/1/2015 | 569,415 |
| 1,000,000 | Regents of University of Michigan, General Revenue Bonds (Series 2010C), 4.00%, 4/1/2022 | 1,142,650 |
| 550,000 | Rochester Hills, MI, Refunding UT GO Bonds (Series 2010), 4.50%, 4/1/2021 | 645,915 |
| 1,130,000 | Romulus, MI Tax Increment Finance Authority, Recreation Center LT GO Bonds, 5.00% (Assured Guaranty Municipal Corp. INS), 11/1/2022 | 1,231,293 |
| 1,100,000 | Roseville, MI Community Schools, School Building & Site Refunding UT GO Bonds, 5.00% (Assured Guaranty Municipal Corp. INS), 5/1/2021 | 1,204,478 |
| 1,670,000 | Saginaw County, MI Water Supply System, Revenue Bonds (Series 2011A), 4.75% (Assured Guaranty Municipal Corp. INS), 7/1/2025 | 1,861,816 |
| 1,500,000 | Saginaw, MI Hospital Finance Authority, Hospital Revenue Refunding Bonds (Series 2010H), 5.00% (Covenant Medical Center, Inc.)/(Original Issue Yield: 5.07%), 7/1/2030 | 1,537,935 |
| 675,000 | South Lyon, MI Community School District, UT GO Bonds (Series II), 5.25% (United States Treasury PRF 5/1/2014@100), 5/1/2018 | 747,023 |
| 1,350,000 | Thornapple Kellogg, MI School District, School Building & Site Refunding UT GO Bonds, 5.00% (National Public Finance Guarantee Corporation INS), 5/1/2022 | 1,494,369 |
| 500,000 | Utica, MI Community Schools, School Building and Site Refunding UT GO Bonds, 5.00% (National Public Finance Guarantee Corporation INS), 5/1/2017 | 591,800 |
| 750,000 | Warren, MI Consolidated School District, UT GO Refunding Bonds, 5.00% (Assured Guaranty Municipal Corp. INS), 5/1/2016 | 872,183 |
| 2,000,000 | Wayne County, MI Airport Authority, Airport Revenue Refunding Bonds (Series 2010C), 5.00%, 12/1/2021 | 2,254,340 |
| 2,000,000 | Wayne County, MI Airport Authority, Airport Revenue Refunding Bonds (Series 2011A-B), 5.00%, 12/1/2021 | 2,219,140 |
| Principal Amount | Value |
| $1,000,000 | Wayne State University, MI, General Revenue Refunding Bonds (Series 2008), 5.00% (Assured Guaranty Municipal Corp. INS), 11/15/2019 | 1,158,900 |
| 1,000,000 | Western Michigan University, General Revenue Refunding Bonds (Series 2009), 5.25% (Assured Guaranty Corp. INS), 11/15/2019 | 1,196,880 |
| 600,000 | Wyandotte, MI Electric Authority, Revenue Bonds (Series A), 5.00% (National Public Finance Guarantee Corporation INS), 10/1/2012 | 615,300 |
| 1,000,000 | Ypsilanti, MI School District, UT GO Bonds, 5.00% (National Public Finance Guarantee Corporation INS), 5/1/2023 | 1,087,620 |
| TOTAL MUNICIPAL BONDS (IDENTIFIED COST $115,746,622) | 124,507,107 |
| SHORT-TERM MUNICIPALS – 3.0%1 |
| Michigan – 3.0% |
| 1,350,000 | Michigan Strategic Fund, (Series 2010) Weekly VRDNs (CS Facilities LLC)/(Fifth Third Bank, Cincinnati LOC), 0.270%, 3/1/2012 | 1,350,000 |
| 500,000 | St. Joseph, MI Hospital Finance Authority, (Series 2002) Weekly VRDNs (Lakeland Hospitals at Niles & St. Joseph Obligated Group)/(Assured Guaranty Municipal Corp. INS)/(JPMorgan Chase Bank, N.A. LIQ), 0.160%, 3/1/2012 | 500,000 |
| 2,000,000 | St. Joseph, MI Hospital Finance Authority, (Series 2006) Weekly VRDNs (Lakeland Hospitals at Niles & St. Joseph Obligated Group)/(Assured Guaranty Municipal Corp. INS)/(JPMorgan Chase Bank, N.A. LIQ), 0.160%, 3/1/2012 | 2,000,000 |
| TOTAL SHORT-TERM MUNICIPALS (AT AMORTIZED COST) | 3,850,000 |
| TOTAL MUNICIPAL INVESTMENTS — 101.6% (IDENTIFIED COST $119,596,622)2 | 128,357,107 |
| OTHER ASSETS AND LIABILITIES - NET — (1.6)%3 | (1,971,130) |
| TOTAL NET ASSETS — 100% | $126,385,977 |
Securities that are subject to the federal alternative minimum tax (AMT) represent 5.6% of the Fund's portfolio as calculated based upon total market value.
| 1 | Current rate and next reset date shown for Variable Rate Demand Notes. |
| 2 | The cost of investments for federal tax purposes amounts to $119,584,783. |
| 3 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Note: The categories of investments are shown as a percentage of total net assets at February 29, 2012.
Semi-Annual Shareholder Report
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:Level 1 — quoted prices in active markets for identical securities, including investment companies with daily net asset values, if applicable.
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.
Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
As of February 29, 2012, all investments of the Fund utilized Level 2 inputs in valuing the Fund's assets carried at fair value.
The following acronyms are used throughout this portfolio:
| AMBAC | — American Municipal Bond Assurance Corporation |
| COL | — Collateralized |
| EDC | — Economic Development Corporation |
| FGIC | — Financial Guaranty Insurance Company |
| GO | — General Obligation |
| GTD | — Guaranteed |
| INS | — Insured |
| LIQ | — Liquidity Agreement |
| LO | — Limited Obligation |
| LOC | — Letter of Credit |
| LT | — Limited Tax |
| MFH | — Multi-Family Housing |
| PCRBs | — Pollution Control Revenue Bonds |
| PRF | — Prerefunded |
| Q-SBLF | — Qualified School Bond Loan Fund |
| TOBs | — Tender Option Bonds |
| UT | — Unlimited Tax |
| VRDNs | — Variable Rate Demand Notes |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportFinancial Highlights – Class A Shares
(For a Share Outstanding Throughout Each Period)
| Six Months Ended (unaudited) 2/29/2012 | Year Ended August 31, | ||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |
| Net Asset Value, Beginning of Period | $11.17 | $11.27 | $10.80 | $10.84 | $10.84 | $11.03 |
| Income From Investment Operations: | |||||
| Net investment income | 0.19 | 0.39 | 0.40 | 0.42 | 0.45 | 0.46 |
| Net realized and unrealized gain (loss) on investments and futures contracts | 0.31 | (0.10) | 0.47 | (0.04) | (0.00)1 | (0.19) |
| TOTAL FROM INVESTMENT OPERATIONS | 0.50 | 0.29 | 0.87 | 0.38 | 0.45 | 0.27 |
| Less Distributions: | |||||
| Distributions from net investment income | (0.19) | (0.39) | (0.40) | (0.42) | (0.45) | (0.46) |
| Net Asset Value, End of Period | $11.48 | $11.17 | $11.27 | $10.80 | $10.84 | $10.84 |
| Total Return2 | 4.47% | 2.74% | 8.25% | 3.69% | 4.19% | 2.49% |
| Ratios to Average Net Assets: | |||||
| Net expenses | 0.61%3 | 0.54% | 0.54% | 0.54% | 0.53% | 0.50% |
| Net investment income | 3.30%3 | 3.60% | 3.66% | 3.98% | 4.10% | 4.21% |
| Expense waiver/reimbursement4 | 0.36%3 | 0.38% | 0.35% | 0.31% | 0.32% | 0.34% |
| Supplemental Data: | |||||
| Net assets, end of period (000 omitted) | $126,386 | $124,626 | $160,614 | $164,536 | $155,117 | $151,877 |
| Portfolio turnover | 6% | 16% | 21% | 12% | 13% | 17% |
| 1 | Represents less than $0.01. |
| 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 expense decrease is reflected in both the net expense and net investment income ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportStatement of Assets and Liabilities
| Assets: |
| Total investments in securities, at value (identified cost $119,596,622) | $128,357,107 |
| Cash | 49,909 |
| Income receivable | 1,543,731 |
| Receivable for shares sold | 130,675 |
| TOTAL ASSETS | 130,081,422 |
| Liabilities: |
| Payable for investments purchased | $3,398,689 |
| Income distribution payable | 132,261 |
| Payable for shares redeemed | 107,051 |
| Payable for shareholder services fee (Note 5) | 21,129 |
| Payable for Directors'/Trustees' fees | 443 |
| Accrued expenses | 35,872 |
| TOTAL LIABILITIES | 3,695,445 |
| Net assets for 11,013,055 shares outstanding | $126,385,977 |
| Net Assets Consist of: |
| Paid-in capital | $117,726,996 |
| Net unrealized appreciation of investments | 8,760,485 |
| Accumulated net realized loss on investments | (104,121) |
| Undistributed net investment income | 2,617 |
| TOTAL NET ASSETS | $126,385,977 |
| Net Asset Value, Offering Price and Redemption Proceeds Per Share: |
| Net asset value per share ($126,385,977 ÷ 11,013,055 shares outstanding), no par value, unlimited shares authorized | $11.48 |
| Offering price per share (100/97.00 of $11.48) | $11.84 |
| Redemption proceeds per share | $11.48 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportSix Months Ended February 29, 2012 (unaudited)
| Investment Income: |
| Interest | $2,395,129 |
| Expenses: |
| Investment adviser fee (Note 5) | $245,063 |
| Administrative fee (Note 5) | 74,693 |
| Custodian fees | 5,550 |
| Transfer and dividend disbursing agent fees and expenses | 29,999 |
| Directors'/Trustees' fees | 1,340 |
| Auditing fees | 11,935 |
| Legal fees | 3,415 |
| Portfolio accounting fees | 44,754 |
| Shareholder services fee (Note 5) | 134,713 |
| Account administration fee | 15,648 |
| Share registration costs | 12,940 |
| Printing and postage | 9,675 |
| Insurance premiums | 2,083 |
| Miscellaneous | 550 |
| TOTAL EXPENSES | 592,358 |
| Waivers and Reimbursement (Note 5): |
| Waiver of investment adviser fee | $(209,397) |
| Waiver of administrative fee | (11,836) |
| Reimbursement of other operating expenses | (434) |
| TOTAL WAIVERS AND REIMBURSEMENT | (221,667) |
| Net expenses | 370,691 |
| Net investment income | 2,024,438 |
| Realized and Unrealized Gain on Investments: |
| Net realized gain on investments | 32,797 |
| Net change in unrealized appreciation of investments | 3,365,927 |
| Net realized and unrealized gain on investments | 3,398,724 |
| Change in net assets resulting from operations | $5,423,162 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportStatement of Changes in Net Assets
| Six Months Ended (unaudited) 2/29/2012 | Year Ended 8/31/2011 |
| Increase (Decrease) in Net Assets |
| Operations: |
| Net investment income | $2,024,438 | $4,863,545 |
| Net realized gain on investments | 32,797 | 955,944 |
| Net change in unrealized appreciation/depreciation of investments | 3,365,927 | (3,291,917) |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 5,423,162 | 2,527,572 |
| Distributions to Shareholders: |
| Distributions from net investment income | (2,022,613) | (4,860,756) |
| Share Transactions: |
| Proceeds from sale of shares | 9,330,504 | 22,585,441 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 1,132,908 | 2,195,813 |
| Cost of shares redeemed | (12,104,443) | (58,435,862) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | (1,641,031) | (33,654,608) |
| Change in net assets | 1,759,518 | (35,987,792) |
| Net Assets: |
| Beginning of period | 124,626,459 | 160,614,251 |
| End of period (including undistributed net investment income of $2,617 and $792, respectively) | $126,385,977 | $124,626,459 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report1. 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 five 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. Each portfolio pays its own expenses. The Fund offers one class of shares: Class A Shares. 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 Michigan and Michigan municipalities. Interest income from the Fund's investments may be subject to the federal alternative minimum tax (AMT) 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 U.S. generally accepted accounting principles (GAAP).
Investment Valuation
In calculating its net asset value (NAV), the Fund generally values investments as follows:
- Fixed-income securities acquired with remaining maturities greater than 60 days are fair valued using price evaluations provided by a pricing service approved by the Fund's Board of Trustees (the “Trustees”).
- Fixed-income securities acquired with remaining maturities of 60 days or less are valued at their cost (adjusted for the accretion of any discount or amortization of any premium), which approximates market value.
- Derivative contracts listed on exchanges are valued at their reported settlement or closing price.
- Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Trustees.
- Shares of other mutual funds are valued based upon their reported NAVs.
- For securities that are fair valued in accordance with procedures established by and under the general supervision of the Trustees, certain factors may be considered such as: the purchase price of the security, information obtained by contacting the issuer, analysis of the issuer's financial statements or other available documents, fundamental analytical data, the nature and duration of restrictions on disposition, the movement of the market in which the security is normally traded and public trading in similar securities of the issuer or comparable issuers.
If the Fund cannot obtain a price or price evaluation from a pricing service for an investment, the Fund may attempt to value the investment based upon the mean of bid and asked quotations or fair value the investment based on price evaluations, from one or more dealers. If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, the Fund uses the fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund could purchase or sell an investment at the price used to calculate the Fund's NAV.
Semi-Annual Shareholder Report
Fair Valuation and Significant Events ProceduresThe Trustees have authorized the use of pricing services to provide evaluations of the current fair value of certain investments for purposes of calculating the NAV. Factors considered by pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and asked for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for other types of fixed-income securities and OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Trustees.
The Trustees also have adopted procedures requiring an investment to be priced at its fair value whenever the Adviser determines that a significant event affecting the value of the investment has occurred between the time as of which the price of the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both an affirmative expectation that the investment's value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security is traded, or after the time of a price evaluation provided by a pricing service or a dealer, include:
- With respect to price evaluations of fixed-income securities determined before the close of regular trading on the NYSE, actions by the Federal Reserve Open Market Committee and other significant trends in U.S. fixed-income markets;
- Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded; and
- Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, a natural disaster affecting the issuer's operations or regulatory changes or market developments affecting the issuer's industry.
The Fund may seek to obtain more current quotations or price evaluations from alternative pricing sources. If a reliable alternative pricing source is not available, the Fund will determine the fair value of the investment using another method approved by the Trustees.
Investment Income, Gains and Losses, Expenses and Distributions
Investment transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. Interest income and expenses are accrued daily. Distributions to shareholders are recorded on the ex-dividend date. Distributions of net investment income are declared daily and paid monthly. 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 using the effective interest rate method.
Semi-Annual Shareholder Report
Federal TaxesIt 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. As of and during the six months ended February 29, 2012, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of February 29, 2012, tax years 2008 through 2011 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts.
When-Issued and Delayed Delivery Transactions
The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.
Other
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated.
3. Shares of Beneficial Interest
The following table summarizes share activity:
| Six Months Ended 2/29/2012 | Year Ended 8/31/2011 |
| Shares sold | 826,872 | 2,063,500 |
| Shares issued to shareholders in payment of distributions declared | 100,276 | 201,206 |
| Shares redeemed | (1,075,432) | (5,349,893) |
| NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS | (148,284) | (3,085,187) |
4. Federal Tax Information
At February 29, 2012, the cost of investments for federal tax purposes was $119,584,783. The net unrealized appreciation of investments for federal tax purposes was $8,772,324. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $8,776,076 and net unrealized depreciation from investments for those securities having an excess of cost over value of $3,752.
At August 31, 2011, the Fund had a capital loss carryforward of $139,798 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, thereby reducing the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal income tax. Pursuant to the Code, a net capital loss incurred in taxable years beginning on or before December 22, 2010, is characterized as short-term and may be carried forward for a maximum Semi-Annual Shareholder Report
of eight tax years (“Carryforward Limit”), whereas a net capital loss incurred in taxable years beginning after December 22, 2010 retains its character as either short-term or long-term, does not expire and is required to be utilized prior to the losses which have a Carryforward Limit.The following schedule summarizes the Fund's capital loss carryforwards and expiration years:
| Expiration Year | Short-Term | Long-Term | Total |
| 2014 | $60,257 | N/A | $60,257 |
| 2016 | $10,927 | N/A | $10,927 |
| 2017 | $68,614 | N/A | $68,614 |
5. Investment Adviser Fee and Other Transactions with Affiliates
Investment Adviser Fee
Federated Investment Management Company is the Fund's investment adviser (the “Adviser”). The advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.40% of the Fund's average daily net assets. Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee. For the six months ended February 29, 2012, the Adviser voluntarily waived $209,397 of its fee and voluntarily reimbursed $434 of other operating expenses.
Administrative Fee
Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FAS is based on the average aggregate daily net assets of certain Federated funds as specified below:
| Administrative Fee | Average Aggregate Daily Net Assets of the Federated Funds |
| 0.150% | on the first $5 billion |
| 0.125% | on the next $5 billion |
| 0.100% | on the next $10 billion |
| 0.075% | on assets in excess of $20 billion |
The administrative fee received during any fiscal year shall be at least $150,000 per portfolio and $40,000 per each additional class of Shares. Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the six months ended February 29, 2012, the net fee paid to FAS was 0.103% of average daily net assets of the Fund. For the six months ended February 29, 2012, FAS waived $11,836 of its fee.
Shareholder Services Fee
The Fund may pay fees (Service Fees) up to 0.25% of the average daily net assets of the Fund's Class A Shares to financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for Services Fees. For the six months ended February 29, 2012, FSSC received $1,061 of fees paid by the Fund.
Semi-Annual Shareholder Report
Interfund TransactionsDuring the six months ended February 29, 2012, 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 $14,800,000 and $14,200,000, respectively.
Expense Limitation
Effective November 1, 2011, the Adviser and its affiliates (which may include FAS and FSSC) have voluntarily agreed to waive their fees and/or reimburse expenses so that the total annual fund operating expenses (as shown in the financial highlights) paid by the Fund's Class A Shares (after the voluntary waivers and reimbursements) will not exceed 0.63% (the “Fee Limit”) up to but not including the later of (the “Termination Date”): (a) November 1, 2012; or (b) the date of the Fund's next effective Prospectus. While the Adviser and its affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination date with the agreement of the Trustees.
General
Certain 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, for the six months ended February 29, 2012, were as follows:
| Purchases | $7,239,970 |
| Sales | $6,946,351 |
7. Concentration of 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 29, 2012, 49.9% of the securities in the Portfolio of Investments were 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, Assured Guaranty Municipal Corp., was 25.3% of total investments.
8. Line of Credit
The Fund participates in a $100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement with PNC Bank. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings are charged interest at a rate offered to the Fund by PNC Bank at the time of the borrowing. As of February 29, 2012, there were no outstanding loans. During the six months ended February 29, 2012, the Fund did not utilize the LOC.
Semi-Annual Shareholder Report
9. Interfund LendingPursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of February 29, 2012, there were no outstanding loans. During the six months ended February 29, 2012, the program was not utilized.
10. Recent Accounting Pronouncements
In April 2011, the Financial Accounting Standards Board (FASB) released Accounting Standards Update (ASU) No. 2011-03, “Reconsideration of Effective Control for Repurchase Agreements.” This ASU amends FASB Accounting Standards Codification (ASC) Topic 860, “Transfers and Servicing”; specifically the criteria required to determine whether a repurchase agreement and similar agreements should be accounted for as sales of financial assets or secured borrowings with commitments. This ASU is effective for fiscal years and interim periods beginning after December 15, 2011. Management has concluded that the adoption of ASU No. 2011-03 is not expected to have a material impact on the Fund's financial statements and the accompanying notes, net assets or results of operations.
In addition, in May 2011, FASB released ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” This ASU amends FASB ASC Topic 820, “Fair Value Measurement,” to establish common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP. This ASU is effective for fiscal years and interim periods beginning after December 15, 2011. Management has concluded that the adoption of ASU No. 2011-04 is not expected to have a material impact on the Fund's financial statements and the accompanying notes.
Semi-Annual Shareholder ReportShareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase or redemption payments; and (2) ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or shareholder services fees and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from September 1, 2011 to February 29, 2012.
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 required to be provided to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
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 9/1/2011 | Ending Account Value 2/29/2012 | Expenses Paid During Period1 |
| Actual | $1,000 | $1,044.70 | $3.10 |
| Hypothetical (assuming a 5% return before expenses) | $1,000 | $1,021.83 | $3.07 |
| 1 | Expenses are equal to the Fund's annualized net expense ratio of 0.61%, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half-year period). |
Evaluation and Approval of Advisory Contract – May 2011
federated MICHIGAN INTERMEDIATE MUNICIPAL TRUST (the “Fund”)
The Fund's Board reviewed the Fund's investment advisory contract at meetings held in May 2011. The Board's decision regarding the contract reflects the exercise of its business judgment on whether to continue the existing arrangements.
In this connection, the Federated Funds' Board had previously appointed a Senior Officer, whose duties include specified responsibilities relating to the process by which advisory fees are to be charged to a Federated fund. The Senior Officer has the authority to retain consultants, experts, or staff as may be reasonably necessary to assist in the performance of his duties, reports directly to the Board, and may be terminated only with the approval of a majority of the independent members of the Board. The Senior Officer prepared and furnished to the Board an independent, written evaluation that covered topics discussed below (the “Evaluation”). The Board considered that Evaluation, along with other information, in deciding to approve the advisory contract.
During its review of the contract, the Board considered compensation and benefits received by the Adviser. This included the fees received for services provided to the Fund by other entities in the Federated organization and research services (if any) received by the Adviser from brokers that execute Federated fund trades, as well as advisory fees. The Board is also familiar with and considered judicial decisions concerning allegedly excessive investment advisory fees, which have indicated that the following factors may be relevant to an Adviser's fiduciary duty with respect to its receipt of compensation from a fund: the nature and quality of the services provided by the Adviser, including the performance of the fund; the Adviser's cost of providing the services; the extent to which the Adviser may realize “economies of scale” as a fund grows larger; any indirect benefits that may accrue to the Adviser and its affiliates as a result of the Adviser's relationship with a fund; performance and expenses of comparable funds; and the extent to which the independent Board members are fully informed about all facts the Board deems relevant bearing on the Adviser's services and fees. The Board further considered management fees (including any components thereof) charged to institutional and other clients of the Adviser for what might be viewed as like services, and the cost to the Adviser and its affiliates of supplying services pursuant to the management fee agreements, excluding any intra-corporate profit and profit margins of the Adviser and its affiliates for supplying such services. The Board was aware of these factors and was guided by them in its review of the Fund's advisory contract to the extent it considered them to be appropriate and relevant, as discussed further below.
Semi-Annual Shareholder Report
The Board considered and weighed these circumstances in light of its substantial accumulated experience in governing the Fund and working with Federated on matters relating to the Federated funds, and was assisted in its deliberations by independent legal counsel. Throughout the year, the Board has requested and received substantial and detailed information about the Fund and the Federated organization that was in addition to the extensive materials that comprise and accompany the Senior Officer's Evaluation. Federated provided much of this information at each regular meeting of the Board, and furnished additional information in connection with the particular meeting at which the Board's formal review of the advisory contract occurred. Between regularly scheduled meetings, the Board also received information on particular matters as the need arose. Thus, the Board's consideration of the advisory contract included review of the Senior Officer's Evaluation, accompanying data and additional information covering such matters as: the Adviser's investment philosophy, revenue, profitability, personnel and processes; investment and operating strategies; the Fund's short- and long-term performance (in absolute terms, both on a gross basis and net of expenses, as well as in relationship to its particular investment program and certain competitor or “peer group” funds and/or other benchmarks, as appropriate), and comments on the reasons for performance; the Fund's investment objectives; the Fund's expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for contractual or voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities (if any); and the nature, quality and extent of the advisory and other services provided to the Fund by the Adviser and its affiliates. The Board also considered the preferences and expectations of Fund shareholders and their relative sophistication; the continuing state of competition in the mutual fund industry and market practices; the range of comparable fees for similar funds in the mutual fund industry; the Fund's relationship to the Federated family of funds which include a comprehensive array of funds with different investment objectives, policies and strategies which are available for exchange without the incurrence of additional sales charges; compliance and audit reports concerning the Federated funds and the Federated companies that service them (including communications from regulatory agencies), as well as Federated's responses to any issues raised therein; and relevant developments in the mutual fund industry and how the Federated funds and/or Federated are responding to them. The Board's evaluation process is evolutionary. The criteria considered and the emphasis placed on relevant criteria change in recognition of changing circumstances in the mutual fund marketplace.With respect to the Fund's performance and expenses in particular, the Board has found the use of comparisons to other mutual funds with comparable investment programs to be relevant, given the high degree of competition in the mutual fund business. The Board focused on comparisons with other similar Semi-Annual Shareholder Report
mutual funds more heavily than non-mutual fund products or services because it is believed that they are more relevant. For example, other mutual funds are the products most like the Fund, they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle in fact chosen and maintained by the Fund's investors. The range of their fees and expenses therefore appears to be a generally reliable indication of what consumers have found to be reasonable in the precise marketplace in which the Fund competes. The Fund's ability to deliver competitive performance when compared to its peer group was a useful indicator of how the Adviser is executing the Fund's investment program, which in turn assisted the Board in reaching a conclusion that the nature, extent, and quality of the Adviser's investment management services were such as to warrant continuation of the advisory contract. In this regard, the Senior Officer has reviewed Federated's fees for providing advisory services to products outside the Federated family of funds (e.g., institutional and separate accounts). He concluded that mutual funds and institutional accounts are inherently different products. Those differences include, but are not limited to, different types of targeted investors; being subject to different laws and regulations; different legal structures; different average account sizes; different associated costs; different portfolio management techniques made necessary by different cash flows; and portfolio manager time spent in review of securities pricing. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund advisory contracts.The Senior Officer reviewed information compiled by Federated, using data supplied by independent fund ranking organizations, regarding the performance of, and fees charged by, other mutual funds, noting his view that comparisons to fund peer groups are relevant in judging the reasonableness of proposed fees.
For the periods covered by the Evaluation, the Fund's performance for the one and five -year period was above the median of the relevant peer group, and the Fund's performance fell below the median of the relevant peer group for the three-year period. The Board discussed the Fund's performance with the Adviser and recognized the efforts being undertaken by the Adviser. The Board will continue to monitor these efforts and the performance of the Fund.
The Board also received financial information about Federated, including information regarding the compensation and benefits Federated derived from its relationships with the Federated funds. This information covered not only the fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds' administrator). The information also detailed any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades. In addition, the Board considered the fact that, in order for a fund to be competitive in the marketplace, Federated and its affiliates frequently waived fees Semi-Annual Shareholder Report
and/or reimbursed expenses and have disclosed to fund investors and/or indicated to the Board their intention to do so in the future, where appropriate. Moreover, the Board receives regular reporting as to the institution or elimination of these voluntary waivers.Federated furnished information, requested by the Senior Officer, that reported revenues on a fund-by-fund basis and made estimates of the allocation of expenses on a fund-by-fund basis, using allocation methodologies specified by the Senior Officer. The Senior Officer noted that, although they may apply consistent allocation processes, the inherent difficulties in allocating costs (and the unavoidable arbitrary aspects of that exercise) and the lack of consensus on how to allocate those costs may render such allocation information unreliable. The allocation information was considered in the analysis by the Board but was determined to be of limited use.
The Board and the Senior Officer also reviewed information compiled by Federated comparing profitability information for Federated to other publicly held fund management companies. In this regard, the Senior Officer noted the limited availability of such information, but nonetheless concluded that Federated's profit margins did not appear to be excessive and the Board agreed.
The Senior Officer's Evaluation also discussed the notion of possible realization of “economies of scale” as a fund grows larger. The Board considered in this regard that the Adviser has made significant and long-term investments in areas that support all of the Federated funds, such as personnel and processes for the portfolio management, compliance, internal audit, and risk management functions; and systems technology; and that the benefits of these efforts (as well as any economies, should they exist) were likely to be enjoyed by the fund complex as a whole. Finally, the Board also noted the absence of any applicable regulatory or industry guidelines on this subject, which (as discussed in the Senior Officer's Evaluation) is compounded by the lack of any common industry practice or general pattern with respect to structuring fund advisory fees with “breakpoints” that serve to reduce the fee as the fund attains a certain size. The Senior Officer did not recommend institution of breakpoints in pricing Federated's fund advisory services at this time.
It was noted in the materials for the Board meeting that for the period covered by the Evaluation, the Fund's investment advisory fee, after waivers and expense reimbursements, if any, was below the median of the relevant peer group. The Board reviewed the fees and other expenses of the Fund with the Adviser and was satisfied that the overall expense structure of the Fund remained competitive.
The Senior Officer noted that, considering the totality of the circumstances, and all of the factors referenced within his Evaluation, he had concluded that, subject to comments and recommendations made within his Evaluation, his observations and the information accompanying the Evaluation supported a finding by the Board that the management fees for each of the funds are reasonable and that Federated appeared to provide appropriate administrative Semi-Annual Shareholder Report
services to the Fund for the fees paid. Under these circumstances, no changes were recommended to, and no objection was raised to, the continuation of the Fund's advisory contract. The Board concluded that the nature, quality and scope of services provided the Fund by the Adviser and its affiliates were satisfactory.In its decision to continue an existing investment advisory contract, the Board was mindful of the potential disruptions of the Fund's operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew an advisory contract. In particular, the Board recognized that many shareholders have invested in the Fund on the strength of the Adviser's industry standing and reputation and with the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's approval of the advisory contract reflected the fact that it is the shareholders who have effectively selected the Adviser by virtue of having invested in the Fund.
The Board based its decision to approve the advisory contract on the totality of the circumstances and relevant factors and with a view to past and future long-term considerations. Not all of the factors and considerations identified above were necessarily relevant to the Fund, nor did the Board consider any one of them to be determinative. With respect to the factors that were relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.
Semi-Annual Shareholder ReportVoting Proxies on Fund Portfolio Securities
A description of the policies and procedures that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. A report on “Form N-PX�� of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available from Federated's website at FederatedInvestors.com. To access this information from the home page, select “All” under “Asset Classes.” Select a fund name and share class, if applicable, to go to the Fund Overview page. On the Fund Overview page, select the “Documents” tab. At the bottom of that page, select “Proxy Voting Record Report (Form N-PX).” Form N-PX filings are also available at the SEC's website at www.sec.gov.
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. From the home page, select “All” under “Asset Classes.” Select a fund name and share class, if applicable, to go to the Fund Overview page. On the Fund Overview page, select the “Documents” tab. At the bottom of that page, select “Form N-Q.”
Semi-Annual Shareholder ReportMutual funds are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal.
This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund's Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.
IMPORTANT NOTICE ABOUT FUND DOCUMENT 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 Michigan Intermediate Municipal Trust
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
CUSIP 313923302
3032602 (4/12)
Federated is a registered trademark of Federated Investors, Inc.
2012 © Federated Investors, Inc.
| Semi-Annual Shareholder Report | ||
| February 29, 2012 | ||
| Share Class | Ticker |
| A | NYIFX |
| B | NYIBX |
Federated New York Municipal Income Fund
Fund Established 1992
A Portfolio of Federated Municipal Securities Income Trust
Dear Valued Shareholder,
I am pleased to present the Semi-Annual Shareholder Report for your fund covering the period from September 1, 2011 through February 29, 2012. This report includes a complete listing of your fund's holdings, performance information and financial statements along with other important fund information.
In addition, our website, FederatedInvestors.com, offers easy access to Federated resources that include timely fund updates, economic and market insights from our investment strategists, and financial planning tools. We invite you to register to take full advantage of its capabilities.
Thank you for investing with Federated. I hope you find this information useful and look forward to keeping you informed.
Sincerely,
J. Christopher Donahue, President
May Lose Value No Bank GuaranteeCONTENTS
Portfolio of Investments Summary Table (unaudited)
At February 29, 2012, the Fund's sector composition1 was as follows:
| Sector Composition | Percentage of Total Net Assets |
| Special Tax | 16.5% |
| General Obligation — Local | 15.1% |
| Transportation | 11.2% |
| General Obligation — State | 10.7% |
| Education | 8.6% |
| Pre-refunded | 6.0% |
| Water and Sewer | 5.7% |
| Resource Recovery | 5.3% |
| Hospital | 4.7% |
| Industrial Development Bond/Pollution Control | 3.2% |
| Derivative Contracts for U.S. Treasury Security2 | 0.0%3 |
| Other4 | 12.4% |
| Other Assets and Liabilities — Net5 | 0.6% |
| TOTAL | 100.0% |
| 1 | Sector classifications, and the assignment of holdings to such sectors, are based upon the economic sector and/or revenue source of the underlying obligor, as determined by the Fund's Adviser. For securities that have been enhanced by a third-party, including bond insurers and banks, sector classifications are based upon the economic sector and/or revenue source of the underlying obligor, as determined by the Fund's Adviser. Pre-refunded securities are those whose debt service is paid from escrowed assets, usually U.S. government securities. |
| 2 | Based upon net unrealized appreciation (depreciation) or value of the derivative contracts as applicable. Derivative contracts may consist of futures, forwards, options and swaps. The impact of a derivative contract on the Fund's performance may be larger than its unrealized appreciation (depreciation) or value may indicate. In many cases, the notional value or amount of a derivative contract may provide a better indication of the contract's significance to the portfolio. More complete information regarding the Fund's direct investments in derivatives contracts, including unrealized appreciation (depreciation), value, and notional values or amounts of such contracts, can be found in the table at the end of the Portfolio of Investments included in this Report. |
| 3 | Represent less than 0.1%. |
| 4 | For purposes of this table, sector classifications constitute 87.0% of the Fund's total net assets. Remaining sectors have been aggregated under the designation “Other.” |
| 5 | Assets, other than investments in securities and derivative contracts, less liabilities. See Statement of Assets and Liabilities. |
February 29, 2012 (unaudited)
| Principal Amount | Value |
| MUNICIPAL BONDS – 96.6% |
| New York – 93.4% |
| $1,000,000 | Babylon, NY IDA, Resource Recovery Bonds (Series 2009A), 5.00% (Covanta Babylon, Inc.), 1/1/2019 | 1,163,050 |
| 480,000 | Brooklyn Arena Local Development Corporation, NY, Pilot Revenue Bonds (Series 2009), 6.375% (Original Issue Yield: 6.476%), 7/15/2043 | 518,616 |
| 785,000 | Dutchess County, NY IDA, Revenue Bonds, 5.00% (Marist College)/(Original Issue Yield: 5.15%), 7/1/2020 | 800,072 |
| 1,000,000 | Erie County, NY IDA, School Facility Revenue Bonds (Series 2009A), 5.25% (Buffalo, NY City School District), 5/1/2025 | 1,152,760 |
| 200,000 | Essex County, NY IDA, Environmental Improvement Revenue Bonds (Series 2006A), 4.60% (International Paper Co.), 12/1/2030 | 198,918 |
| 500,000 | Hempstead Town, NY IDA, Civic Facility Revenue Bonds, 5.00% (Hofstra University)/(Original Issue Yield: 5.10%), 7/1/2033 | 508,785 |
| 215,000 | Hudson Yards Infrastructure Corp. NY, Hudson Yards Senior Revenue Bonds (Series 2012A), 5.75%, 2/15/2047 | 242,924 |
| 220,000 | Islip, NY Resource Recovery Agency, Resource Recovery Revenue Bonds (Series 2001E), 5.75% (Assured Guaranty Municipal Corp. INS), 7/1/2023 | 233,935 |
| 500,000 | Livingston County, NY IDA, Civic Facility Revenue Bonds (Series 2005), 6.00% (Nicholas H. Noyes Memorial Hospital Civic Facility), 7/1/2030 | 493,390 |
| 500,000 | Long Island Power Authority, NY, General Revenue Bonds (Series 2011A), 5.00%, 5/1/2038 | 538,045 |
| 500,000 | Madison County, NY IDA, Civic Facility Revenue Bonds (Series 2003A), 5.00% (Colgate University), 7/1/2023 | 519,200 |
| 500,000 | Metropolitan Transportation Authority, NY, Dedicated Tax Fund Bonds (Series 2009B), 5.00% (MTA Dedicated Tax Fund)/(Original Issue Yield: 5.10%), 11/15/2034 | 550,990 |
| 250,000 | Metropolitan Transportation Authority, NY, Revenue Bonds (Series 1998A), 5.00% (MTA Dedicated Tax Fund)/(United States Treasury PRF 10/1/2015@100)/(Original Issue Yield: 5.22%), 4/1/2023 | 290,207 |
| 500,000 | Metropolitan Transportation Authority, NY, Revenue Bonds (Series 2006A), 5.00% (MTA Transportation Revenue), 11/15/2035 | 524,750 |
| 500,000 | Nassau County, NY IDA, IDRBs (Series 2003A), 5.25% (KeySpan-Glenwood Energy Center LLC)/(KeySpan Corp. GTD), 6/1/2027 | 510,800 |
| 1,000,000 | Nassau County, NY, UT GO Bonds (Series 2009A), 5.00% (Assured Guaranty Corp. INS), 5/1/2021 | 1,173,000 |
| 500,000 | New York City Liberty Development Corp., Revenue Bonds (Series 2005), 5.25% (Goldman Sachs Group, Inc.), 10/1/2035 | 552,595 |
| 500,000 | New York City Trust For Cultural Resources, Refunding Revenue Bonds (Series 2008A), 5.00% (Museum of Modern Art), 4/1/2028 | 567,685 |
| Principal Amount | Value |
| $500,000 | New York City Trust For Cultural Resources, Refunding Revenue Bonds (Series 2008A), 5.00% (Museum of Modern Art), 4/1/2031 | 555,895 |
| 250,000 | New York City, NY IDA, Civic Facilities Revenue Bonds, 5.375% (New York University)/(AMBAC INS), 7/1/2017 | 251,045 |
| 365,000 | New York City, NY IDA, Civic Facility Revenue Bonds (Series 2001A), 6.375% (Staten Island University Hospital)/(United States Treasury PRF 7/1/2012@100), 7/1/2031 | 372,592 |
| 170,000 | New York City, NY IDA, Civic Facility Revenue Bonds (Series 2002C), 6.45% (Staten Island University Hospital)/(United States Treasury PRF 7/1/2012@101), 7/1/2032 | 175,068 |
| 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 | 462,965 |
| 500,000 | New York City, NY IDA, Special Facilities Revenue Bonds, 5.25% (British Airways), 12/1/2032 | 404,680 |
| 300,000 | New York City, NY IDA, Special Facilities Revenue Bonds, 5.50% (Terminal One Group Association), 1/1/2024 | 318,372 |
| 500,000 | New York City, NY Municipal Water Finance Authority, Water and Sewer System Revenue Bonds (Series 2009AA), 5.00%, 6/15/2022 | 584,805 |
| 500,000 | New York City, NY Municipal Water Finance Authority, Water and Sewer System Second General Resolution Revenue Bonds (Series 2012AA), 5.00%, 6/15/2034 | 561,150 |
| 500,000 | New York City, NY TFA, Building Aid Revenue Bonds (Series 2009S-5), 5.25% (Original Issue Yield: 5.33%), 1/15/2039 | 549,210 |
| 455,000 | New York City, NY TFA, Future Tax Secured Subordinate Bonds (Series 2011C), 5.50%, 11/1/2035 | 538,984 |
| 500,000 | New York City, NY, UT GO Bonds (Series 2009E-1), 6.25% (Original Issue Yield: 6.40%), 10/15/2028 | 610,095 |
| 500,000 | New York City, NY, UT GO Bonds (Series 2011A-1), 5.00%, 8/1/2029 | 581,090 |
| 500,000 | New York Liberty Development Corporation, Liberty Revenue Bonds (Series 2011), 5.75% (4 World Trade Center), 11/15/2051 | 568,085 |
| 500,000 | New York State Dormitory Authority, General Purpose Revenue Bonds (Series 2011C), 5.00% (New York State Personal Income Tax Revenue Bond Fund), 3/15/2026 | 595,625 |
| 1,000,000 | New York State Dormitory Authority, Improvement Revenue Bonds (Series 2008D), 5.00% (Mental Health Services Facility)/(Assured Guaranty Municipal Corp. INS), 2/15/2018 | 1,201,010 |
| 500,000 | New York State Dormitory Authority, Lease Revenue Bonds (Series 2006A), 5.00% (State University of New York Dormitory Facilities)/(National Public Finance Guarantee Corporation INS), 7/1/2031 | 535,330 |
| 500,000 | New York State Dormitory Authority, Revenue Bonds (Series 1998), 5.50% (Memorial Sloan-Kettering Cancer Center)/(National Public Finance Guarantee Corporation INS), 7/1/2023 | 639,320 |
| Principal Amount | Value |
| $250,000 | New York State Dormitory Authority, Revenue Bonds (Series 2003), 5.375% (North Shore-Long Island Jewish Obligated Group)/(United States Treasury PRF 5/1/2013@100)/(Original Issue Yield: 5.48%), 5/1/2023 | 265,117 |
| 500,000 | New York State Dormitory Authority, Revenue Bonds (Series 2008A), 5.00% (School District Financing Program)/(Assured Guaranty Municipal Corp. INS), 10/1/2023 | 573,690 |
| 520,000 | New York State Dormitory Authority, Revenue Bonds (Series 2008C), 5.00% (New York State Personal Income Tax Revenue Bond Fund), 3/15/2026 | 612,929 |
| 500,000 | New York State Dormitory Authority, Revenue Bonds (Series 2009C), 5.00% (School District Financing Program)/(Assured Guaranty Corp. INS), 10/1/2023 | 576,755 |
| 250,000 | New York State Dormitory Authority, Revenue Bonds (Series A), 5.625% (City University of New York)/(Original Issue Yield: 5.95%), 7/1/2016 | 282,458 |
| 300,000 | New York State Environmental Facilities Corp., Clean Water & Drinking Water Revolving Funds Revenue Bonds (Series 2008A), 5.00%, 6/15/2029 | 343,515 |
| 500,000 | New York State Environmental Facilities Corp., Clean Water & Drinking Water Revolving Funds Revenue Bonds (Series 2009A), 5.00% (Original Issue Yield: 5.26%), 6/15/2034 | 559,840 |
| 500,000 | New York State Local Government Assistance Corp., Senior Lien Revenue Refunding Bonds (Series 2008 A-5/6), 5.00%, 4/1/2020 | 612,855 |
| 500,000 | New York State Local Government Assistance Corp., Subordinate Lien Refunding Revenue Bonds (Series 2010A), 5.00%, 4/1/2023 | 601,695 |
| 490,000 | New York State Mortgage Agency, Homeowner Mortgage Revenue Bonds (Series 156), 5.35%, 10/1/2033 | 521,919 |
| 1,000,000 | New York State Thruway Authority, Revenue Bonds (Series 2006A), 5.00% (New York State Thruway Authority — Dedicated Highway & Bridge Trust Fund)/(AMBAC INS), 4/1/2026 | 1,099,360 |
| 250,000 | New York State Urban Development Corp., Revenue Refunding Bonds (Series 1995), 5.70% (New York State)/(Original Issue Yield: 5.94%), 4/1/2020 | 305,537 |
| 500,000 | New York State Urban Development Corp., Service Contract Revenue Refunding Bonds (Series 2008C), 5.00% (New York State), 1/1/2027 | 553,970 |
| 500,000 | New York State Urban Development Corp., Subordinated Lien Revenue Bonds (Series 2004A), 5.125% (New York State), 1/1/2022 | 532,910 |
| 500,000 | New York State, UT GO Bonds (Series 2009A), 5.00% (Original Issue Yield: 5.24%), 2/15/2039 | 552,800 |
| 500,000 | New York State, UT GO Bonds (Series 2011A), 5.00%, 2/15/2020 | 623,675 |
| 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) Mandatory Tender 11/15/2015 | 505,670 |
| 1,000,000 | Port Authority of New York and New Jersey, 5.00%, 12/1/2029 | 1,074,500 |
| Principal Amount | Value |
| $500,000 | Rensselaer County, NY IDA, Civic Facility Revenue Bonds (Series 2006), 5.00% (Rensselaer Polytechnic Institute), 3/1/2036 | 515,350 |
| 500,000 | Suffolk County, NY EDC, Revenue Bonds (Series 2011), 5.00% (Catholic Health Services of Long Island Obligated Group), 7/1/2028 | 552,990 |
| 450,000 | Syracuse, NY IDA, School Facility Revenue Bonds (Series 2008A), 5.00% (Syracuse CSD, NY)/(Assured Guaranty Municipal Corp. INS), 5/1/2028 | 498,479 |
| 500,000 | Triborough Bridge & Tunnel Authority, NY, General Revenue Bonds (Series 2008A), 5.00% (Original Issue Yield: 5.10%), 11/15/2037 | 544,430 |
| 460,000 | Triborough Bridge & Tunnel Authority, NY, General Revenue Bonds (Series 2009A-2), 5.00%, 11/15/2023 | 542,105 |
| 800,000 | Westchester, NY Tobacco Asset Securitization Corp., Revenue Bonds, 5.00%, 6/1/2026 | 776,448 |
| TOTAL | 33,674,040 |
| Puerto Rico – 3.2% |
| 630,000 | Commonwealth of Puerto Rico, Public Improvement UT GO Bonds (Series 2004A), 5.00% (United States Treasury PRF 7/1/2014@100), 7/1/2034 | 696,925 |
| 325,000 | Puerto Rico Highway and Transportation Authority, Transportation Revenue Bonds (Series G), 5.00% (United States Treasury PRF 7/1/2013@100)/(Original Issue Yield: 5.10%), 7/1/2033 | 345,485 |
| 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 | 135,381 |
| TOTAL | 1,177,791 |
| TOTAL MUNICIPAL BONDS (IDENTIFIED COST $32,503,516) | 34,851,831 |
| SHORT-TERM MUNICIPAL – 2.8%1 |
| New York – 2.8% |
| 1,000,000 | New York City Trust For Cultural Resources, (Series 2008A-2) Daily VRDNs (Lincoln Center for the Performing Arts, Inc.)/(Bank of America N.A. LOC), 0.210%, 3/1/2012 (AT AMORTIZED COST) | 1,000,000 |
| TOTAL MUNICIPAL INVESTMENTS — 99.4% (IDENTIFIED COST $33,503,516)2 | 35,851,831 |
| OTHER ASSETS AND LIABILITIES - NET — 0.6%3 | 208,974 |
| TOTAL NET ASSETS — 100% | $36,060,805 |
Semi-Annual Shareholder Report
At February 29, 2012, the Fund had the following open futures contracts:| Description | Number of Contracts | Notional Value | Expiration Date | Unrealized Depreciation |
| 4 U.S. Treasury Notes, 10-Year Short Futures | 20 | $2,619,063 | June 2012 | $(675) |
Unrealized Depreciation on Futures Contracts is included in “Other Assets and Liabilities – Net.”
Securities that are subject to the federal alternative minimum tax (AMT) represent 5.9% of the Fund's portfolio as calculated based upon total market value.
| 1 | Current rate and next reset date shown for Variable Rate Demand Notes. |
| 2 | The cost of investments for federal tax purposes amounts to $33,488,005. |
| 3 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
| 4 | Non-income producing security. |
Note: The categories of investments are shown as a percentage of total net assets at February 29, 2012.
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
Level 1 — quoted prices in active markets for identical securities, including investment companies with daily net asset values, if applicable.
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.
Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
The following is a summary of inputs used, as of February 29, 2012, in valuing the Fund's assets carried at fair value:
| Valuation Inputs | ||||
| Level 1 — Quoted Prices and Investments In Mutual Funds | Level 2 — Other Significant Observable Inputs | Level 3 — Significant Unobservable Inputs | Total | |
| Debt Securities: | ||||
| Municipal Bonds | $ — | $34,851,831 | $ — | $34,851,831 |
| Short-Term Municipal | — | 1,000,000 | — | 1,000,000 |
| TOTAL SECURITIES | $ — | $35,851,831 | $ — | $35,851,831 |
| OTHER FINANCIAL INSTRUMENTS* | $(675) | $ — | $ — | $(675) |
| * | Other financial instruments include futures contracts. |
Semi-Annual Shareholder Report
The following acronyms are used throughout this portfolio:| AMBAC | — American Municipal Bond Assurance Corporation |
| CSD | — Central School District |
| EDC | — Economic Development Corporation |
| GO | — General Obligation |
| GTD | — Guaranteed |
| IDA | — Industrial Development Authority |
| IDRBs | — Industrial Development Revenue Bonds |
| INS | — Insured |
| LOC | — Letter of Credit |
| PRF | — Prerefunded |
| TFA | — Transitional Finance Authority |
| TOBs | — Tender Option Bonds |
| UT | — Unlimited Tax |
| VRDNs | — Variable Rate Demand Notes |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportFinancial Highlights – Class A Shares
(For a Share Outstanding Throughout Each Period)
| Six Months Ended (unaudited) 2/29/2012 | Year Ended August 31, | ||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |
| Net Asset Value, Beginning of Period | $10.13 | $10.32 | $9.71 | $9.98 | $10.36 | $10.73 |
| Income From Investment Operations: | |||||
| Net investment income | 0.18 | 0.38 | 0.38 | 0.41 | 0.43 | 0.44 |
| Net realized and unrealized gain (loss) on investments, futures contracts and swap contracts | 0.34 | (0.19) | 0.61 | (0.27) | (0.38) | (0.37) |
| TOTAL FROM INVESTMENT OPERATIONS | 0.52 | 0.19 | 0.99 | 0.14 | 0.05 | 0.07 |
| Less Distributions: | |||||
| Distributions from net investment income | (0.18) | (0.38) | (0.38) | (0.41) | (0.43) | (0.44) |
| Net Asset Value, End of Period | $10.47 | $10.13 | $10.32 | $9.71 | $9.98 | $10.36 |
| Total Return1 | 5.16% | 2.00% | 10.41% | 1.68% | 0.53% | 0.57% |
| Ratios to Average Net Assets: | |||||
| Net expenses | 0.76%2 | 0.76% | 0.76% | 0.76% | 0.76%3 | 0.80%4 |
| Net investment income | 3.51%2 | 3.88% | 3.82% | 4.40% | 4.25% | 4.09% |
| Expense waiver/reimbursement5 | 1.06%2 | 1.12% | 0.98% | 1.02% | 0.89% | 0.85% |
| Supplemental Data: | |||||
| Net assets, end of period (000 omitted) | $33,018 | $29,108 | $31,644 | $29,334 | $32,288 | $36,867 |
| Portfolio turnover | 2% | 11% | 26% | 12% | 20% | 21% |
| 1 | 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. |
| 2 | Computed on an annualized basis. |
| 3 | The net expense ratio is calculated without reduction for expense offset arrangements. The net expense ratio is 0.76% for the year ended August 31, 2008, after taking into account this expense reduction. |
| 4 | Includes 0.04% of interest and trust expenses related to the Fund's participation in certain inverse floater structures. |
| 5 | This expense decrease is reflected in both the net expense and net investment income ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportFinancial Highlights – Class B Shares
(For a Share Outstanding Throughout Each Period)
| Six Months Ended (unaudited) 2/29/2012 | Year Ended August 31, | ||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |
| Net Asset Value, Beginning of Period | $10.13 | $10.32 | $9.71 | $9.98 | $10.36 | $10.73 |
| Income From Investment Operations: | |||||
| Net investment income | 0.14 | 0.31 | 0.31 | 0.34 | 0.36 | 0.36 |
| Net realized and unrealized gain (loss) on investments, futures contracts and swap contracts | 0.34 | (0.19) | 0.61 | (0.27) | (0.38) | (0.37) |
| TOTAL FROM INVESTMENT OPERATIONS | 0.48 | 0.12 | 0.92 | 0.07 | (0.02) | (0.01) |
| Less Distributions: | |||||
| Distributions from net investment income | (0.14) | (0.31) | (0.31) | (0.34) | (0.36) | (0.36) |
| Net Asset Value, End of Period | $10.47 | $10.13 | $10.32 | $9.71 | $9.98 | $10.36 |
| Total Return1 | 4.76% | 1.23% | 9.58% | 0.91% | (0.23)% | (0.19)% |
| Ratios to Average Net Assets: | |||||
| Net expenses | 1.52%2 | 1.52% | 1.52% | 1.52% | 1.52%3 | 1.56%4 |
| Net investment income | 2.73%2 | 3.10% | 3.07% | 3.65% | 3.50% | 3.33% |
| Expense waiver/reimbursement5 | 1.05%2 | 1.10% | 0.92% | 0.96% | 0.70% | 0.60% |
| Supplemental Data: | |||||
| Net assets, end of period (000 omitted) | $3,043 | $3,471 | $9,362 | $10,511 | $12,936 | $15,951 |
| Portfolio turnover | 2% | 11% | 26% | 12% | 20% | 21% |
| 1 | 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. |
| 2 | Computed on an annualized basis. |
| 3 | The net expense ratio is calculated without reduction for expense offset arrangements. The net expense ratio is 1.52% for the year ended August 31, 2008, after taking into account this expense reduction. |
| 4 | Includes 0.04% of interest and trust expenses related to the Fund's participation in certain inverse floater structures. |
| 5 | This expense decrease is reflected in both the net expense and net investment income ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportStatement of Assets and Liabilities
| Assets: |
| Total investments in securities, at value (identified cost $33,503,516) | $35,851,831 |
| Cash | 17,442 |
| Restricted cash | 22,000 |
| Income receivable | 423,361 |
| Receivable for shares sold | 55,030 |
| Prepaid expenses | 16,112 |
| Receivable for daily variation margin | 8,750 |
| TOTAL ASSETS | 36,394,526 |
| Liabilities: |
| Payable for shares redeemed | $258,411 |
| Income distribution payable | 24,706 |
| Payable for portfolio accounting fees | 28,914 |
| Payable for shareholder services fee (Note 5) | 6,395 |
| Payable for distribution services fee (Note 5) | 1,815 |
| Payable to adviser (Note 5) | 1,574 |
| Accrued expenses | 11,906 |
| TOTAL LIABILITIES | 333,721 |
| Net assets for 3,444,334 shares outstanding | $36,060,805 |
| Net Assets Consist of: |
| Paid-in capital | $37,232,511 |
| Net unrealized appreciation of investments and futures contracts | 2,347,640 |
| Accumulated net realized loss on investments and futures contracts | (3,523,091) |
| Undistributed net investment income | 3,745 |
| TOTAL NET ASSETS | $36,060,805 |
| Net Asset Value, Offering Price and Redemption Proceeds Per Share |
| Class A Shares: |
| Net asset value per share ($33,017,635 ÷ 3,153,671 shares outstanding), no par value, unlimited shares authorized | $10.47 |
| Offering price per share (100/95.50 of $10.47) | $10.96 |
| Redemption proceeds per share | $10.47 |
| Class B Shares: |
| Net asset value per share ($3,043,170 ÷ 290,663 shares outstanding), no par value, unlimited shares authorized | $10.47 |
| Offering price per share | $10.47 |
| Redemption proceeds per share (94.50/100 of $10.47) | $9.89 |
Six Months Ended February 29, 2012 (unaudited)
| Investment Income: |
| Interest | $729,493 |
| Expenses: |
| Investment adviser fee (Note 5) | $68,347 |
| Administrative fee (Note 5) | 94,482 |
| Custodian fees | 2,446 |
| Transfer and dividend disbursing agent fees and expenses | 18,478 |
| Directors'/Trustees' fees | 975 |
| Auditing fees | 11,934 |
| Legal fees | 2,310 |
| Portfolio accounting fees | 45,581 |
| Distribution services fee (Note 5) | 11,589 |
| Shareholder services fee (Note 5) | 42,717 |
| Share registration costs | 12,680 |
| Printing and postage | 8,442 |
| Insurance premiums | 1,987 |
| Miscellaneous | 631 |
| TOTAL EXPENSES | 322,599 |
| Waivers and Reimbursements (Note 5): |
| Waiver of investment adviser fee | $(68,347) |
| Waiver of administrative fee | (17,234) |
| Reimbursement of shareholder services fee | (1,604) |
| Reimbursement of other operating expenses | (93,023) |
| TOTAL WAIVERS AND REIMBURSEMENTS | (180,208) |
| Net expenses | 142,391 |
| Net investment income | 587,102 |
| Realized and Unrealized Gain (Loss) on Investments and Futures Contracts: |
| Net realized gain on investments | 14,320 |
| Net realized loss on futures contracts | (2,274) |
| Net change in unrealized appreciation of investments | 1,159,563 |
| Net change in unrealized depreciation of futures contracts | (675) |
| Net realized and unrealized gain on investments and futures contracts | 1,170,934 |
| Change in net assets resulting from operations | $1,758,036 |
Statement of Changes in Net Assets
| Six Months Ended (unaudited) 2/29/2012 | Year Ended 8/31/2011 |
| Increase (Decrease) in Net Assets |
| Operations: |
| Net investment income | $587,102 | $1,326,317 |
| Net realized gain (loss) on investments and futures contracts | 12,046 | (200,918) |
| Net change in unrealized appreciation/depreciation of investments and futures contracts | 1,158,888 | (815,454) |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 1,758,036 | 309,945 |
| Distributions to Shareholders: |
| Distributions from net investment income |
| Class A Shares | (541,520) | (1,124,486) |
| Class B Shares | (42,095) | (191,169) |
| CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | (583,615) | (1,315,655) |
| Share Transactions: |
| Proceeds from sale of shares | 5,740,020 | 8,877,609 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 440,436 | 922,181 |
| Cost of shares redeemed | (3,873,015) | (17,221,514) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | 2,307,441 | (7,421,724) |
| Change in net assets | 3,481,862 | (8,427,434) |
| Net Assets: |
| Beginning of period | 32,578,943 | 41,006,377 |
| End of period (including undistributed net investment income of $3,745 and $258, respectively) | $36,060,805 | $32,578,943 |
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 five 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. Each portfolio pays its own expenses. The Fund offers two classes of shares: Class A Shares and Class B Shares. All shares of the Fund have equal rights with respect to voting, except on class-specific matters. The investment objective of the Fund is to provide current income exempt from federal regular income tax (federal regular income tax does not include the AMT), 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 AMT 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 U.S. generally accepted accounting principles (GAAP).
Investment Valuation
In calculating its net asset value (NAV), the Fund generally values investments as follows:
- Fixed-income securities acquired with remaining maturities greater than 60 days are fair valued using price evaluations provided by a pricing service approved by the Fund's Board of Trustees (the “Trustees”).
- Fixed-income securities acquired with remaining maturities of 60 days or less are valued at their cost (adjusted for the accretion of any discount or amortization of any premium), which approximates market value.
- Derivative contracts listed on exchanges are valued at their reported settlement or closing price.
- Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Trustees.
- Shares of other mutual funds are valued based upon their reported NAVs.
- For securities that are fair valued in accordance with procedures established by and under the general supervision of the Trustees, certain factors may be considered such as: the purchase price of the security, information obtained by contacting the issuer, analysis of the issuer's financial statements or other available documents, fundamental analytical data, the nature and duration of restrictions on disposition, the movement of the market in which the security is normally traded and public trading in similar securities of the issuer or comparable issuers.
Semi-Annual Shareholder Report
If the Fund cannot obtain a price or price evaluation from a pricing service for an investment, the Fund may attempt to value the investment based upon the mean of bid and asked quotations or fair value the investment based on price evaluations, from one or more dealers. If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, the Fund uses the fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund could purchase or sell an investment at the price used to calculate the Fund's NAV.Fair Valuation and Significant Events Procedures
The Trustees have authorized the use of pricing services to provide evaluations of the current fair value of certain investments for purposes of calculating the NAV. Factors considered by pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers, and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and asked for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for other types of fixed-income securities and OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Trustees.
The Trustees also have adopted procedures requiring an investment to be priced at its fair value whenever the Adviser determines that a significant event affecting the value of the investment has occurred between the time as of which the price of the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both an affirmative expectation that the investment's value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security is traded, or after the time of a price evaluation provided by a pricing service or a dealer, include:
- With respect to price evaluations of fixed-income securities determined before the close of regular trading on the NYSE, actions by the Federal Reserve Open Market Committee and other significant trends in U.S. fixed-income markets;
- Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded; and
- Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, a natural disaster affecting the issuer's operations or regulatory changes or market developments affecting the issuer's industry.
The Fund may seek to obtain more current quotations or price evaluations from alternative pricing sources. If a reliable alternative pricing source is not available, the Fund will determine the fair value of the investment using another method approved by the Trustees.
Investment Income, Gains and Losses, Expenses and Distributions
Investment transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. Interest income and expenses are accrued daily. Distributions to shareholders are recorded on the ex-dividend date. Distributions of net investment income are declared daily and paid monthly. Non-cash Semi-Annual Shareholder Report
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 Class A Shares and Class B Shares may bear distribution services fees and shareholder services fees unique to those classes. 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 using the effective interest rate method.
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. As of and during the six months ended February 29, 2012, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of February 29, 2012, tax years 2008 through 2011 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts.
When-Issued and Delayed Delivery Transactions
The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.
Futures Contracts
The Fund purchases and sells financial futures contracts to manage cash flows, enhance yield and to potentially reduce transaction costs. Upon entering into a financial 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. There is minimal counterparty risk to the Fund since futures are exchange traded and the exchange's clearing house, as counterparty to all exchange traded futures, guarantees the futures against default.
The average notional value of futures contracts held by the Fund throughout the period was $374,152. This is based on amounts held as of each month-end throughout the fiscal period.
Futures contracts outstanding at period end are listed after the Fund's portfolio of investments.
Semi-Annual Shareholder Report
Additional Disclosure Related to Derivative Instruments| Fair Value of Derivative Instruments | ||
| Asset | ||
| Statement of Assets and Liabilities Location | Fair Value | |
| Derivatives not accounted for as hedging instruments under ASC Topic 815 | ||
| Interest rate contracts | Receivable for daily variation margin | $(675)* |
| * | Includes cumulative appreciation/depreciation of futures contracts as reported in the footnotes to the Portfolio of Investments. Only the current day's variation margin is reported within the Statement of Assets and Liabilities. |
The Effect of Derivative Instruments on the Statement of Operations for the six months Ended February 29, 2012
Amount of Realized Gain/(Loss) on Derivatives Recognized in Income
| Futures |
| Interest rate contracts | $(2,274) |
Change in Unrealized Appreciation/(Depreciation) on Derivatives Recognized in Income
| Futures |
| Interest rate contracts | $(675) |
Other
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated.
3. Shares of Beneficial Interest
The following tables summarize share activity:
| Six Months Ended February 29, 2012 | Year Ended August 31, 2011 | ||
| Class A Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 517,096 | $5,265,706 | 879,289 | $8,635,803 |
| Shares issued to shareholders in payment of distributions declared | 39,317 | 404,765 | 78,438 | 775,315 |
| Shares redeemed | (277,523) | (2,834,289) | (1,149,363) | (11,236,870) |
| NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS | 278,890 | $2,836,182 | (191,636) | $(1,825,752) |
| Six Months Ended February 29, 2012 | Year Ended August 31, 2011 | ||
| Class B Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 46,204 | $474,314 | 24,596 | $241,806 |
| Shares issued to shareholders in payment of distributions declared | 3,468 | 35,671 | 14,855 | 146,866 |
| Shares redeemed | (101,796) | (1,038,726) | (603,865) | (5,984,644) |
| NET CHANGE RESULTING FROM CLASS B SHARE TRANSACTIONS | (52,124) | $(528,741) | (564,414) | $(5,595,972) |
| NET CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS | 226,766 | $2,307,441 | (756,050) | $(7,421,724) |
4. Federal Tax Information
At February 29, 2012, the cost of investments for federal tax purposes was $33,488,005. The net unrealized appreciation of investments for federal tax purposes excluding any unrealized appreciation on futures contracts was $2,363,826. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $2,506,651 and net unrealized depreciation from investments for those securities having an excess of cost over value of $142,825.
At August 31, 2011, the Fund had a capital loss carryforward of $3,075,938 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, thereby reducing the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal income tax. Pursuant to the Code, a net capital loss incurred in taxable years beginning on or before December 22, 2010, is characterized as short-term and may be carried forward for a maximum of eight tax years (“Carryforward Limit”), whereas a net capital loss incurred in taxable years beginning after December 22, 2010, retains its character as either short-term or long-term, does not expire and is required to be utilized prior to the losses which have a Carryforward Limit.
The following schedule summarizes the Fund's capital loss carryforwards and expiration years:
| Expiration Year | Short – Term | Long-Term | Total |
| 2012 | $4,752 | N/A | $4,752 |
| 2013 | $318,023 | N/A | $318,023 |
| 2016 | $249,898 | N/A | $249,898 |
| 2017 | $958,822 | N/A | $958,822 |
| 2018 | $1,218,820 | N/A | $1,218,820 |
| 2019 | $325,623 | N/A | $325,623 |
5. Investment Adviser Fee and Other Transactions with Affiliates
Investment Adviser Fee
Federated Investment Management Company is the Fund's investment adviser (the “Adviser”). The advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.40% of the Fund's average daily net assets. Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee and/or reimburse certain operating expenses of the Fund. For the six months ended February 29, 2012, the Adviser voluntarily waived its entire fee of $68,347 and voluntarily reimbursed $93,023 of other operating expenses.
Administrative Fee
Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FAS is based on the average aggregate daily net assets of certain Federated funds as specified below:
| Administrative Fee | Average Aggregate Daily Net Assets of the Federated Funds |
| 0.150% | on the first $5 billion |
| 0.125% | on the next $5 billion |
| 0.100% | on the next $10 billion |
| 0.075% | on assets in excess of $20 billion |
The administrative fee received during any fiscal year shall be at least $150,000 per portfolio and $40,000 per each additional class of Shares. Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the six months ended February 29, 2012, FAS waived $17,234 of its fee. The net fee paid to FAS was 0.452% of average daily net assets of the Fund. The Fund is currently being charged the minimum administrative fee; therefore the fee as a percentage of average aggregate daily net assets is greater than the amounts presented in the chart above.
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 at the following percentages of average daily net assets annually, to compensate FSC:
| Share Class Name | Percentage of Average Daily Net Assets of Class |
| Class A Shares | 0.05% |
| Class B Shares | 0.75% |
Semi-Annual Shareholder Report
Subject to the terms described in the Expense Limitation note, FSC may voluntarily choose to waive any portion of its fee. For the six months ended February 29, 2012, distribution services fees for the Fund were as follows:| Distribution Services Fees Incurred |
| Class B Shares | $11,589 |
When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares. For the six months ended February 29, 2012, FSC retained $1,945 of fees paid by the Fund. For the six months ended February 29, 2012, the Fund's Class A Shares did not incur a distribution services fee; however it may begin to incur this fee upon approval of the Trustees.
Sales Charges
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. For the six months ended February 29, 2012, FSC retained $2,613 in sales charges from the sale of Class A Shares.
Shareholder Services Fee
The Fund may pay fees (“Service Fees”) up to 0.25% of the average daily net assets of the Fund's Class A Shares and Class B Shares to financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for Service Fees. In addition, unaffiliated third-party financial intermediaries may waive Service Fees. This waiver can be modified or terminated at any time. For the six months ended February 29, 2012, Service Fees were as follows:
| Service Fees Incurred | Service Fees Reimbursed |
| Class A Shares | $38,854 | $(1,604) |
| Class B Shares | 3,863 | — |
| TOTAL | $42,717 | $(1,604) |
Interfund Transactions
During the six months ended February 29, 2012, 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 $8,150,000 and $8,550,000, respectively.
Semi-Annual Shareholder Report
Expense LimitationThe Adviser and its affiliates (which may include FSC, FAS and FSSC) have voluntarily agreed to waive their fees and/or reimburse expenses so that the total operating expenses (as shown in the financial highlights) paid by the Fund's Class A Shares and Class B Shares (after the voluntary waivers and/or reimbursements) will not exceed 0.76% and 1.52% (the “Fee Limit”), respectively, up to but not including the later of (the “Termination Date”): (a) November 1, 2012; or (b) the date of the Fund's next effective Prospectus. While the Adviser and its affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated, or the Fee Limit increased, prior to the Termination Date with the agreement of the Fund's Trustees.
General
Certain 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, for the six months ended February 29, 2012, were as follows:
| Purchases | $4,065,780 |
| Sales | $514,320 |
7. Concentration of 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 29, 2012, 18.9% 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.
8. Line of Credit
The Fund participates in a $100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement with PNC Bank. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings are charged interest at a rate offered to the Fund by PNC Bank at the time of the borrowing. As of February 29, 2012, there were no outstanding loans. During the six months ended February 29, 2012, the Fund did not utilize the LOC.
9. Interfund Lending
Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (SEC), the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of February 29, 2012, there were no outstanding loans. During the six months ended February 29, 2012, the program was not utilized.
Semi-Annual Shareholder Report
10. Recent Accounting PronouncementsIn April 2011, the Financial Accounting Standards Board (FASB) released Accounting Standards Update (ASU) No. 2011-03, “Reconsideration of Effective Control for Repurchase Agreements.” This ASU amends FASB Accounting Standards Codification (ASC) Topic 860, “Transfers and Servicing”; specifically the criteria required to determine whether a repurchase agreement and similar agreements should be accounted for as sales of financial assets or secured borrowings with commitments. This ASU is effective for fiscal years and interim periods beginning after December 15, 2011. Management has concluded that the adoption of ASU No. 2011-03 is not expected to have a material impact on the Fund's financial statements and the accompanying notes, net assets or results of operations.
In addition, in May 2011, FASB released ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” This ASU amends FASB ASC Topic 820, “Fair Value Measurement,” to establish common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP. This ASU is effective for fiscal years and interim periods beginning after December 15, 2011. Management has concluded that the adoption of ASU No. 2011-04 is not expected to have a material impact on the Fund's financial statements and the accompanying notes.
Semi-Annual Shareholder ReportShareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase or redemption payments; and (2) ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or shareholder services fees and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from September 1, 2011 to February 29, 2012.
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 required to be provided to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Semi-Annual Shareholder Report
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 9/1/2011 | Ending Account Value 2/29/2012 | Expenses Paid During Period1 |
| Actual: |
| Class A Shares | $1,000 | $1,051.60 | $3.88 |
| Class B Shares | $1,000 | $1,047.60 | $7.74 |
| Hypothetical (assuming a 5% return before expenses): |
| Class A Shares | $1,000 | $1,021.08 | $3.82 |
| Class B Shares | $1,000 | $1,017.30 | $7.62 |
| 1 | Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half-year period). The annualized net expense ratios are as follows: |
| Class A Shares | 0.76% |
| Class B Shares | 1.52% |
Evaluation and Approval of Advisory Contract – May 2011
federated new york municipal income fund (the “Fund”)
The Fund's Board reviewed the Fund's investment advisory contract at meetings held in May 2011. The Board's decision regarding the contract reflects the exercise of its business judgment on whether to continue the existing arrangements.
In this connection, the Federated Funds' Board had previously appointed a Senior Officer, whose duties include specified responsibilities relating to the process by which advisory fees are to be charged to a Federated fund. The Senior Officer has the authority to retain consultants, experts, or staff as may be reasonably necessary to assist in the performance of his duties, reports directly to the Board, and may be terminated only with the approval of a majority of the independent members of the Board. The Senior Officer prepared and furnished to the Board an independent, written evaluation that covered topics discussed below (the “Evaluation”). The Board considered that Evaluation, along with other information, in deciding to approve the advisory contract.
During its review of the contract, the Board considered compensation and benefits received by the Adviser. This included the fees received for services provided to the Fund by other entities in the Federated organization and research services (if any) received by the Adviser from brokers that execute Federated fund trades, as well as advisory fees. The Board is also familiar with and considered judicial decisions concerning allegedly excessive investment advisory fees, which have indicated that the following factors may be relevant to an Adviser's fiduciary duty with respect to its receipt of compensation from a fund: the nature and quality of the services provided by the Adviser, including the performance of the fund; the Adviser's cost of providing the services; the extent to which the Adviser may realize “economies of scale” as a fund grows larger; any indirect benefits that may accrue to the Adviser and its affiliates as a result of the Adviser's relationship with a fund; performance and expenses of comparable funds; and the extent to which the independent Board members are fully informed about all facts the Board deems relevant bearing on the Adviser's services and fees. The Board further considered management fees (including any components thereof) charged to institutional and other clients of the Adviser for what might be viewed as like services, and the cost to the Adviser and its affiliates of supplying services pursuant to the management fee agreements, excluding any intra-corporate profit and profit margins of the Adviser and its affiliates for supplying such services. The Board was aware of these factors and was guided by them in its review of the Fund's advisory contract to the extent it considered them to be appropriate and relevant, as discussed further below.
Semi-Annual Shareholder Report
The Board considered and weighed these circumstances in light of its substantial accumulated experience in governing the Fund and working with Federated on matters relating to the Federated funds, and was assisted in its deliberations by independent legal counsel. Throughout the year, the Board has requested and received substantial and detailed information about the Fund and the Federated organization that was in addition to the extensive materials that comprise and accompany the Senior Officer's Evaluation. Federated provided much of this information at each regular meeting of the Board, and furnished additional information in connection with the particular meeting at which the Board's formal review of the advisory contract occurred. Between regularly scheduled meetings, the Board also received information on particular matters as the need arose. Thus, the Board's consideration of the advisory contract included review of the Senior Officer's Evaluation, accompanying data and additional information covering such matters as: the Adviser's investment philosophy, revenue, profitability, personnel and processes; investment and operating strategies; the Fund's short- and long-term performance (in absolute terms, both on a gross basis and net of expenses, as well as in relationship to its particular investment program and certain competitor or “peer group” funds and/or other benchmarks, as appropriate), and comments on the reasons for performance; the Fund's investment objectives; the Fund's expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for contractual or voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities (if any); and the nature, quality and extent of the advisory and other services provided to the Fund by the Adviser and its affiliates. The Board also considered the preferences and expectations of Fund shareholders and their relative sophistication; the continuing state of competition in the mutual fund industry and market practices; the range of comparable fees for similar funds in the mutual fund industry; the Fund's relationship to the Federated family of funds which include a comprehensive array of funds with different investment objectives, policies and strategies which are available for exchange without the incurrence of additional sales charges; compliance and audit reports concerning the Federated funds and the Federated companies that service them (including communications from regulatory agencies), as well as Federated's responses to any issues raised therein; and relevant developments in the mutual fund industry and how the Federated funds and/or Federated are responding to them. The Board's evaluation process is evolutionary. The criteria considered and the emphasis placed on relevant criteria change in recognition of changing circumstances in the mutual fund marketplace.With respect to the Fund's performance and expenses in particular, the Board has found the use of comparisons to other mutual funds with comparable investment programs to be relevant, given the high degree of competition in the mutual fund business. The Board focused on comparisons with other similar Semi-Annual Shareholder Report
mutual funds more heavily than non-mutual fund products or services because it is believed that they are more relevant. For example, other mutual funds are the products most like the Fund, they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle in fact chosen and maintained by the Fund's investors. The range of their fees and expenses therefore appears to be a generally reliable indication of what consumers have found to be reasonable in the precise marketplace in which the Fund competes. The Fund's ability to deliver competitive performance when compared to its peer group was a useful indicator of how the Adviser is executing the Fund's investment program, which in turn assisted the Board in reaching a conclusion that the nature, extent, and quality of the Adviser's investment management services were such as to warrant continuation of the advisory contract. In this regard, the Senior Officer has reviewed Federated's fees for providing advisory services to products outside the Federated family of funds (e.g., institutional and separate accounts). He concluded that mutual funds and institutional accounts are inherently different products. Those differences include, but are not limited to, different types of targeted investors; being subject to different laws and regulations; different legal structures; different average account sizes; different associated costs; different portfolio management techniques made necessary by different cash flows; and portfolio manager time spent in review of securities pricing. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund advisory contracts.The Senior Officer reviewed information compiled by Federated, using data supplied by independent fund ranking organizations, regarding the performance of, and fees charged by, other mutual funds, noting his view that comparisons to fund peer groups are relevant in judging the reasonableness of proposed fees.
The Fund's performance fell below the median of the relevant peer group for the one-year, three-year and five-year periods covered by the Evaluation. The Board discussed the Fund's performance with the Adviser and recognized the efforts being undertaken by the Adviser. The Board will continue to monitor these efforts and the performance of the Fund.
The Board also received financial information about Federated, including information regarding the compensation and benefits Federated derived from its relationships with the Federated funds. This information covered not only the fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds' administrator). The information also detailed any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades. In addition, the Board considered the fact that, in order for a fund to be competitive in the marketplace, Federated and its affiliates frequently waived fees Semi-Annual Shareholder Report
and/or reimbursed expenses and have disclosed to fund investors and/or indicated to the Board their intention to do so in the future, where appropriate. Moreover, the Board receives regular reporting as to the institution or elimination of these voluntary waivers.Federated furnished information, requested by the Senior Officer, that reported revenues on a fund-by-fund basis and made estimates of the allocation of expenses on a fund-by-fund basis, using allocation methodologies specified by the Senior Officer. The Senior Officer noted that, although they may apply consistent allocation processes, the inherent difficulties in allocating costs (and the unavoidable arbitrary aspects of that exercise) and the lack of consensus on how to allocate those costs may render such allocation information unreliable. The allocation information was considered in the analysis by the Board but was determined to be of limited use.
The Board and the Senior Officer also reviewed information compiled by Federated comparing profitability information for Federated to other publicly held fund management companies. In this regard, the Senior Officer noted the limited availability of such information, but nonetheless concluded that Federated's profit margins did not appear to be excessive and the Board agreed.
The Senior Officer's Evaluation also discussed the notion of possible realization of “economies of scale” as a fund grows larger. The Board considered in this regard that the Adviser has made significant and long-term investments in areas that support all of the Federated funds, such as personnel and processes for the portfolio management, compliance, internal audit, and risk management functions; and systems technology; and that the benefits of these efforts (as well as any economies, should they exist) were likely to be enjoyed by the fund complex as a whole. Finally, the Board also noted the absence of any applicable regulatory or industry guidelines on this subject, which (as discussed in the Senior Officer's Evaluation) is compounded by the lack of any common industry practice or general pattern with respect to structuring fund advisory fees with “breakpoints” that serve to reduce the fee as the fund attains a certain size. The Senior Officer did not recommend institution of breakpoints in pricing Federated's fund advisory services at this time.
It was noted in the materials for the Board meeting that for the period covered by the Evaluation, the Fund's investment advisory fee was waived in its entirety. The Board reviewed the contractual fee rate and other expenses of the Fund with the Adviser and was satisfied that the overall expense structure of the Fund remained competitive.
The Senior Officer noted that, considering the totality of the circumstances, and all of the factors referenced within his Evaluation, he had concluded that, subject to comments and recommendations made within his Evaluation, his observations and the information accompanying the Evaluation supported a finding by the Board that the management fees for each of the funds are reasonable and that Federated appeared to provide appropriate administrative services to the Fund for the fees paid. Under these circumstances, no changes Semi-Annual Shareholder Report
were recommended to, and no objection was raised to, the continuation of the Fund's advisory contract. The Board concluded that the nature, quality and scope of services provided the Fund by the Adviser and its affiliates were satisfactory.In its decision to continue an existing investment advisory contract, the Board was mindful of the potential disruptions of the Fund's operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew an advisory contract. In particular, the Board recognized that many shareholders have invested in the Fund on the strength of the Adviser's industry standing and reputation and with the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's approval of the advisory contract reflected the fact that it is the shareholders who have effectively selected the Adviser by virtue of having invested in the Fund.
The Board based its decision to approve the advisory contract on the totality of the circumstances and relevant factors and with a view to past and future long-term considerations. Not all of the factors and considerations identified above were necessarily relevant to the Fund, nor did the Board consider any one of them to be determinative. With respect to the factors that were relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.
Semi-Annual Shareholder ReportVoting Proxies on Fund Portfolio Securities
A description of the policies and procedures that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. A report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available from Federated's website at FederatedInvestors.com. To access this information from the home page, select “All” under “Asset Classes.” Select a fund name and share class, if applicable, to go to the Fund Overview page. On the Fund Overview page, select the “Documents” tab. At the bottom of that page, select “Proxy Voting Record Report (Form N-PX).” Form N-PX filings are also available at the SEC's website at www.sec.gov.
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. From the home page, select “All” under “Asset Classes.” Select a fund name and share class, if applicable, to go to the Fund Overview page. On the Fund Overview page, select the “Documents” tab. At the bottom of that page, select “Form N-Q.”
Semi-Annual Shareholder ReportMutual funds are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal.
This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund's Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.
IMPORTANT NOTICE ABOUT FUND DOCUMENT 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 New York Municipal Income Fund
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
CUSIP 313923401
CUSIP 313923880
4031009 (4/12)
Federated is a registered trademark of Federated Investors, Inc.
2012 © Federated Investors, Inc.
| Semi-Annual Shareholder Report | ||
| February 29, 2012 | ||
| Share Class | Ticker |
| A | OMIAX |
| F | OMIFX |
Federated Ohio Municipal Income Fund
Fund Established 1990
A Portfolio of Federated Municipal Securities Income Trust
Dear Valued Shareholder,
I am pleased to present the Semi-Annual Shareholder Report for your fund covering the period from September 1, 2011 through February 29, 2012. This report includes a complete listing of your fund's holdings, performance information and financial statements along with other important fund information.
In addition, our website, FederatedInvestors.com, offers easy access to Federated resources that include timely fund updates, economic and market insights from our investment strategists, and financial planning tools. We invite you to register to take full advantage of its capabilities.
Thank you for investing with Federated. I hope you find this information useful and look forward to keeping you informed.
Sincerely,
J. Christopher Donahue, President
May Lose Value No Bank GuaranteeCONTENTS
Portfolio of Investments Summary Table (unaudited)
At February 29, 2012, the Fund's sector composition1 was as follows:
| Sector Composition | Percentage of Total Net Assets |
| General Obligation — Local | 17.8% |
| Hospital | 14.6% |
| Education | 12.0% |
| Water and Sewer | 10.1% |
| General Obligation — State | 7.5% |
| Public Power | 6.2% |
| Transportation | 4.7% |
| Special Tax | 4.2% |
| Pre-refunded | 4.1% |
| Senior Care | 3.7% |
| Other2 | 13.0% |
| Other Assets and Liabilities — Net3 | 2.1% |
| TOTAL | 100.0% |
| 1 | Sector classifications, and the assignment of holdings to such sectors, are based upon the economic sector and/or revenue source of the underlying obligor, as determined by the Fund's Adviser. For securities that have been enhanced by a third-party, including bond insurers and banks, sector classifications are based upon the economic sector and/or revenue source of the underlying obligor, as determined by the Fund's Adviser. Pre-refunded securities are those whose debt service is paid from escrowed assets, usually U.S. government securities. |
| 2 | For purposes of this table, sector classifications constitute 84.9% of the Fund's total net assets. Remaining sectors have been aggregated under the designation “Other.” |
| 3 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
February 29, 2012 (unaudited)
| Principal Amount | Value |
| MUNICIPAL BONDS – 95.4% |
| Ohio – 94.5% |
| $1,000,000 | Akron, Bath & Copley, OH Joint Township, Hospital District Revenue Bonds (Series A), 5.25% (Summa Health System)/(Radian Asset Assurance, Inc. INS), 11/15/2016 | 1,058,600 |
| 2,250,000 | Akron, Bath & Copley, OH Joint Township, Hospital Facilities Revenue Bonds (Series A), 5.25% (Summa Health System)/(Radian Asset Assurance, Inc. INS)/(Original Issue Yield: 5.47%), 11/15/2031 | 2,275,290 |
| 2,000,000 | Allen County, OH, Hospital Facilities Revenue Bonds (Series 2010B), 5.25% (Catholic Healthcare Partners), 9/1/2027 | 2,225,980 |
| 500,000 | American Municipal Power-Ohio, Inc., Revenue Bonds (Series 2008A), 5.00% (American Municipal Power, Prairie State Energy Campus Project), 2/15/2016 | 571,490 |
| 2,000,000 | American Municipal Power-Ohio, Inc., Revenue Bonds (Series 2008A), 5.25% (American Municipal Power, Prairie State Energy Campus Project), 2/15/2028 | 2,211,740 |
| 1,500,000 | Beavercreek, OH Local School District, UT GO Bonds, 6.60% (National Public Finance Guarantee Corporation INS), 12/1/2015 | 1,686,900 |
| 1,965,000 | Buckeye Tobacco Settlement Financing Authority, OH, Asset-Backed Bonds, 5.125% (Original Issue Yield: 5.44%), 6/1/2024 | 1,540,285 |
| 1,000,000 | Buckeye Tobacco Settlement Financing Authority, OH, Tobacco Settlement Asset-Backed Bonds (Series 2007A-1), 5.00%, 6/1/2015 | 1,061,230 |
| 1,000,000 | Buckeye Tobacco Settlement Financing Authority, OH, Tobacco Settlement Asset-Backed Bonds (Series A-2), 6.50%, 6/1/2047 | 815,300 |
| 2,635,000 | Butler County, OH, MFH Revenue Bonds (Series 2006), 5.10% (Trinity Manor Senior Housing)/(GNMA COL Home Mortgage Program), 7/20/2036 | 2,699,689 |
| 1,000,000 | Centerville, OH, Health Care Fixed Rate Revenue Bonds (Series 2007A), 6.00% (Bethany Lutheran Village), 11/1/2038 | 995,940 |
| 1,000,000 | Cincinnati City School District, OH, COP, 5.00% (Assured Guaranty Municipal Corp. INS), 12/15/2024 | 1,154,740 |
| 1,000,000 | Cincinnati City School District, OH, UT GO Bonds, 5.00% (National Public Finance Guarantee Corporation INS), 12/1/2017 | 1,219,530 |
| 2,490,000 | Cincinnati, OH Water System, Revenue Refunding Bonds (Series A), 5.00%, 12/1/2025 | 3,036,206 |
| 1,980,000 | Cleveland, OH Airport System, Revenue Bonds (Series 2006A), 5.25% (Assured Guaranty Corp. INS), 1/1/2018 | 2,300,899 |
| 2,200,000 | Cleveland, OH Airport System, Revenue Bonds, 5.00% (Assured Guaranty Municipal Corp. INS), 1/1/2022 | 2,360,820 |
| 1,550,000 | Cleveland, OH Public Power System, Revenue Bonds (Series 2008B-1), 5.00%, 11/15/2038 | 1,623,114 |
| 2,685,000 | Cleveland, OH Public Power System, Revenue Refunding Bonds (Series 2010), 5.00%, 11/15/2017 | 3,146,229 |
| Principal Amount | Value |
| $2,350,000 | Cleveland, OH Waterworks, Revenue Bonds (Series 2007P), 5.00%, 1/1/2022 | 2,704,450 |
| 1,000,000 | Cleveland, OH Waterworks, Water Revenue Bonds (Series 2007O), 5.00% (National Public Finance Guarantee Corporation INS), 1/1/2032 | 1,064,820 |
| 2,000,000 | Cleveland, OH, LT GO Bonds, 5.50% (Assured Guaranty Municipal Corp. INS), 10/1/2019 | 2,449,540 |
| 1,000,000 | Columbus, OH City School District, School Facilities Construction & Improvement UT GO Bonds (Series 2009), 5.00%, 12/1/2027 | 1,143,580 |
| 1,600,000 | Columbus, OH Sewer System, Revenue Bonds (Series 2008A), 5.00%, 6/1/2028 | 1,794,880 |
| 1,225,000 | Columbus, OH Sewer System, Revenue Bonds (Series 2008A), 5.00%, 6/1/2031 | 1,356,296 |
| 1,000,000 | Columbus, OH Sewer System, Revenue Bonds (Series A), 5.00%, 6/1/2023 | 1,155,060 |
| 1,290,000 | Cuyahoga County, OH, UT GO Jail Facilities Bonds, 5.25% (National Public Finance Guarantee Corporation INS)/(Original Issue Yield: 5.50%), 10/1/2013 | 1,340,671 |
| 2,000,000 | Cuyahoga County, OH, Various Purpose LT GO Bonds (Series 2009A), 5.00%, 12/1/2022 | 2,396,900 |
| 130,000 | Dayton-Montgomery County, OH Port Authority, Revenue Bonds (Series A), 4.75% (Dayton Regional Bond Fund), 11/15/2015 | 132,024 |
| 590,000 | Dayton-Montgomery County, OH Port Authority, Revenue Bonds (Series A), 5.00% (Dayton Regional Bond Fund), 11/15/2017 | 593,634 |
| 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 | 1,013,290 |
| 3,000,000 | Franklin County, OH Convention Facilities Authority, Revenue Bonds, 5.00% (AMBAC INS), 12/1/2026 | 3,242,610 |
| 2,400,000 | Franklin County, OH Health Care Facilities, Improvement Revenue Bonds (Series 2010A), 5.625% (Ohio Presbyterian Retirement Services)/(Original Issue Yield: 5.75%), 7/1/2026 | 2,589,312 |
| 1,535,000 | Franklin County, OH Hospital Facility Authority, Hospital Improvement Revenue Bonds (Series 2009), 5.00% (Nationwide Children's Hospital)/(Original Issue Yield: 5.11%), 11/1/2034 | 1,638,612 |
| 475,000 | Franklin County, OH Mortgage Revenue, Revenue Bonds, 5.00% (Trinity Healthcare Credit Group), 6/1/2013 | 500,341 |
| 2,165,000 | Franklin County, OH, Various Purpose LT GO Bonds, 5.00%, 12/1/2031 | 2,433,612 |
| 1,000,000 | Gallipolis, OH City School District, School Facilities Construction & Improvement UT GO Bonds, 5.00% (National Public Finance Guarantee Corporation INS), 12/1/2030 | 1,072,270 |
| 1,530,000 | Hamilton County, OH Hospital Facilities Authority, Revenue Bonds (Series 2004J), 5.25% (Cincinnati Children's Hospital Medical Center)/(FGIC and National Public Finance Guarantee Corporation INS), 5/15/2023 | 1,569,076 |
| Principal Amount | Value |
| $1,510,000 | Hamilton County, OH Hospital Facilities Authority, Revenue Bonds, 4.50% (Convalescent Hospital Children)/(FGIC and National Public Finance Guarantee Corporation INS), 5/15/2014 | 1,575,277 |
| 1,000,000 | Hamilton County, OH, EDRBs (Series 2006A), 5.00% (King Highland Community Urban Redevelopment Corp.- University of Cincinnati, Lessee)/(National Public Finance Guarantee Corporation INS), 6/1/2033 | 1,043,890 |
| 2,850,000 | Hamilton County, OH, Sales Tax Refunding Bonds (Series 2011A), 5.00%, 12/1/2032 | 3,097,380 |
| 2,000,000 | Hamilton County, OH, Sales Tax Refunding Revenue Bonds (Series 2006A), 5.00% (AMBAC INS), 12/1/2018 | 2,314,220 |
| 1,310,000 | Hamilton, OH City School District, School Facilities Construction & Improvement UT GO Bonds, 5.00% (Assured Guaranty Municipal Corp. INS), 12/1/2029 | 1,416,058 |
| 2,000,000 | Hamilton, OH Wastewater System, Revenue Bonds (Series 2011), 5.00% (Assured Guaranty Municipal Corp. INS), 10/1/2036 | 2,136,480 |
| 2,000,000 | Hilliard, OH School District, UT GO Bonds (Series 2006A), 5.00% (National Public Finance Guarantee Corporation INS), 12/1/2027 | 2,187,180 |
| 2,000,000 | Kent State University, OH, General Receipts Bonds (Series 2009B), 5.00% (Assured Guaranty Corp. INS), 5/1/2028 | 2,227,640 |
| 1,860,000 | Kettering, OH City School District, UT GO Bonds, 4.75% (Assured Guaranty Municipal Corp. INS), 12/1/2020 | 2,100,238 |
| 1,500,000 | Lorain County, OH Port Authority, Recovery Zone Facility Revenue Bonds (Series 2010), 6.75% (United States Steel Corp.), 12/1/2040 | 1,606,140 |
| 1,500,000 | Lorain County, OH, Health Care Facilities Revenue Refunding Bonds (Series 1998A), 5.25% (Kendal at Oberlin)/(Original Issue Yield: 5.53%), 2/1/2021 | 1,501,590 |
| 1,000,000 | Lorain County, OH, Hospital Revenue Bonds (Series 2006H), 5.00% (Catholic Healthcare Partners)/(Assured Guaranty Corp. INS), 2/1/2024 | 1,108,010 |
| 1,000,000 | Lorain County, OH, Hospital Revenue Refunding & Improvement Bonds, 5.25% (Catholic Healthcare Partners)/(Original Issue Yield: 5.52%), 10/1/2033 | 1,010,990 |
| 2,000,000 | Lucas County, OH, Hospital Revenue Bonds (Series 2011A), 6.50% (ProMedica Healthcare Obligated Group), 11/15/2037 | 2,429,520 |
| 1,000,000 | Marysville, OH Wastewater Treatment System, Revenue Bonds (Series 2007), 4.75% (Syncora Guarantee, Inc. INS), 12/1/2047 | 1,017,310 |
| 1,090,000 | Marysville, OH Wastewater Treatment System, Revenue Bonds, 4.75% (Assured Guaranty Corp. INS)/(Original Issue Yield: 4.80%), 12/1/2046 | 1,106,045 |
| 1,000,000 | Miami County, OH, Hospital Facilities Revenue & Refunding Bonds (Series 2006), 5.25% (Upper Valley Medical Center, OH), 5/15/2021 | 1,076,520 |
| 2,000,000 | Miami University, OH, General Receipts Revenue & Refunding Bonds (Series 2011), 5.00%, 9/1/2031 | 2,309,000 |
| 500,000 | Miami University, OH, General Receipts Revenue & Refunding Bonds (Series 2011), 5.00%, 9/1/2036 | 560,630 |
| Principal Amount | Value |
| $1,600,000 | Miamisburg, OH City School District, School Facilities Construction & Improvement UT GO Bonds, 5.00%, 12/1/2024 | 1,829,408 |
| 1,000,000 | Montgomery County, OH, MFH Revenue Bonds (Series 2005), 4.95% (Chevy Chase Apartments)/(FHLMC GTD), 11/1/2035 | 1,036,300 |
| 1,000,000 | Montgomery County, OH, Revenue Bonds (Series 2008D), 6.125% (Catholic Health Initiatives)/(Original Issue Yield: 6.30%), 10/1/2028 | 1,173,790 |
| 1,415,000 | Oak Hills, OH Local School District, UT GO Bonds, 5.00% (Assured Guaranty Municipal Corp. INS), 12/1/2025 | 1,507,074 |
| 530,000 | Ohio HFA, Residential Mortgage Revenue Bonds (Series 2008F), 5.25% (GNMA COL Home Mortgage Program GTD), 9/1/2028 | 555,673 |
| 745,000 | Ohio HFA, SFM Revenue Bonds, 3.90% (GNMA COL), 3/1/2013 | 758,008 |
| 1,885,000 | Ohio Municipal Electric Generation Agency, Revenue Bonds, 5.00% (American Municipal Power, JV5)/(AMBAC INS), 2/15/2014 | 2,014,971 |
| 2,000,000 | Ohio State Air Quality Development Authority, Air Quality Revenue Refunding Bonds (Series 2009B), 5.80% (Columbus Southern Power Company), 12/1/2038 | 2,230,820 |
| 1,150,000 | Ohio State Air Quality Development Authority, Environmental Improvement Revenue Bonds (Series 2010), 5.00% (Buckeye Power, Inc.), 12/1/2021 | 1,282,365 |
| 2,000,000 | Ohio State Air Quality Development Authority, PCR Refunding Bonds (Series 2009-C), 5.625% (FirstEnergy Solutions Corp.), 6/1/2018 | 2,290,440 |
| 1,455,000 | Ohio State Air Quality Development Authority, Revenue Bonds (Series 2009A), 5.70% (FirstEnergy Solutions Corp.), 8/1/2020 | 1,666,150 |
| 1,000,000 | Ohio State Air Quality Development Authority, Revenue Refunding Bonds (Series 2012-A), 6.75% (AK Steel Corp.), 6/1/2024 | 1,017,130 |
| 2,000,000 | Ohio State Higher Educational Facility Commission, Higher Education Facility Revenue Bonds (Series 2006), 5.00% (Kenyon College, OH), 7/1/2041 | 2,077,220 |
| 1,875,000 | Ohio State Higher Educational Facility Commission, Hospital Revenue Bonds (Series 2007A), 5.25% (University Hospitals Health System, Inc.), 1/15/2046 | 1,919,381 |
| 1,000,000 | Ohio State Higher Educational Facility Commission, Revenue Bonds (Series 2011A), 5.375% (University of Dayton)/(Original Issue Yield: 5.48%), 12/1/2030 | 1,114,740 |
| 300,000 | Ohio State Higher Educational Facility Commission, Revenue Bonds, 4.75% (Mount Union College), 10/1/2016 | 341,931 |
| 2,000,000 | Ohio State Higher Educational Facility Commission, Revenue Bonds, 5.00% (College of Wooster), 9/1/2020 | 2,166,540 |
| 1,000,000 | Ohio State Higher Educational Facility Commission, Revenue Bonds, 5.00% (University of Dayton)/(AMBAC INS), 12/1/2027 | 1,042,770 |
| 2,010,000 | Ohio State Higher Educational Facility Commission, Revenue Bonds, 5.00% (Xavier University)/(Escrowed In Treasuries COL), 5/1/2016 | 2,368,122 |
| 3,115,000 | Ohio State Higher Educational Facility Commission, Revenue Bonds, 5.00% (Xavier University)/(United States Treasury PRF), 5/1/2019 | 3,670,000 |
| Principal Amount | Value |
| $1,000,000 | Ohio State Higher Educational Facility Commission, Revenue Refunding Bonds (Series 2008C), 5.00% (Case Western Reserve University, OH), 12/1/2029 | 1,080,230 |
| 1,000,000 | Ohio State Turnpike Commission, Revenue Refunding Bonds (Series 2010A), 5.00%, 2/15/2031 | 1,118,160 |
| 2,000,000 | Ohio State Turnpike Commission, Turnpike Revenue Refunding Bonds (Series 1998A), 5.50% (National Re Holdings Corp. INS), 2/15/2024 | 2,542,820 |
| 2,000,000 | Ohio State University, General Receipts Bonds (Series 2008A), 5.00%, 12/1/2027 | 2,409,540 |
| 320,000 | Ohio State University, General Receipts Revenue Bonds (Series 2003B), 5.25%, 6/1/2023 | 337,654 |
| 1,000,000 | Ohio State Water Development Authority, Revenue Refunding Bonds (Series 2008), 5.00% (United States Treasury PRF 6/1/2018@100), 6/1/2028 | 1,242,440 |
| 2,500,000 | Ohio State, Common Schools UT GO Bonds (Series 2011B), 5.00%, 9/15/2024 | 3,033,550 |
| 1,200,000 | Ohio State, Hospital Revenue Refunding Bonds (Series 2008A), 5.25% (Cleveland Clinic)/(Original Issue Yield: 98.376%), 1/1/2033 | 1,292,892 |
| 2,585,000 | Ohio State, Infrastructure Improvement GO Bonds (Series 2008A), 5.375% (Original Issue Yield: 5.50%), 9/1/2028 | 2,967,528 |
| 3,000,000 | Ohio State, Infrastructure Improvement UT GO Bonds (Series 2007A), 4.75%, 9/1/2027 | 3,286,590 |
| 1,000,000 | Ohio State, Major New State Infrastructure Project Revenue Bonds (Series 2008-1), 5.75%, 6/15/2019 | 1,247,120 |
| 2,310,000 | Ohio State, UT GO Bonds, 4.25%, 5/1/2016 | 2,652,042 |
| 2,000,000 | Ohio Water Development Authority, Drinking Water Assistance Fund Refunding Revenue Bonds (Series 2008), 5.00% (Ohio State Water Development Authority), 12/1/2021 | 2,379,320 |
| 2,000,000 | Olentangy, OH Local School District, UT GO Bonds, 5.00% (Assured Guaranty Municipal Corp. INS), 12/1/2022 | 2,290,080 |
| 415,000 | Orrville, OH CSD, UT GO Bonds, 4.50% (AMBAC INS), 12/1/2018 | 482,948 |
| 350,000 | Orrville, OH CSD, UT GO Refunding Bonds, 5.00% (AMBAC INS), 12/1/2020 | 404,579 |
| 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 | 417,645 |
| 1,000,000 | Ravenna, OH City School District, UT GO Bonds (Series 2006), 5.00% (Assured Guaranty Municipal Corp. INS), 1/15/2031 | 1,141,360 |
| 770,000 | Richland County, OH Hospital Facilities, Revenue Bond, 5.00% (Medcentral Health System), 11/15/2015 | 854,392 |
| 1,500,000 | Rickenbacker, OH Port Authority, Capital Funding Revenue Bonds (Series 2002A), 5.375% (OASBO Expanded Asset Pooled Financing Program)/(Original Issue Yield: 5.60%), 1/1/2032 | 1,775,955 |
| Principal Amount | Value |
| $1,500,000 | Toledo-Lucas County, OH Port Authority, Revenue Bonds, 6.45% (CSX Corp.), 12/15/2021 | 1,871,220 |
| 1,375,000 | Toledo-Lucas County, OH Port Authority, Special Assessment Revenue Bonds, 5.25% (Crocker Park Public Improvement Project)/(Original Issue Yield: 5.37%), 12/1/2023 | 1,416,401 |
| 2,000,000 | University of Akron, OH, General Receipts Bonds (Series 2008B), 5.25% (Assured Guaranty Municipal Corp. INS), 1/1/2027 | 2,229,100 |
| 1,025,000 | University of Cincinnati, OH, General Receipts Revenue Bonds (Series 2004D), 5.00% (AMBAC INS), 6/1/2026 | 1,108,773 |
| 1,000,000 | University of Cincinnati, OH, Receipts Revenue Bonds (Series E), 5.00%, 6/1/2022 | 1,219,170 |
| TOTAL | 166,863,420 |
| Guam – 0.3% |
| 560,000 | Guam Government LO (Section 30), Bonds (Series 2009A), 5.625% (Original Issue Yield: 5.875%), 12/1/2029 | 598,175 |
| Puerto Rico – 0.6% |
| 1,000,000 | Puerto Rico Government Development Bank (GDB), Senior Notes (Series 2006B), 5.00%, 12/1/2017 | 1,105,110 |
| TOTAL MUNICIPAL BONDS (IDENTIFIED COST $156,494,367) | 168,566,705 |
| SHORT-TERM MUNICIPALS – 2.5%1 |
| Ohio – 2.5% |
| 2,850,000 | Allen County, OH, (Series 2008A) Daily VRDNs (Catholic Healthcare Partners)/(Bank of America N.A. LOC), 0.140%, 3/1/2012 | 2,850,000 |
| 200,000 | Franklin County, OH Hospital Facility Authority, (Series 2008E) Weekly VRDNs (Nationwide Children's Hospital)/(JPMorgan Chase Bank, N.A. LIQ), 0.130%, 3/1/2012 | 200,000 |
| 1,350,000 | Geauga County, OH, Revenue Bonds (Series 2007A) Daily VRDNs (South Franklin Circle)/(Key Bank, N.A. LOC), 0.220%, 3/1/2012 | 1,350,000 |
| TOTAL SHORT-TERM MUNICIPALS (AT AMORTIZED COST) | 4,400,000 |
| TOTAL MUNICIPAL INVESTMENTS — 97.9% (IDENTIFIED COST $160,894,367)2 | 172,966,705 |
| OTHER ASSETS AND LIABILITIES - NET — 2.1%3 | 3,681,779 |
| TOTAL NET ASSETS — 100% | $176,648,484 |
Securities that are subject to the federal alternative minimum tax (AMT) represent 2.9% of the Fund's portfolio as calculated based upon total market value.
| 1 | Current rate and next reset date shown for Variable Rate Demand Notes. |
| 2 | The cost of investments for federal tax purposes amounts to $160,842,033. |
| 3 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Note: The categories of investments are shown as a percentage of total net assets at February 29, 2012.
Semi-Annual Shareholder ReportVarious inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
Level 1 — quoted prices in active markets for identical securities, including investment companies with daily net asset values, if applicable.
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.
Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
As of February 29, 2012, all investments of the Fund utilized Level 2 inputs in valuing the Fund's assets carried at fair value.
The following acronyms are used throughout this portfolio:
| AMBAC | — American Municipal Bond Assurance Corporation |
| COL | — Collateralized |
| COP | — Certificate of Participation |
| CSD | — Central School District |
| EDRBs | — Economic Development Revenue Bonds |
| FGIC | — Financial Guaranty Insurance Company |
| FHLMC | — Federal Home Loan Mortgage Corporation |
| GNMA | — Government National Mortgage Association |
| GO | — General Obligation |
| GTD | — Guaranteed |
| HFA | — Housing Finance Authority |
| INS | — Insured |
| LIQ | — Liquidity Agreement |
| LO | — Limited Obligation |
| LOC | — Letter of Credit |
| LT | — Limited Tax |
| MFH | — Multi-Family Housing |
| PCR | — Pollution Control Revenue |
| PRF | — Prerefunded |
| SFM | — Single Family Mortgage |
| UT | — Unlimited Tax |
| VRDNs | — Variable Rate Demand Notes |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportFinancial Highlights – Class A Shares
(For a Share Outstanding Throughout Each Period)
| Six Months Ended (unaudited) 2/29/2012 | Year Ended August 31, | Period Ended 8/31/20091 |
| 2011 | 2010 | |
| Net Asset Value, Beginning of Period | $10.93 | $11.14 | $10.68 | $10.22 |
| Income From Investment Operations: | ||
| Net investment income | 0.20 | 0.42 | 0.42 | 0.37 |
| Net realized and unrealized gain (loss) on investments | 0.39 | (0.21) | 0.45 | 0.44 |
| TOTAL FROM INVESTMENT OPERATIONS | 0.59 | 0.21 | 0.87 | 0.81 |
| Less Distributions: | ||
| Distributions from net investment income | (0.20) | (0.42) | (0.41) | (0.35) |
| Net Asset Value, End of Period | $11.32 | $10.93 | $11.14 | $10.68 |
| Total Return2 | 5.46% | 2.04% | 8.34% | 8.11% |
| Ratios to Average Net Assets: | ||
| Net expenses | 0.75%3 | 0.75% | 0.75% | 0.75%3,4 |
| Net investment income | 3.64%3 | 3.87% | 3.84% | 4.09%3 |
| Expense waiver/reimbursement5 | 0.18%3 | 0.18% | 0.16% | 0.17%3 |
| Supplemental Data: | ||
| Net assets, end of period (000 omitted) | $52,070 | $50,990 | $57,338 | $61,141 |
| Portfolio turnover | 11% | 9% | 20% | 13%6 |
| 1 | Reflects operations for the period from November 18, 2008 (date of initial investment) to August 31, 2009. |
| 2 | Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized. |
| 3 | Computed on an annualized basis. |
| 4 | The net expense ratio is calculated without reduction for expense offset arrangements. The net expense ratio is 0.75% for the period ended August 31, 2009, after taking into account this expense reduction. |
| 5 | This expense decrease is reflected in both the net expense and net investment income ratios shown above. |
| 6 | Portfolio turnover is calculated at the Fund level. Percentage indicated was calculated for the year ended August 31, 2009. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportFinancial Highlights – Class F Shares
(For a Share Outstanding Throughout Each Period)
| Six Months Ended (unaudited) 2/29/2012 | Year Ended August 31, | ||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |
| Net Asset Value, Beginning of Period | $10.93 | $11.14 | $10.68 | $10.92 | $11.15 | $11.47 |
| Income From Investment Operations: | |||||
| Net investment income | 0.19 | 0.40 | 0.40 | 0.43 | 0.46 | 0.46 |
| Net realized and unrealized gain (loss) on investments, futures contracts and swap contracts | 0.39 | (0.21) | 0.46 | (0.25) | (0.23) | (0.32) |
| TOTAL FROM INVESTMENT OPERATIONS | 0.58 | 0.19 | 0.86 | 0.18 | 0.23 | 0.14 |
| Less Distributions: | |||||
| Distributions from net investment income | (0.19) | (0.40) | (0.40) | (0.42) | (0.46) | (0.46) |
| Net Asset Value, End of Period | $11.32 | $10.93 | $11.14 | $10.68 | $10.92 | $11.15 |
| Total Return1 | 5.38% | 1.89% | 8.18% | 1.81% | 2.06% | 1.22% |
| Ratios to Average Net Assets: | |||||
| Net expenses | 0.90%2 | 0.90% | 0.90% | 0.90%3 | 0.90%3 | 0.92%4 |
| Net investment income | 3.49%2 | 3.70% | 3.72% | 4.06% | 4.15% | 4.02% |
| Expense waiver/reimbursement5 | 0.43%2 | 0.43% | 0.41% | 0.44% | 0.45% | 0.43% |
| Supplemental Data: | |||||
| Net assets, end of period (000 omitted) | $124,578 | $117,884 | $135,096 | $124,090 | $117,080 | $120,409 |
| Portfolio turnover | 11% | 9% | 20% | 13% | 13% | 14% |
| 1 | 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. |
| 2 | Computed on an annualized basis. |
| 3 | The net expense ratio is calculated without reduction for expense offset arrangements. The net expense ratios are 0.90% and 0.90% for the years ended August 31, 2009 and 2008, respectively, after taking into account these expense reductions. |
| 4 | Includes interest and trust expenses related to the Fund's participation in certain inverse floater structures of 0.02% for the year ended August 31, 2007. |
| 5 | This expense decrease is reflected in both the net expense and net investment income ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportStatement of Assets and Liabilities
| Assets: |
| Total investments in securities, at value (identified cost $160,894,367) | $172,966,705 |
| Cash | 77,556 |
| Income receivable | 2,044,887 |
| Receivable for investments sold | 1,337,914 |
| Receivable for shares sold | 533,305 |
| TOTAL ASSETS | 176,960,367 |
| Liabilities: |
| Payable for shares redeemed | $220,066 |
| Payable for shareholder services fee (Note 5) | 33,457 |
| Payable for portfolio accounting fees | 29,330 |
| Payable for distribution services fee (Note 5) | 14,711 |
| Payable for Directors'/Trustees' fees | 474 |
| Accrued expenses | 13,845 |
| TOTAL LIABILITIES | 311,883 |
| Net assets for 15,608,069 shares outstanding | $176,648,484 |
| Net Assets Consist of: |
| Paid-in capital | $167,866,016 |
| Net unrealized appreciation of investments | 12,072,338 |
| Accumulated net realized loss on investments, futures contracts and swap contracts | (3,312,656) |
| Undistributed net investment income | 22,786 |
| TOTAL NET ASSETS | $176,648,484 |
| Net Asset Value, Offering Price and Redemption Proceeds Per Share |
| Class A Shares: |
| Net asset value per share ($52,070,725 ÷ 4,600,992 shares outstanding), no par value, unlimited shares authorized | $11.32 |
| Offering price per share (100/95.50 of $11.32) | $11.85 |
| Redemption proceeds per share | $11.32 |
| Class F Shares: |
| Net asset value per share ($124,577,759 ÷ 11,007,077 shares outstanding), no par value, unlimited shares authorized | $11.32 |
| Offering price per share (100/99.00 of $11.32) | $11.43 |
| Redemption proceeds per share (99.00/100 of $11.32) | $11.21 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportSix Months Ended February 29, 2012 (unaudited)
| Investment Income: |
| Interest | $3,721,656 |
| Expenses: |
| Investment adviser fee (Note 5) | $339,010 |
| Administrative fee (Note 5) | 94,482 |
| Custodian fees | 6,345 |
| Transfer and dividend disbursing agent fees and expenses | 49,405 |
| Directors'/Trustees' fees | 1,604 |
| Auditing fees | 11,686 |
| Legal fees | 2,676 |
| Portfolio accounting fees | 45,997 |
| Distribution services fee (Note 5) | 237,855 |
| Shareholder services fee (Note 5) | 211,505 |
| Account administration fee (Note 2) | 376 |
| Share registration costs | 17,094 |
| Printing and postage | 12,377 |
| Insurance premiums | 2,133 |
| Miscellaneous | 1,189 |
| TOTAL EXPENSES | 1,033,734 |
| Waivers (Note 5): |
| Waiver of investment adviser fee | $(139,525) |
| Waiver of administrative fee | (16,557) |
| Waiver of distribution services fee | (148,660) |
| TOTAL WAIVERS | (304,742) |
| Net expenses | 728,992 |
| Net investment income | 2,992,664 |
| Realized and Unrealized Gain on Investments: |
| Net realized gain on investments | 496,684 |
| Net change in unrealized appreciation of investments | 5,548,420 |
| Net realized and unrealized gain on investments | 6,045,104 |
| Change in net assets resulting from operations | $9,037,768 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportStatement of Changes in Net Assets
| Six Months Ended (unaudited) 2/29/2012 | Year Ended 8/31/2011 |
| Increase (Decrease) in Net Assets |
| Operations: |
| Net investment income | $2,992,664 | $6,685,564 |
| Net realized gain (loss) on investments | 496,684 | (1,061,763) |
| Net change in unrealized appreciation/depreciation of investments | 5,548,420 | (3,165,104) |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 9,037,768 | 2,458,697 |
| Distributions to Shareholders: |
| Distributions from net investment income |
| Class A Shares | (922,199) | (2,068,806) |
| Class F Shares | (2,082,685) | (4,678,794) |
| CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | (3,004,884) | (6,747,600) |
| Share Transactions: |
| Proceeds from sale of shares | 10,429,124 | 15,589,268 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 1,944,239 | 3,577,683 |
| Cost of shares redeemed | (10,630,996) | (38,439,096) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | 1,742,367 | (19,272,145) |
| Change in net assets | 7,775,251 | (23,561,048) |
| Net Assets: |
| Beginning of period | 168,873,233 | 192,434,281 |
| End of period (including undistributed net investment income of $22,786 and $35,006, respectively) | $176,648,484 | $168,873,233 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report1. 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 five portfolios. The financial statements included herein are only those of the Federated Ohio Municipal Income Fund (the “Fund”), a non-diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. Each portfolio pays its own expenses. The Fund offers two classes of shares: Class A Shares and Class F Shares. All shares of the Fund have equal rights with respect to voting, except on class-specific matters. The investment objective of the Fund is to provide current income exempt from federal regular income tax (federal regular income tax does not include the federal alternative minimum tax (AMT)) and the personal income taxes imposed by the state of Ohio and Ohio municipalities. Interest income from the Fund's investments may be subject to the federal AMT for individuals and corporations.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with U.S. generally accepted accounting principles (GAAP).
Investment Valuation
In calculating its net asset value (NAV), the Fund generally values investments as follows:
- Fixed-income securities acquired with maturities greater than 60 days are fair valued using price evaluations provided by a pricing service approved by the Fund's Board of Trustees (the “Trustees”).
- Fixed-income securities acquired with remaining maturities of 60 days or less are valued at their cost (adjusted for the accretion of any discount or amortization of any premium), which approximates market value.
- Derivative contracts listed on exchanges are valued at their reported settlement or closing price.
- Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Trustees.
- Shares of other mutual funds are valued based upon their reported NAVs.
- For securities that are fair valued in accordance with procedures established by and under the general supervision of the Trustees, certain factors may be considered such as: the purchase price of the security, information obtained by contacting the issuer, analysis of the issuer's financial statements or other available documents, fundamental analytical data, the nature and duration of restrictions on disposition, the movement of the market in which the security is normally traded and public trading in similar securities of the issuer or comparable issuers.
Semi-Annual Shareholder Report
If the Fund cannot obtain a price or price evaluation from a pricing service for an investment, the Fund may attempt to value the investment based upon the mean of bid and asked quotations or fair value the investment based on price evaluations, from one or more dealers. If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, the Fund uses the fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund could purchase or sell an investment at the price used to calculate the Fund's NAV.Fair Valuation and Significant Events Procedures
The Trustees have authorized the use of pricing services to provide evaluations of the current fair value of certain investments for purposes of calculating the NAV. Factors considered by pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and asked for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for other types of fixed-income securities and OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Trustees.
The Trustees also have adopted procedures requiring an investment to be priced at its fair value whenever the Adviser determines that a significant event affecting the value of the investment has occurred between the time as of which the price of the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both an affirmative expectation that the investment's value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security is traded, or after the time of a price evaluation provided by a pricing service or a dealer, include:
- With respect to price evaluations of fixed-income securities determined before the close of regular trading on the NYSE, actions by the Federal Reserve Open Market Committee and other significant trends in U.S. fixed-income markets;
- Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded; and
- Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, a natural disaster affecting the issuer's operations or regulatory changes or market developments affecting the issuer's industry.
The Fund may seek to obtain more current quotations or price evaluations from alternative pricing sources. If a reliable alternative pricing source is not available, the Fund will determine the fair value of the investment using another method approved by the Trustees.
Investment Income, Gains and Losses, Expenses and Distributions
Investment transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified cost basis. Interest income and expenses are accrued daily. Distributions to shareholders are recorded on the ex-dividend date. Distributions of net investment income are declared and paid monthly. Non-cash Semi-Annual Shareholder Report
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 Class A Shares and Class F Shares may bear account administration fees, distribution services fees and shareholder services fees unique to those classes. For the six months ended February 29, 2012, account administration fees for the Fund were as follows:| Account Administration Fees Incurred |
| Class F Shares | $376 |
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 using the effective interest rate method.
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. As of and during the six months ended February 29, 2012, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of February 29, 2012, tax years 2008 through 2011 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts.
When-Issued and Delayed Delivery Transactions
The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.
Other
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated.
Semi-Annual Shareholder Report
3. Shares of Beneficial InterestThe following table summarizes share activity:
| Six Months Ended 2/29/2012 | Year Ended 8/31/2011 | ||
| Class A Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 156,078 | $1,738,418 | 487,067 | $5,235,408 |
| Shares issued to shareholders in payment of distributions declared | 16,529 | 183,098 | 30,581 | 327,696 |
| Shares redeemed | (238,796) | (2,636,133) | (998,958) | (10,649,720) |
| NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS | (66,189) | $(714,617) | (481,310) | $(5,086,616) |
| Six Months Ended 2/29/2012 | Year Ended 8/31/2011 | ||
| Class F Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 781,719 | $8,690,706 | 956,698 | $10,353,860 |
| Shares issued to shareholders in payment of distributions declared | 159,035 | 1,761,141 | 303,161 | 3,249,987 |
| Shares redeemed | (723,190) | (7,994,863) | (2,600,313) | (27,789,376) |
| NET CHANGE RESULTING FROM CLASS F SHARE TRANSACTIONS | 217,564 | $2,456,984 | (1,340,454) | $(14,185,529) |
| NET CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS | 151,375 | $1,742,367 | (1,821,764) | $(19,272,145) |
4. Federal Tax Information
At February 29, 2012, the cost of investments for federal tax purposes was $160,842,033. The net unrealized appreciation of investments for federal tax purposes was $12,124,672. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $12,565,180, and net unrealized depreciation from investments for those securities having an excess of cost over value of $440,508.
Semi-Annual Shareholder Report
At August 31, 2011, the Fund had a capital loss carryforward of $2,828,247 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, thereby reducing the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal income tax. Pursuant to the Code, a net capital loss incurred in taxable years beginning on or before December 22, 2010, is characterized as short-term and may be carried forward for a maximum of eight tax years (“Carryforward Limit”), whereas a net capital loss incurred in taxable years beginning after December 22, 2010, retains its character as either short-term or long-term, does not expire and is required to be utilized prior to the losses which have a Carryforward Limit.| Expiration Year | Short-Term | Long-Term | Total |
| 2012 | $176,880 | N/A | $176,880 |
| 2013 | $621,142 | N/A | $621,142 |
| 2015 | $180,029 | N/A | $180,029 |
| 2016 | $641,658 | N/A | $641,658 |
| 2017 | $626,069 | N/A | $626,069 |
| 2018 | $560,004 | N/A | $560,004 |
| 2019 | $22,465 | N/A | $22,465 |
5. Investment Adviser Fee and Other Transactions with Affiliates
Investment Adviser Fee
Federated Investment Management Company is the Fund's investment adviser (the “Adviser”). The advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.40% of the Fund's average daily net assets. Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee. For the six months ended February 29, 2012, the Adviser voluntarily waived $139,525 of its fee.
Administrative Fee
Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FAS is based on the average aggregate daily net assets of certain Federated funds as specified below:
| Administrative Fee | Average Aggregate Daily Net Assets of the Federated Funds |
| 0.150% | on the first $5 billion |
| 0.125% | on the next $5 billion |
| 0.100% | on the next $10 billion |
| 0.075% | on assets in excess of $20 billion |
The administrative fee received during any fiscal year shall be at least $150,000 per portfolio and $40,000 per each additional class of Shares. Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the six months ended February 29, 2012, the net fee paid to FAS was 0.092% of average daily net assets of the Fund. FAS waived $16,557 of its fee.
Semi-Annual Shareholder Report
Distribution Services FeeThe Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the Fund's Class A Shares and Class F Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses at the following percentage of average daily net assets, annually, to compensate FSC.
| Share Class Name | Percentage of Average Daily Net Assets of Class |
| Class A Shares | 0.05% |
| Class F Shares | 0.40% |
Subject to the terms described in the Expense Limitation note, FSC may voluntarily choose to waive any portion of its fee. For the six months ended February 29, 2012, distribution services fees for the Fund were as follows:
| Distribution Services Fees Incurred | Distribution Services Fees Waived |
| Class F Shares | $237,855 | $(148,660) |
When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares. For the six months ended February 29, 2012, FSC retained $89,195 of fees paid by the Fund. For the six months ended February 29, 2012, the Fund's Class A Shares did not incur a distribution services fee; however it may begin to incur this fee upon approval of the Trustees.
Sales Charges
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. For the six months ended February 29, 2012, FSC retained $3,768 in sales charges from the sale of Class A Shares. FSC also retained $132 of CDSC relating to redemptions of Class A Shares and $12,828 relating to redemptions of Class F Shares.
Semi-Annual Shareholder Report
Shareholder Services FeeThe Fund may pay fees (Service Fees) up to 0.25% of the average daily net assets of the Fund's Class A Shares and Class F Shares to financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for Service Fees. For the six months ended February 29, 2012, Services Fees for the Fund were as follows:
| Service Fees Incurred |
| Class A Shares | $63,221 |
| Class F Shares | 148,284 |
| TOTAL | $211,505 |
For the six months ended February 29, 2012, FSSC received $805 of fees paid by the fund.
Interfund Transactions
During the six months ended February 29, 2012, 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 $25,555,000 and $21,955,000, respectively.
Expense Limitation
The Adviser and its affiliates (which may include FSC, FAS and FSSC) have voluntarily agreed to waive their fees and/or reimburse expenses so that the total annual fund operating expenses (as shown in the financial highlights) paid by the Fund's Class A Shares and Class F Shares (after the voluntary waivers and reimbursements) will not exceed 0.75% and 0.90%, (the “Fee Limit”), respectively, up to but not including the later of (the “Termination Date”): (a) November 1, 2012; or (b) the date of the Fund's next effective Prospectus. While the Adviser and its affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Trustees.
General
Certain 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, for the six months ended February 29, 2012, were as follows:
| Purchases | $17,874,202 |
| Sales | $20,588,976 |
7. Concentration of 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 29, 2012, 34.7% 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 14.8% of total investments.
8. Line of Credit
The Fund participates in a $100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement with PNC Bank. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings are charged interest at a rate offered to the Fund by PNC Bank at the time of the borrowing. As of February 29, 2012, there were no outstanding loans. During the six months ended February 29, 2012, the Fund did not utilize the LOC.
9. Interfund LEnDing
Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of February 29, 2012, there were no outstanding loans. During the six months ended February 29, 2012, the program was not utilized.
10. Recent Accounting Pronouncements
In April 2011, the Financial Accounting Standards Board (FASB) released Accounting Standards Update (ASU) No. 2011-03, “Reconsideration of Effective Control for Repurchase Agreements.” This ASU amends FASB Accounting Standards Codification (ASC) Topic 860, “Transfers and Servicing”; specifically the criteria required to determine whether a repurchase agreement and similar agreements should be accounted for as sales of financial assets or secured borrowings with commitments. This ASU is effective for fiscal years and interim periods beginning after December 15, 2011. Management has concluded that the adoption of ASU No. 2011-03 is not expected to have a material impact on the Fund's financial statements and the accompanying notes, net assets or results of operations.
In addition, in May 2011, FASB released ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” This ASU amends FASB ASC Topic 820, “Fair Value Measurement,” to establish common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP. This ASU is effective for fiscal years and interim periods beginning after December 15, 2011. Management has concluded that the adoption of ASU No. 2011-04 is not expected to have a material impact on the Fund's financial statements and the accompanying notes.
Semi-Annual Shareholder ReportShareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase or redemption payments; and (2) ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or shareholder services fees and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from September 1, 2011 to February 29, 2012.
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 required to be provided to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Semi-Annual Shareholder Report
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 9/1/2011 | Ending Account Value 2/29/2012 | Expenses Paid During Period1 |
| Actual: |
| Class A Shares | $1,000 | $1,054.60 | $3.83 |
| Class F Shares | $1,000 | $1,053.80 | $4.60 |
| Hypothetical (assuming a 5% return before expenses): |
| Class A Shares | $1,000 | $1,021.13 | $3.77 |
| Class F Shares | $1,000 | $1,020.39 | $4.52 |
| 1 | Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half-year period). The annualized net expense ratios are as follows: |
| Class A Shares | 0.75% |
| Class F Shares | 0.90% |
Evaluation and Approval of Advisory Contract – May 2011
federated ohio municipal income fund (the “Fund”)
The Fund's Board reviewed the Fund's investment advisory contract at meetings held in May 2011. The Board's decision regarding the contract reflects the exercise of its business judgment on whether to continue the existing arrangements.
In this connection, the Federated Funds' Board had previously appointed a Senior Officer, whose duties include specified responsibilities relating to the process by which advisory fees are to be charged to a Federated fund. The Senior Officer has the authority to retain consultants, experts, or staff as may be reasonably necessary to assist in the performance of his duties, reports directly to the Board, and may be terminated only with the approval of a majority of the independent members of the Board. The Senior Officer prepared and furnished to the Board an independent, written evaluation that covered topics discussed below (the “Evaluation”). The Board considered that Evaluation, along with other information, in deciding to approve the advisory contract.
During its review of the contract, the Board considered compensation and benefits received by the Adviser. This included the fees received for services provided to the Fund by other entities in the Federated organization and research services (if any) received by the Adviser from brokers that execute Federated fund trades, as well as advisory fees. The Board is also familiar with and considered judicial decisions concerning allegedly excessive investment advisory fees, which have indicated that the following factors may be relevant to an Adviser's fiduciary duty with respect to its receipt of compensation from a fund: the nature and quality of the services provided by the Adviser, including the performance of the fund; the Adviser's cost of providing the services; the extent to which the Adviser may realize “economies of scale” as a fund grows larger; any indirect benefits that may accrue to the Adviser and its affiliates as a result of the Adviser's relationship with a fund; performance and expenses of comparable funds; and the extent to which the independent Board members are fully informed about all facts the Board deems relevant bearing on the Adviser's services and fees. The Board further considered management fees (including any components thereof) charged to institutional and other clients of the Adviser for what might be viewed as like services, and the cost to the Adviser and its affiliates of supplying services pursuant to the management fee agreements, excluding any intra-corporate profit and profit margins of the Adviser and its affiliates for supplying such services. The Board was aware of these factors and was guided by them in its review of the Fund's advisory contract to the extent it considered them to be appropriate and relevant, as discussed further below.
Semi-Annual Shareholder Report
The Board considered and weighed these circumstances in light of its substantial accumulated experience in governing the Fund and working with Federated on matters relating to the Federated funds, and was assisted in its deliberations by independent legal counsel. Throughout the year, the Board has requested and received substantial and detailed information about the Fund and the Federated organization that was in addition to the extensive materials that comprise and accompany the Senior Officer's Evaluation. Federated provided much of this information at each regular meeting of the Board, and furnished additional information in connection with the particular meeting at which the Board's formal review of the advisory contract occurred. Between regularly scheduled meetings, the Board also received information on particular matters as the need arose. Thus, the Board's consideration of the advisory contract included review of the Senior Officer's Evaluation, accompanying data and additional information covering such matters as: the Adviser's investment philosophy, revenue, profitability, personnel and processes; investment and operating strategies; the Fund's short- and long-term performance (in absolute terms, both on a gross basis and net of expenses, as well as in relationship to its particular investment program and certain competitor or “peer group” funds and/or other benchmarks, as appropriate), and comments on the reasons for performance; the Fund's investment objectives; the Fund's expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for contractual or voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities (if any); and the nature, quality and extent of the advisory and other services provided to the Fund by the Adviser and its affiliates. The Board also considered the preferences and expectations of Fund shareholders and their relative sophistication; the continuing state of competition in the mutual fund industry and market practices; the range of comparable fees for similar funds in the mutual fund industry; the Fund's relationship to the Federated family of funds which include a comprehensive array of funds with different investment objectives, policies and strategies which are available for exchange without the incurrence of additional sales charges; compliance and audit reports concerning the Federated funds and the Federated companies that service them (including communications from regulatory agencies), as well as Federated's responses to any issues raised therein; and relevant developments in the mutual fund industry and how the Federated funds and/or Federated are responding to them. The Board's evaluation process is evolutionary. The criteria considered and the emphasis placed on relevant criteria change in recognition of changing circumstances in the mutual fund marketplace.With respect to the Fund's performance and expenses in particular, the Board has found the use of comparisons to other mutual funds with comparable investment programs to be relevant, given the high degree of competition in the mutual fund business. The Board focused on comparisons with other similar Semi-Annual Shareholder Report
mutual funds more heavily than non-mutual fund products or services because it is believed that they are more relevant. For example, other mutual funds are the products most like the Fund, they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle in fact chosen and maintained by the Fund's investors. The range of their fees and expenses therefore appears to be a generally reliable indication of what consumers have found to be reasonable in the precise marketplace in which the Fund competes. The Fund's ability to deliver competitive performance when compared to its peer group was a useful indicator of how the Adviser is executing the Fund's investment program, which in turn assisted the Board in reaching a conclusion that the nature, extent, and quality of the Adviser's investment management services were such as to warrant continuation of the advisory contract. In this regard, the Senior Officer has reviewed Federated's fees for providing advisory services to products outside the Federated family of funds (e.g., institutional and separate accounts). He concluded that mutual funds and institutional accounts are inherently different products. Those differences include, but are not limited to, different types of targeted investors; being subject to different laws and regulations; different legal structures; different average account sizes; different associated costs; different portfolio management techniques made necessary by different cash flows; and portfolio manager time spent in review of securities pricing. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund advisory contracts.The Senior Officer reviewed information compiled by Federated, using data supplied by independent fund ranking organizations, regarding the performance of, and fees charged by, other mutual funds, noting his view that comparisons to fund peer groups are relevant in judging the reasonableness of proposed fees.
For the periods covered by the Evaluation, the Fund's performance for the one-year period was above the median of the relevant peer group, and the Fund's performance fell below the median of the relevant peer group for the three and five-year periods. The Board discussed the Fund's performance with the Adviser and recognized the efforts being undertaken by the Adviser. The Board will continue to monitor these efforts and the performance of the Fund.
The Board also received financial information about Federated, including information regarding the compensation and benefits Federated derived from its relationships with the Federated funds. This information covered not only the fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds' administrator). The information also detailed any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades. In addition, the Board considered the fact that, in order for a fund to be competitive in the marketplace, Federated and its affiliates frequently waived fees Semi-Annual Shareholder Report
and/or reimbursed expenses and have disclosed to fund investors and/or indicated to the Board their intention to do so in the future, where appropriate. Moreover, the Board receives regular reporting as to the institution or elimination of these voluntary waivers.Federated furnished information, requested by the Senior Officer, that reported revenues on a fund-by-fund basis and made estimates of the allocation of expenses on a fund-by-fund basis, using allocation methodologies specified by the Senior Officer. The Senior Officer noted that, although they may apply consistent allocation processes, the inherent difficulties in allocating costs (and the unavoidable arbitrary aspects of that exercise) and the lack of consensus on how to allocate those costs may render such allocation information unreliable. The allocation information was considered in the analysis by the Board but was determined to be of limited use.
The Board and the Senior Officer also reviewed information compiled by Federated comparing profitability information for Federated to other publicly held fund management companies. In this regard, the Senior Officer noted the limited availability of such information, but nonetheless concluded that Federated's profit margins did not appear to be excessive and the Board agreed.
The Senior Officer's Evaluation also discussed the notion of possible realization of “economies of scale” as a fund grows larger. The Board considered in this regard that the Adviser has made significant and long-term investments in areas that support all of the Federated funds, such as personnel and processes for the portfolio management, compliance, internal audit, and risk management functions; and systems technology; and that the benefits of these efforts (as well as any economies, should they exist) were likely to be enjoyed by the fund complex as a whole. Finally, the Board also noted the absence of any applicable regulatory or industry guidelines on this subject, which (as discussed in the Senior Officer's Evaluation) is compounded by the lack of any common industry practice or general pattern with respect to structuring fund advisory fees with “breakpoints” that serve to reduce the fee as the fund attains a certain size. The Senior Officer did not recommend institution of breakpoints in pricing Federated's fund advisory services at this time.
It was noted in the materials for the Board meeting that for the period covered by the Evaluation, the Fund's investment advisory fee, after waivers and expense reimbursements, if any, was below the median of the relevant peer group. The Board reviewed the fees and other expenses of the Fund with the Adviser and was satisfied that the overall expense structure of the Fund remained competitive.
The Senior Officer noted that, considering the totality of the circumstances, and all of the factors referenced within his Evaluation, he had concluded that, subject to comments and recommendations made within his Evaluation, his observations and the information accompanying the Evaluation supported a finding by the Board that the management fees for each of the funds are reasonable and that Federated appeared to provide appropriate administrative Semi-Annual Shareholder Report
services to the Fund for the fees paid. Under these circumstances, no changes were recommended to, and no objection was raised to, the continuation of the Fund's advisory contract. The Board concluded that the nature, quality and scope of services provided the Fund by the Adviser and its affiliates were satisfactory.In its decision to continue an existing investment advisory contract, the Board was mindful of the potential disruptions of the Fund's operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew an advisory contract. In particular, the Board recognized that many shareholders have invested in the Fund on the strength of the Adviser's industry standing and reputation and with the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's approval of the advisory contract reflected the fact that it is the shareholders who have effectively selected the Adviser by virtue of having invested in the Fund.
The Board based its decision to approve the advisory contract on the totality of the circumstances and relevant factors and with a view to past and future long-term considerations. Not all of the factors and considerations identified above were necessarily relevant to the Fund, nor did the Board consider any one of them to be determinative. With respect to the factors that were relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.
Semi-Annual Shareholder ReportVoting Proxies on Fund Portfolio Securities
A description of the policies and procedures that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. A report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available from Federated's website at FederatedInvestors.com. To access this information from the home page, select “All” under “Asset Classes.” Select a fund name and share class, if applicable, to go to the Fund Overview page. On the Fund Overview page, select the “Documents” tab. At the bottom of that page, select “Proxy Voting Record Report (Form N-PX).” Form N-PX filings are also available at the SEC's website at www.sec.gov.
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. From the home page, select “All” under “Asset Classes.” Select a fund name and share class, if applicable, to go to the Fund Overview page. On the Fund Overview page, select the “Documents” tab. At the bottom of that page, select “Form N-Q.”
Semi-Annual Shareholder ReportMutual funds are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal.
This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund's Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.
IMPORTANT NOTICE ABOUT FUND DOCUMENT 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 Ohio Municipal Income Fund
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
CUSIP 313923823
CUSIP 313923609
2032305 (4/12)
Federated is a registered trademark of Federated Investors, Inc.
2012 © Federated Investors, Inc.
| Semi-Annual Shareholder Report | ||
| February 29, 2012 | ||
| Share Class | Ticker |
| A | PAMFX |
| B | FPABX |
Federated Pennsylvania Municipal Income Fund
Fund Established 1990
A Portfolio of Federated Municipal Securities Income Trust
Dear Valued Shareholder,
I am pleased to present the Semi-Annual Shareholder Report for your fund covering the period from September 1, 2011 through February 29, 2012. This report includes a complete listing of your fund's holdings, performance information and financial statements along with other important fund information.
In addition, our website, FederatedInvestors.com, offers easy access to Federated resources that include timely fund updates, economic and market insights from our investment strategists, and financial planning tools. We invite you to register to take full advantage of its capabilities.
Thank you for investing with Federated. I hope you find this information useful and look forward to keeping you informed.
Sincerely,
J. Christopher Donahue, President
May Lose Value No Bank GuaranteeCONTENTS
Portfolio of Investments Summary Table (unaudited)
At February 29, 2012, the Fund's sector composition1 was as follows:
| Sector Composition | Percentage of Total Net Assets |
| Government Obligation — Local | 17.6% |
| Hospital | 14.4% |
| Education | 11.9% |
| Water and Sewer | 10.0% |
| Government Obligation — State | 7.5% |
| Public Power | 6.1% |
| Transportation | 4.6% |
| Special Tax | 4.2% |
| Pre-refunded | 4.1% |
| Senior Care | 3.6% |
| Other2 | 12.8% |
| Other Assets and Liabilities — Net3 | 3.2% |
| TOTAL | 100% |
| 1 | Sector classifications, and the assignment of holdings to such sectors, are based upon the economic sector and/or revenue source of the underlying obligor, as determined by the Fund's Adviser. For securities that have been enhanced by a third-party, including bond insurers and banks, sector classifications are based upon the economic sector and/or revenue source of the underlying obligor, as determined by the Fund's Adviser. Pre-refunded securities are those whose debt service is paid from escrowed assets, usually U.S. government securities. |
| 2 | For purposes of this table, sector classifications constitute 84.0% of the Fund's total net assets. Remaining sectors have been aggregated under the designation “Other.” |
| 3 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
February 29, 2012 (unaudited)
| Principal Amount | Value |
| MUNICIPAL BONDS – 93.7% |
| Pennsylvania – 93.7% |
| $1,000,000 | Abington, PA School District, UT GO Bonds, 4.00% (FGIC and National Public Finance Guarantee Corporation INS), 10/1/2012 | 1,020,530 |
| 3,555,000 | Allegheny County, PA HDA, Hospital Revenue Bonds (Series 2008A), 5.00% (UPMC Health System), 6/15/2018 | 4,265,787 |
| 2,000,000 | Allegheny County, PA HDA, Refunding Revenue Bonds (Series 1998A), 5.125% (Jefferson Regional Medical Center, PA)/(Original Issue Yield: 5.34%), 5/1/2023 | 2,000,680 |
| 2,000,000 | Allegheny County, PA HDA, Revenue Bonds, 5.50% (Catholic Health East)/(Original Issue Yield: 5.60%), 11/15/2032 | 2,020,700 |
| 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 | 1,000,960 |
| 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 | 1,002,240 |
| 2,200,000 | Allegheny County, PA Higher Education Building Authority, University Revenue Bonds (Series 2006A), 4.75% (Robert Morris University), 2/15/2026 | 2,153,800 |
| 1,000,000 | 1,2 | 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 | 886,430 |
| 1,385,000 | Allegheny County, PA IDA, Environmental Improvement Refunding Revenue Bonds (Series 2005), 5.50% (United States Steel Corp.), 11/1/2016 | 1,416,038 |
| 3,000,000 | Allegheny County, PA IDA, Environmental Improvement Revenue Refunding Bonds (Series 2009), 6.75% (United States Steel Corp.), 11/1/2024 | 3,253,710 |
| 835,000 | Allegheny County, PA IDA, Lease Revenue Bonds (Series 2006), 5.125% (Residential Resources, Inc. Project), 9/1/2031 | 809,474 |
| 2,000,000 | Allegheny County, PA Port Authority, Special Revenue Transportation Refunding Bonds (Series 2011), 5.00% (Original Issue Yield: 5.20%), 3/1/2026 | 2,268,680 |
| 1,715,000 | Allegheny County, PA Port Authority, Special Revenue Transportation Refunding Bonds (Series 2011), 5.75%, 3/1/2029 | 2,006,533 |
| 1,000,000 | Beaver County, PA Hospital Authority, Revenue Bonds (Series 2012), 5.00% (Heritage Valley Health System, Inc.), 5/15/2027 | 1,120,530 |
| 3,000,000 | Bradford County, PA IDA, Solid Waste Disposal Refunding Revenue Bonds (Series 2005A), 4.70% (International Paper Co.), 3/1/2019 | 3,021,540 |
| 750,000 | Bucks County, PA IDA, Revenue Bonds (Series 2002A), 6.00% (Pennswood Village)/(United States Treasury PRF 10/1/2012@101)/(Original Issue Yield: 6.12%), 10/1/2027 | 782,617 |
| Principal Amount | Value |
| $500,000 | Bucks County, PA IDA, Revenue Bonds (Series 2002A), 6.00% (Pennswood Village)/(United States Treasury PRF 10/1/2012@101)/(Original Issue Yield: 6.16%), 10/1/2034 | 521,745 |
| 2,000,000 | Bucks County, PA Water & Sewer Authority, Revenue Bond, 4.20% (Assured Guaranty Municipal Corp. INS)/(Original Issue Yield: 4.21%), 6/1/2020 | 2,193,080 |
| 1,000,000 | Carlisle, PA Area School District, UT GO Bonds, 4.00% (FGIC and National Public Finance Guarantee Corporation INS), 3/1/2013 | 1,036,750 |
| 1,055,000 | Catasauqua, PA Area School District, UT GO Bonds, 5.00% (Assured Guaranty Municipal Corp. INS), 2/15/2031 | 1,115,842 |
| 1,500,000 | Centre County, PA Hospital Authority, Hospital Revenue Bonds, 6.25% (Mount Nittany Medical Center)/(Assured Guaranty Corp. INS)/(Original Issue Yield: 6.30%), 11/15/2044 | 1,580,655 |
| 2,000,000 | Chester County, PA HEFA, Revenue Bonds (Series 2006), 5.00% (Devereux Foundation), 11/1/2031 | 2,052,600 |
| 2,000,000 | Chester County, PA, UT GO Bonds, 5.00%, 7/15/2028 | 2,340,780 |
| 1,500,000 | Clarion County, PA IDA, Water Facility Revenue Refunding Bonds (Series 2009), 5.50% (Pennsylvania American Water Co.), 12/1/2039 | 1,650,765 |
| 2,000,000 | Commonwealth of Pennsylvania, UT GO Bonds (First Series 2011), 5.00%, 11/15/2030 | 2,375,520 |
| 5,075,000 | Commonwealth of Pennsylvania, UT GO Bonds (Second Series 2009), 5.00%, 4/15/2023 | 6,141,207 |
| 4,000,000 | Commonwealth of Pennsylvania, UT GO Bonds (Second Series 2010A), 5.00%, 5/1/2017 | 4,852,680 |
| 6,150,000 | Commonwealth of Pennsylvania, UT GO Bonds (Series 2007A), 5.00%, 8/1/2023 | 7,060,446 |
| 1,000,000 | Cumberland County, PA Municipal Authority, Retirement Community Revenue Bonds (Series 2002A), 7.125% (Wesley Affiliated Services, Inc. Obligated Group)/(United States Treasury PRF 1/1/2013@101)/(Original Issue Yield: 7.40%), 1/1/2025 | 1,067,420 |
| 2,000,000 | Delaware Valley, PA Regional Finance Authority, Local Government Revenue Bonds (Series 1997B), 5.60% (AMBAC INS), 7/1/2017 | 2,312,880 |
| 1,000,000 | Delaware Valley, PA Regional Finance Authority, Revenue Bonds, 5.75%, 7/1/2017 | 1,163,900 |
| 1,500,000 | Ephrata, PA Area School District, UT GO Bonds, 4.25% (FGIC and National Public Finance Guarantee Corporation INS), 4/15/2017 | 1,669,845 |
| 1,500,000 | Erie County, PA Hospital Authority, Revenue Bonds (Series 2006), 5.00% (UPMC Health System)/(CIFG Assurance NA INS), 11/1/2035 | 1,558,200 |
| 1,000,000 | Erie, PA Higher Education Building Authority, Revenue Bonds (Series 2007 GG3), 5.00% (Gannon University)/(Radian Asset Assurance, Inc. INS), 5/1/2032 | 997,410 |
| 2,250,000 | Geisinger Authority, PA Health System, Health System Revenue Bonds (Series 2009A), 5.25% (Geisinger Health System), 6/1/2039 | 2,440,215 |
| 2,000,000 | Harrisburg, PA Authority, Water Revenue Refunding Bonds (Series 2008), 5.25% (Original Issue Yield: 5.35%), 7/15/2031 | 1,670,600 |
| Principal Amount | Value |
| $2,000,000 | Indiana County, PA IDA, Refunding Revenue Bonds, 5.00% (Indiana University of PA)/(AMBAC INS), 11/1/2029 | 1,936,020 |
| 1,615,000 | Johnstown, PA Redevelopment Authority, Revenue Bonds (Series A), 4.50% (Assured Guaranty Municipal Corp. INS), 8/15/2019 | 1,719,103 |
| 1,000,000 | Lancaster County, PA Hospital Authority, Revenue Bonds, 5.50% (Lancaster General Hospital)/(United States Treasury PRF 9/15/2013@100)/(Original Issue Yield: 5.63%), 3/15/2026 | 1,075,620 |
| 1,000,000 | Lancaster, PA Higher Education Authority, College Revenue Bonds, 5.00% (Franklin & Marshall College), 4/15/2019 | 1,122,320 |
| 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 | 1,007,330 |
| 2,000,000 | Lehigh County, PA General Purpose Authority, Hospital Revenue Bonds, 5.25% (St. Lukes Hospital of Bethlehem)/(United States Treasury PRF 8/15/2013@100)/(Original Issue Yield: 5.42%), 8/15/2023 | 2,143,760 |
| 2,250,000 | Lehigh County, PA General Purpose Authority, Revenue Bonds (Series 2005B), 5.00% (Lehigh Valley Health Network)/(Assured Guaranty Municipal Corp. INS), 7/1/2035 | 2,378,565 |
| 550,000 | Luzerne County, PA IDA, Lease Revenue Bonds, 3.40% (Luzerne County, PA)/(Assured Guaranty Municipal Corp. INS)/(Original Issue Yield: 3.55%), 12/15/2013 | 575,894 |
| 500,000 | Luzerne County, PA IDA, Lease Revenue Bonds, 3.55% (Luzerne County, PA)/(Assured Guaranty Municipal Corp. INS)/(Original Issue Yield: 3.70%), 12/15/2014 | 534,815 |
| 2,250,000 | Lycoming County PA Authority, College Revenue Bonds (Series 2008), 5.50% (Pennsylvania College of Technology)/(Assured Guaranty Corp. INS), 10/1/2032 | 2,463,772 |
| 2,200,000 | Lycoming County PA Authority, Revenue Bonds (Series A), 5.75% (Susquehanna Health System)/(Original Issue Yield: 5.90%), 7/1/2039 | 2,319,482 |
| 1,000,000 | Monroe County, PA Hospital Authority, Hospital Revenue Bonds (Series 2002A), 5.50% (Pocono Medical Center)/(Radian Asset Assurance, Inc. INS)/(Original Issue Yield: 5.60%), 1/1/2022 | 1,001,930 |
| 1,000,000 | Monroe County, PA Hospital Authority, Revenue Bonds, 6.00% (Pocono Medical Center)/(United States Treasury PRF 1/1/2014@100)/(Original Issue Yield: 6.17%), 1/1/2043 | 1,103,660 |
| 2,000,000 | Montgomery County, PA Higher Education & Health Authority Hospital, Revenue Bonds (Series 2006FF1), 5.00% (Dickinson College)/(CIFG Assurance NA INS), 5/1/2031 | 2,103,520 |
| 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 | 1,004,400 |
| 1,000,000 | New Wilmington, PA Municipal Authority, Revenue Bonds (Series 2007GG4), 5.125% (Westminster College)/(Radian Asset Assurance, Inc. INS), 5/1/2033 | 1,015,120 |
| Principal Amount | Value |
| $1,500,000 | Northampton County, PA General Purpose Authority, Hospital Revenue Bonds (Series 2008A), 5.50% (St. Lukes Hospital of Bethlehem)/(Original Issue Yield: 5.60%), 8/15/2035 | 1,561,935 |
| 1,000,000 | Northumberland County PA IDA, Facilities Revenue Bonds (Series 2002B), 5.50% (NHS Youth Service, Inc.)/(ACA Financial Guaranty Company INS)/(Original Issue Yield: 5.80%), 2/15/2033 | 561,220 |
| 710,000 | Pennsylvania Convention Center Authority, Revenue Bonds, 6.70% (Escrowed In Treasuries COL)/(Original Issue Yield: 6.843%), 9/1/2016 | 809,698 |
| 2,000,000 | Pennsylvania EDFA, Exempt Facilities Revenue Bonds (Series 2009), 7.00% (Allegheny Energy Supply Company LLC), 7/15/2039 | 2,299,980 |
| 3,000,000 | Pennsylvania EDFA, PCR Refunding Bonds (Series 2008), 4.00% (PPL Electric Utilities Corp.), 10/1/2023 | 3,149,010 |
| 2,000,000 | Pennsylvania EDFA, Revenue Bonds (Series 1998A), 5.25% (Northwestern Human Services, Inc.)/(Original Issue Yield: 5.668%), 6/1/2028 | 1,751,140 |
| 1,000,000 | Pennsylvania EDFA, Revenue Bonds (Series 2000), 5.90% (Dr. Gertrude A. Barber Center, Inc.)/(Radian Asset Assurance, Inc. INS), 12/1/2030 | 1,000,950 |
| 2,000,000 | Pennsylvania EDFA, Revenue Bonds (Series 2010B), 5.00% (Aqua Pennsylvania, Inc.), 12/1/2043 | 2,191,260 |
| 1,000,000 | Pennsylvania EDFA, Solid Waste Disposal Revenue Bonds (Series 2004A), 4.70% TOBs (Waste Management, Inc.), Mandatory Tender 11/1/2014 | 1,075,440 |
| 1,000,000 | Pennsylvania EDFA, Solid Waste Disposal Revenue Bonds, Project A, 5.10% (Waste Management, Inc.), 10/1/2027 | 1,028,160 |
| 2,000,000 | Pennsylvania EDFA, Water Facilities Revenue Bonds (Series 2009B), 5.00% (Aqua Pennsylvania, Inc.), 11/15/2040 | 2,185,560 |
| 2,000,000 | Pennsylvania EDFA, Water Facility Revenue Bonds (Series 2009), 6.20% (Pennsylvania American Water Co.), 4/1/2039 | 2,309,200 |
| 1,500,000 | Pennsylvania Intergovernmental Coop Authority, Special Tax Revenue Refunding Bonds (Series 2009), 5.00%, 6/15/2022 | 1,764,990 |
| 1,000,000 | Pennsylvania Intergovernmental Coop Authority, Special Tax Revenue Refunding Bonds (Series 2010), 5.00%, 6/15/2018 | 1,220,340 |
| 1,020,000 | Pennsylvania State Higher Education Facilities Authority, 5.125% (Gwynedd-Mercy College)/(Radian Asset Assurance, Inc. INS), 5/1/2032 | 1,044,806 |
| 1,000,000 | Pennsylvania State Higher Education Facilities Authority, College Revenue Bonds (Series 2007), 5.00% (Bryn Mawr College)/(AMBAC INS), 12/1/2037 | 1,064,470 |
| 1,330,000 | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds (Series 2003A), 5.25% (Clarion University Foundation, Inc.)/(Syncora Guarantee, Inc. INS), 7/1/2018 | 1,349,139 |
| 1,490,000 | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds (Series 2003AA1), 5.25% (Dickinson College)/(Radian Asset Assurance, Inc. INS), 11/1/2018 | 1,560,343 |
| Principal Amount | Value |
| $1,000,000 | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds (Series 2006-FF2), 5.00% (Elizabethtown College)/(Radian Asset Assurance, Inc. INS), 12/15/2027 | 1,036,640 |
| 2,000,000 | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds (Series 2008), 5.00% (University of the Sciences in Philadelphia)/(Assured Guaranty Corp. INS), 11/1/2032 | 2,173,320 |
| 1,500,000 | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds (Series 2009), 5.00% (Carnegie Mellon University), 8/1/2021 | 1,779,825 |
| 1,000,000 | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds (Series 2009A), 5.25% (University of Pennsylvania Health System), 8/15/2022 | 1,168,100 |
| 2,000,000 | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds (Series 200B), 5.50% (University of Pennsylvania Health System)/(Original Issue Yield: 5.65%), 8/15/2018 | 2,461,640 |
| 1,100,000 | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds (Series 2010), 5.00% (Thomas Jefferson University), 3/1/2040 | 1,191,960 |
| 1,875,000 | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds (Series 2010E), 5.00% (UPMC Health System)/(Original Issue Yield: 5.10%), 5/15/2031 | 2,039,212 |
| 1,000,000 | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds (Series AL), 5.00% (State System of Higher Education, Commonwealth of PA), 6/15/2020 | 1,226,500 |
| 1,200,000 | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds (Series B), 4.00% (Thomas Jefferson University)/(AMBAC INS), 9/1/2013 | 1,251,876 |
| 1,250,000 | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds (Series EE-1), 5.00% (York College of Pennsylvania)/(Syncora Guarantee, Inc. INS), 11/1/2033 | 1,300,025 |
| 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 | 3,221,851 |
| 1,100,000 | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds, 5.00% (Messiah College)/(AMBAC INS), 11/1/2012 | 1,125,113 |
| 750,000 | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds, 5.00% (Widener University), 7/15/2039 | 766,305 |
| 1,000,000 | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds, 5.25% (Widener University)/(Original Issue Yield: 5.42%),7/15/2024 | 1,025,880 |
| 1,500,000 | Pennsylvania State Higher Education Facilities Authority, Student Housing Revenue Bonds (Series 2003A), 5.00% (California University of Pennsylvania)/(ACA Financial Guaranty Company INS)/(Original Issue Yield: 5.08%), 7/1/2023 | 1,336,830 |
| 2,000,000 | Pennsylvania State Higher Education Facilities Authority, Student Housing Revenue Bonds, 5.125% (Foundation for Indiana University of Pennsylvania)/(Syncora Guarantee, Inc. INS), 7/1/2039 | 2,004,480 |
| Principal Amount | Value |
| $1,500,000 | Pennsylvania State IDA, EDRBs (Series 2002), 5.50% (AMBAC INS), 7/1/2020 | 1,535,445 |
| 1,000,000 | Pennsylvania State Public School Building Authority, Revenue Bonds, 4.05% (Community College of Philadelphia)/(Original Issue Yield: 4.15%), 6/15/2012 | 1,008,890 |
| 5,740,000 | Pennsylvania State Turnpike Commission, Turnpike Revenue Bonds (Series 2006A), 5.00% (AMBAC INS), 12/1/2026 | 6,287,252 |
| 1,000,000 | Pennsylvania State Turnpike Commission, Turnpike Revenue Bonds (Series 2011E), 5.00%, 12/1/2030 | 1,124,770 |
| 2,440,000 | Pennsylvania State Turnpike Commission-Motor License Fund Enhanced, Motor License Fund-Enhanced Turnpike Subordinate Special Revenue Bonds (Series 2011A), 5.50% (Original Issue Yield: 5.55%), 12/1/2041 | 2,797,216 |
| 2,000,000 | Pennsylvania State Turnpike Commission-Motor License Fund Enhanced, Motor License Fund-Enhanced Turnpike Subordinate Special Revenue Bonds (Series 2011A), 6.00%, 12/1/2036 | 2,414,380 |
| 1,500,000 | Pennsylvania State University, Revenue Bonds, 5.00%, 9/1/2029 | 1,672,095 |
| 3,000,000 | Pennsylvania State University, Revenue Bonds, 5.00%, 9/1/2035 | 3,342,030 |
| 1,600,000 | Philadelphia Authority for Industrial Development, Senior Living Revenue Bonds (Series 2005A), 5.625% (PresbyHomes Germantown/Morrisville), 7/1/2035 | 1,509,712 |
| 2,000,000 | Philadelphia, PA Airport System, Airport Revenue Refunding Bonds (Series 2010D), 5.25%, 6/15/2028 | 2,139,880 |
| 2,350,000 | Philadelphia, PA Gas Works, Revenue Bonds (Seventh Series 1998 General Ordinance), 5.00% (AMBAC INS), 10/1/2037 | 2,392,300 |
| 2,000,000 | Philadelphia, PA Hospitals & Higher Education Facilities Authority, Hospital Revenue Bonds (Series 2011D), 5.00% (Children's Hospital of Philadelphia), 7/1/2028 | 2,276,440 |
| 1,250,000 | Philadelphia, PA Redevelopment Authority, Revenue Bonds (Series 2003A), 5.50% (Beech Student Housing Complex)/(ACA Financial Guaranty Company INS), 7/1/2019 | 1,210,350 |
| 1,000,000 | Philadelphia, PA Redevelopment Authority, Revenue Bonds (Series 2003A), 5.625% (Beech Student Housing Complex)/(ACA Financial Guaranty Company INS), 7/1/2023 | 934,270 |
| 1,000,000 | Philadelphia, PA School District, UT GO Bonds (Series 2002B), 5.625% (United States Treasury PRF 8/1/2012@100), 8/1/2022 | 1,023,070 |
| 3,000,000 | Philadelphia, PA School District, UT GO Bonds (Series 2008E), 6.00% (Original Issue Yield: 6.30%), 9/1/2038 | 3,412,410 |
| 2,610,000 | Philadelphia, PA Water & Wastewater System, Revenue Bonds (Series 2001A), 5.00% (United States Treasury PRF 11/1/2012@100)/(Original Issue Yield: 5.10%), 11/1/2031 | 2,694,538 |
| 500,000 | Philadelphia, PA Water & Wastewater System, Revenue Refunding Bonds, 6.25% (National Public Finance Guarantee Corporation INS), 8/1/2012 | 512,465 |
| Principal Amount | Value |
| $750,000 | Philadelphia, PA Water & Wastewater System, Water and Wastewater Revenue Bonds (Series 2009A), 5.25% (Original Issue Yield: 5.33%), 1/1/2036 | 810,225 |
| 3,000,000 | Philadelphia, PA, UT GO Bonds (Series 2008B), 7.125% (Assured Guaranty Corp. INS)/(Original Issue Yield: 7.25%), 7/15/2038 | 3,442,950 |
| 3,000,000 | Philadelphia, PA, UT GO Refunding Bonds (Series 2009A), 5.125% (Assured Guaranty Corp. INS)/(Original Issue Yield: 5.20%), 8/1/2025 | 3,359,430 |
| 1,000,000 | Pittsburgh, PA Urban Redevelopment Authority, Revenue Bonds (Series 2006C), 4.80% (GNMA COL), 4/1/2028 | 1,031,800 |
| 1,035,000 | Pittsburgh, PA Urban Redevelopment Authority, Tax Allocation, 4.50% (Center Triangle), 5/1/2019 | 1,143,975 |
| 1,885,000 | Pittsburgh, PA Water & Sewer Authority, Water & Sewer System Revenue Bonds, 5.00% (United States Treasury PRF 9/1/2015@100), 9/1/2024 | 2,168,033 |
| 3,000,000 | Pittsburgh, PA Water & Sewer Authority, Water and Sewer System Revenue Bonds (Series 2008 D-1), 5.00% (Assured Guaranty Municipal Corp. INS), 9/1/2025 | 3,336,660 |
| 2,455,000 | Pittsburgh, PA, UT GO Bonds (Series 2012B), 5.00%, 9/1/2025 | 2,791,900 |
| 3,000,000 | Pittsburgh, PA, UT GO Bonds (Series 2012B), 5.00%, 9/1/2026 | 3,372,240 |
| 2,165,000 | Radnor Township, PA, UT GO Bonds (Series 2004AA), 5.125%, 7/15/2027 | 2,350,540 |
| 1,500,000 | Reading Area Water Authority, PA, Water Revenue Bonds (Series 2011), 5.25% (Original Issue Yield: 5.27%), 12/1/2036 | 1,607,520 |
| 1,000,000 | Saxonburg, PA Area Authority, Sewer & Water Revenue Bonds, 5.00% (Assured Guaranty Corp. INS), 3/1/2030 | 1,062,910 |
| 7,440,000 | Scranton, PA Sewer Authority, Sewer Revenue Bonds, 5.00% (Assured Guaranty Municipal Corp. INS), 12/1/2036 | 7,751,959 |
| 3,000,000 | Scranton-Lackawanna, PA Health & Welfare Authority, Revenue Bonds, 5.00% (University of Scranton)/(Syncora Guarantee, Inc. INS), 11/1/2037 | 3,163,200 |
| 1,000,000 | South Fork Municipal Authority, PA, Hospital Revenue Bonds (Series 2010), 5.50% (Conemaugh Valley Memorial Hospital)/(Original Issue Yield: 5.72%), 7/1/2029 | 1,065,960 |
| 1,295,000 | Southcentral PA, General Authority, Hospital Revenue Bonds, 5.00% (Hanover Hospital, Inc.)/(Radian Asset Assurance, Inc. INS), 12/1/2029 | 1,295,337 |
| 1,000,000 | Southeastern, PA Transportation Authority, Capital Grant Receipts Bonds (Series 2011), 5.00%, 6/1/2028 | 1,130,330 |
| 1,000,000 | Southeastern, PA Transportation Authority, Revenue Refunding Bonds (Series 2010), 5.00%, 3/1/2018 | 1,184,450 |
| 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 | 526,045 |
| Principal Amount | Value |
| $1,000,000 | St. Mary Hospital Authority, PA, Health System Revenue Bonds (Series 2004B), 5.375% (Catholic Health East)/(United States Treasury PRF 11/15/2014@100)/(Original Issue Yield: 5.42%), 11/15/2034 | 1,124,690 |
| 1,000,000 | St. Mary Hospital Authority, PA, Health System Revenue Bonds (Series 2004B), 5.50% (Catholic Health East)/(United States Treasury PRF 11/15/2014@100), 11/15/2024 | 1,128,040 |
| 2,000,000 | State Public School Building Authority, PA, School Revenue Bonds, 5.00% (Haverford Twp, PA School District)/(Syncora Guarantee, Inc. INS), 3/15/2027 | 2,143,840 |
| 2,000,000 | State Public School Building Authority, PA, School Revenue Bonds, 5.00% (Haverford Twp, PA School District)/(Syncora Guarantee, Inc. INS), 3/15/2029 | 2,130,840 |
| 900,000 | 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 | 712,782 |
| 1,245,000 | Union County, PA Higher Educational Facilities Financing Authority, Revenue Bonds (Series 2002A), 5.25% (Bucknell University), 4/1/2021 | 1,305,071 |
| 1,250,000 | Union County, PA Hospital Authority, Revenue Bonds, 5.25% (Evangelical Community Hospital)/(Radian Asset Assurance, Inc. INS), 8/1/2024 | 1,269,575 |
| 400,000 | Washington County, PA Authority, Lease Revenue Bonds, 7.875% (Escrowed In Treasuries COL), 12/15/2018 | 581,636 |
| 490,000 | West View, PA Municipal Authority, SO Bonds, 9.50% (Escrowed In Treasuries COL), 11/15/2014 | 572,928 |
| 2,660,000 | Westmoreland County, PA Municipal Authority, Municipal Service Refunding Revenue Bonds (Series 2006A), 5.00% (Assured Guaranty Municipal Corp. INS), 8/15/2028 | 2,865,565 |
| TOTAL MUNICIPAL BONDS (IDENTIFIED COST $232,690,793) | 246,093,242 |
| SHORT-TERM MUNICIPALS – 3.1%3 |
| Pennsylvania – 3.1% |
| 600,000 | Luzerne County, PA, (Series A of 2006) Weekly VRDNs (Assured Guaranty Municipal Corp. INS)/(JPMorgan Chase Bank, N.A. LIQ), 0.160%, 3/1/2012 | 600,000 |
| 3,200,000 | Pennsylvania State Higher Education Facilities Authority, (Series 2007B) Weekly VRDNs (La Salle University)/(Citizens Bank of Pennsylvania LOC), 0.170%, 3/7/2012 | 3,200,000 |
| 1,500,000 | Philadelphia, PA Authority for Industrial Development, (Series 2007A) Daily VRDNs (Fox Chase Cancer Center)/(Citizens Bank of Pennsylvania LOC), 0.250%, 3/1/2012 | 1,500,000 |
| Principal Amount | Value |
| $2,800,000 | Pittsburgh, PA Water & Sewer Authority, (Series B-1 of 2007) Weekly VRDNs (Assured Guaranty Municipal Corp. INS)/(JPMorgan Chase Bank, N.A. LIQ), 0.160%, 3/1/2012 | 2,800,000 |
| TOTAL SHORT-TERM MUNICIPALS (AT AMORTIZED COST) | 8,100,000 |
| TOTAL MUNICIPAL INVESTMENTS — 96.8% (IDENTIFIED COST $240,790,793)4 | 254,193,242 |
| OTHER ASSETS AND LIABILITIES - NET — 3.2%5 | 8,301,315 |
| TOTAL NET ASSETS — 100% | $262,494,557 |
Securities that are subject to the federal alternative minimum tax (AMT) represent 3.5% of the Fund's portfolio as calculated based upon total market value.
| 1 | Denotes a restricted security that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) is subject to a contractual restriction on public sales. At February 29, 2012, these restricted securities amounted to $1,599,212, which represented 0.6% of total net assets. |
| 2 | Denotes a restricted security that may be resold without restriction to “qualified institutional buyers” as defined in Rule 144A under the Securities Act of 1933 and that the Fund has determined to be liquid under criteria established by the Fund's Board of Trustees (the “Trustees”). At February 29, 2012, this liquid restricted security amounted to $886,430, which represented 0.3% of total net assets. |
| 3 | Current rate and next reset date shown for Variable Rate Demand Notes. |
| 4 | The cost of investments for federal tax purposes amounts to $240,779,977. |
| 5 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Note: The categories of investments are shown as a percentage of total net assets at February 29, 2012.
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
Level 1 — quoted prices in active markets for identical securities, including investment companies with daily net asset values, if applicable.
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.
Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
As of February 29, 2012, all investments of the Fund utilized Level 2 inputs in valuing the Fund's assets carried at fair value.
Semi-Annual Shareholder Report
The following acronyms are used throughout this portfolio:| AMBAC | — American Municipal Bond Assurance Corporation |
| COL | — Collateralized |
| EDFA | — Economic Development Finance Authority |
| EDRBs | — Economic Development Revenue Bonds |
| FGIC | — Financial Guaranty Insurance Company |
| GNMA | — Government National Mortgage Association |
| GO | — General Obligation |
| HDA | — Hospital Development Authority |
| HEFA | — Health and Education Facilities Authority |
| IDA | — Industrial Development Authority |
| INS | — Insured |
| LIQ | — Liquidity Agreement |
| LOC | — Letter of Credit |
| PCR | — Pollution Control Revenue |
| PRF | — Prerefunded |
| SO | — Special Obligation |
| TOBs | — Tender Option Bonds |
| UT | — Unlimited Tax |
| VRDNs | — Variable Rate Demand Notes |
Financial Highlights – Class A Shares
(For a Share Outstanding Throughout Each Period)
| Six Months Ended (unaudited) 2/29/2012 | Year Ended August 31, | ||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |
| Net Asset Value, Beginning of Period | $10.68 | $10.92 | $10.37 | $10.70 | $11.22 | $11.63 |
| Income From Investment Operations: | |||||
| Net investment income | 0.20 | 0.44 | 0.43 | 0.47 | 0.47 | 0.50 |
| Net realized and unrealized gain (loss) on investments, futures contracts and swap contracts | 0.35 | (0.25) | 0.55 | (0.34) | (0.52) | (0.41) |
| TOTAL FROM INVESTMENT OPERATIONS | 0.55 | 0.19 | 0.98 | 0.13 | (0.05) | 0.09 |
| Less Distributions: | |||||
| Distributions from net investment income | (0.20) | (0.43) | (0.43) | (0.46) | (0.47) | (0.50) |
| Net Asset Value, End of Period | $11.03 | $10.68 | $10.92 | $10.37 | $10.70 | $11.22 |
| Total Return1 | 5.25% | 1.92% | 9.60% | 1.46% | (0.44)% | 0.70% |
| Ratios to Average Net Assets: | |||||
| Net expenses | 0.75%2 | 0.75% | 0.75% | 0.75% | 0.75%3 | 0.82%4 |
| Net investment income | 3.78%2 | 4.04% | 4.04% | 4.65% | 4.30% | 4.34% |
| Expense waiver/reimbursement5 | 0.10%2 | 0.11% | 0.09% | 0.10% | 0.09% | 0.09% |
| Supplemental Data: | |||||
| Net assets, end of period (000 omitted) | $256,511 | $238,538 | $270,219 | $276,442 | $281,863 | $282,386 |
| Portfolio turnover | 6% | 8% | 12% | 13% | 19% | 23% |
| 1 | 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. |
| 2 | Computed on an annualized basis. |
| 3 | The net expense ratio is calculated without reduction for expense offset arrangements. The net expense ratio is 0.75% for the year ended August 31, 2008, after taking into account this expense reduction. |
| 4 | Includes interest and trust expenses related to the Fund's participation in certain inverse floater structures of 0.07% for the year ended August 31, 2007. |
| 5 | This expense decrease is reflected in both the net expense and net investment income ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportFinancial Highlights – Class B Shares
(For a Share Outstanding Throughout Each Period)
| Six Months Ended (unaudited) 2/29/2012 | Year Ended August 31, | ||||
| 2011 | 2010 | 2009 | 2008 | 2007 | |
| Net Asset Value, Beginning of Period | $10.68 | $10.92 | $10.37 | $10.69 | $11.22 | $11.63 |
| Income From Investment Operations: | |||||
| Net investment income | 0.16 | 0.331 | 0.35 | 0.39 | 0.39 | 0.41 |
| Net realized and unrealized gain (loss) on investments, futures contracts and swap contracts | 0.35 | (0.22) | 0.54 | (0.33) | (0.53) | (0.41) |
| TOTAL FROM INVESTMENT OPERATIONS | 0.51 | 0.11 | 0.89 | 0.06 | (0.14) | — |
| Less Distributions: | |||||
| Distributions from net investment income | (0.16) | (0.35) | (0.34) | (0.38) | (0.39) | (0.41) |
| Net Asset Value, End of Period | $11.03 | $10.68 | $10.92 | $10.37 | $10.69 | $11.22 |
| Total Return2 | 4.84% | 1.13% | 8.76% | 0.77% | (1.30)% | (0.08)% |
| Ratios to Average Net Assets: | |||||
| Net expenses | 1.52%3 | 1.52% | 1.52% | 1.52% | 1.52%4 | 1.59%5 |
| Net investment income | 3.01%3 | 3.26% | 3.27% | 3.90% | 3.53% | 3.56% |
| Expense waiver/reimbursement6 | 0.08%3 | 0.09% | 0.07% | 0.08% | 0.08% | 0.08% |
| Supplemental Data: | |||||
| Net assets, end of period (000 omitted) | $5,983 | $7,401 | $16,071 | $20,671 | $27,298 | $34,860 |
| Portfolio turnover | 6% | 8% | 12% | 13% | 19% | 23% |
| 1 | Per share number has been calculated using the average shares method. |
| 2 | Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized. |
| 3 | Computed on an annualized basis. |
| 4 | The net expense ratio is calculated without reduction for expense offset arrangements. The net expense ratio is 1.52% for the year ended August 31, 2008 after taking into account this expense reduction. |
| 5 | Includes interest and trust expenses related to the Fund's participation in certain inverse floater structures of 0.07% for the year ended August 31, 2007. |
| 6 | This expense decrease is reflected in both the net expense and net investment income ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportStatement of Assets and Liabilities
| Assets: |
| Total investments in securities, at value (identified cost $240,790,793) | $254,193,242 |
| Cash | 44,501 |
| Receivable for investments sold | 3,275,000 |
| Income receivable | 3,243,153 |
| Receivable for shares sold | 2,136,458 |
| TOTAL ASSETS | 262,892,354 |
| Liabilities: |
| Payable for shares redeemed | $293,949 |
| Payable for portfolio accounting fees | 30,171 |
| Payable for distribution services fee (Note 5) | 3,621 |
| Payable for shareholder services fee (Note 5) | 50,386 |
| Payable for Directors'/Trustees' fees | 406 |
| Accrued expenses | 19,264 |
| TOTAL LIABILITIES | 397,797 |
| Net assets for 23,801,726 shares outstanding | $262,494,557 |
| Net Assets Consist of: |
| Paid-in capital | $270,181,334 |
| Net unrealized appreciation of investments | 13,402,449 |
| Accumulated net realized loss on investments | (21,091,844) |
| Undistributed net investment income | 2,618 |
| TOTAL NET ASSETS | $262,494,557 |
| Net Asset Value, Offering Price and Redemption Proceeds Per Share |
| Class A Shares: |
| Net asset value per share ($256,511,127 ÷ 23,259,370 shares outstanding), no par value, unlimited shares authorized | $11.03 |
| Offering price per share (100/95.50 of $11.03) | $11.55 |
| Redemption proceeds per share | $11.03 |
| Class B Shares: |
| Net asset value per share ($5,983,430 ÷ 542,356 shares outstanding), no par value, unlimited shares authorized | $11.03 |
| Offering price per share | $11.03 |
| Redemption proceeds per share (94.50/100 of $11.03) | $10.42 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportSix Months Ended February 29, 2012 (unaudited)
| Investment Income: |
| Interest | $5,635,203 |
| Expenses: |
| Investment adviser fee (Note 5) | $497,138 |
| Administrative fee (Note 5) | 96,983 |
| Custodian fees | 7,533 |
| Transfer and dividend disbursing agent fees and expenses | 63,504 |
| Directors'/Trustees' fees | 1,650 |
| Auditing fees | 11,686 |
| Legal fees | 2,309 |
| Portfolio accounting fees | 44,338 |
| Distribution services fee (Note 5) | 24,318 |
| Shareholder services fee (Note 5) | 307,565 |
| Account administration fee (Note 2) | 3,146 |
| Share registration costs | 14,422 |
| Printing and postage | 14,231 |
| Insurance premiums | 2,201 |
| Miscellaneous | 1,494 |
| TOTAL EXPENSES | 1,092,518 |
| Waivers and Reimbursement (Note 5): |
| Waiver of investment adviser fee | $(102,717) |
| Waiver of administrative fee | (2,402) |
| Reimbursement of shareholder services fee | (24,208) |
| TOTAL WAIVERS AND REIMBURSEMENT | (129,327) |
| Net expenses | 963,191 |
| Net investment income | 4,672,012 |
| Realized and Unrealized Gain on Investments: |
| Net realized gain on investments | 496,351 |
| Net change in unrealized appreciation of investments | 7,626,800 |
| Net realized and unrealized gain on investments | 8,123,151 |
| Change in net assets resulting from operations | $12,795,163 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportStatement of Changes in Net Assets
| Six Months Ended (unaudited) 2/29/2012 | Year Ended 8/31/2011 |
| Increase (Decrease) in Net Assets |
| Operations: |
| Net investment income | $4,672,012 | $10,337,293 |
| Net realized gain (loss) on investments | 496,351 | (1,583,780) |
| Net change in unrealized appreciation/depreciation of investments | 7,626,800 | (5,525,388) |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 12,795,163 | 3,228,125 |
| Distributions to Shareholders: |
| Distributions from net investment income |
| Class A Shares | (4,596,668) | (10,127,762) |
| Class B Shares | (97,027) | (372,487) |
| CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | (4,693,695) | (10,500,249) |
| Share Transactions: |
| Proceeds from sale of shares | 25,819,945 | 34,671,658 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 3,164,093 | 6,428,811 |
| Cost of shares redeemed | (20,529,507) | (74,179,726) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | 8,454,531 | (33,079,257) |
| Change in net assets | 16,555,999 | (40,351,381) |
| Net Assets: |
| Beginning of period | 245,938,558 | 286,289,939 |
| End of period (including undistributed net investment income of $2,618 and $24,301, respectively) | $262,494,557 | $245,938,558 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report1. 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 five portfolios. The financial statements included herein are only those of 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. Each portfolio pays its own expenses. The Fund offers two classes of shares: Class A Shares and Class B Shares. All shares of the Fund have equal rights with respect to voting, except on class-specific matters. The investment objective of the Fund is to provide current income exempt from federal regular income tax (federal regular income tax does not include the federal alternative minimum tax (AMT)) and the personal income taxes imposed by the Commonwealth of Pennsylvania and Pennsylvania municipalities. Interest income from the Fund's investments may be subject to the federal AMT 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 U.S. generally accepted accounting principles (GAAP).
Investment Valuation
In calculating its net asset value (NAV), the Fund generally values investments as follows:
- Fixed-income securities acquired with remaining maturities greater than 60 days are fair valued using price evaluations provided by a pricing service approved by the Trustees.
- Fixed-income securities acquired with remaining maturities of 60 days or less are valued at their cost (adjusted for the accretion of any discount or amortization of any premium), which approximates market value.
- Derivative contracts listed on exchanges are valued at their reported settlement or closing price.
- Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Trustees.
- Shares of other mutual funds are valued based upon their reported NAVs.
- For securities that are fair valued in accordance with procedures established by and under the general supervision of the Trustees, certain factors may be considered such as: the purchase price of the security, information obtained by contacting the issuer, analysis of the issuer's financial statements or other available documents, fundamental analytical data, the nature and duration of restrictions on disposition, the movement of the market in which the security is normally traded and public trading in similar securities of the issuer or comparable issuers.
If the Fund cannot obtain a price or price evaluation from a pricing service for an investment, the Fund may attempt to value the investment based upon the mean of bid and asked quotations or fair value the investment based on price evaluations, from one or more dealers. If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, the Fund uses the fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund could purchase or sell an investment at the price used to calculate the Fund's NAV.
Semi-Annual Shareholder Report
Fair Valuation and Significant Events ProceduresThe Trustees have authorized the use of pricing services to provide evaluations of the current fair value of certain investments for purposes of calculating the NAV. Factors considered by pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and asked for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for other types of fixed-income securities and OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Trustees.
The Trustees also have adopted procedures requiring an investment to be priced at its fair value whenever the Adviser determines that a significant event affecting the value of the investment has occurred between the time as of which the price of the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both an affirmative expectation that the investment's value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security is traded, or after the time of a price evaluation provided by a pricing service or a dealer, include:
- With respect to price evaluations of fixed-income securities determined before the close of regular trading on the NYSE, actions by the Federal Reserve Open Market Committee and other significant trends in U.S. fixed-income markets;
- Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded; and
- Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, a natural disaster affecting the issuer's operations or regulatory changes or market developments affecting the issuer's industry.
The Fund may seek to obtain more current quotations or price evaluations from alternative pricing sources. If a reliable alternative pricing source is not available, the Fund will determine the fair value of the investment using another method approved by the Trustees.
Semi-Annual Shareholder Report
Investment Income, Gains and Losses, Expenses and DistributionsInvestment transactions are accounted for on a trade date basis. Realized gains and losses from investment transactions are recorded on an identified cost basis. Interest income and expenses are accrued daily. Distributions to shareholders are recorded on the ex-dividend date. Distributions of net investment income are declared and paid monthly. Non-cash 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 Class A Shares and Class B Shares may bear account administration fees, distribution services fees and shareholder services fees unique to those classes. For the six months ended February 29, 2012, account administration fees for the Fund were as follows:
| Account Administration Fees Incurred |
| Class A Shares | $3,146 |
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 using the effective interest rate method.
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. As of and during the six months ended February 29, 2012, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of February 29, 2012, tax years 2008 through 2011 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts.
When-Issued and Delayed Delivery Transactions
The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.
Semi-Annual Shareholder Report
Restricted SecuritiesThe Fund may purchase securities which are considered restricted. Restricted securities are securities that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) are subject to contractual restrictions on public sales. In some cases, when a security cannot be offered for public sale without first being registered, the issuer of the restricted security has agreed to register such securities for resale, at the issuer's expense, either upon demand by the Fund or in connection with another registered offering of the securities. Many such restricted securities may be resold in the secondary market in transactions exempt from registration. Restricted securities may be determined to be liquid under criteria established by the Trustees. The Fund will not incur any registration costs upon such resales. The Fund's restricted securities are valued at the price provided by dealers in the secondary market or, if no market prices are available, at the fair value as determined in accordance with procedures established by and under the general supervision of the Trustees.
Additional information on restricted securities, excluding securities purchased under Rule 144A that have been deemed liquid by the Trustees, if applicable, held at February 29, 2012, is as follows:
| Security | Acquisition Date | Cost | Market Value |
| Susquehanna, PA Area Regional Airport Authority, Airport Facilities Revenue Bonds (Series 1999), 5.50% (Aero Harrisburg)/(Original Issue Yield: 5.85%), 1/1/2024 | 3/30/2000 | $871,783 | $712,782 |
Other
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated.
3. Shares of Beneficial Interest
The following tables summarize share activity:
| Six Months Ended 2/29/2012 | Year Ended 8/31/2011 | ||
| Class A Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 2,360,023 | $25,710,551 | 3,256,199 | $34,223,213 |
| Shares issued to shareholders in payment of distributions declared | 284,057 | 3,073,386 | 584,362 | 6,113,898 |
| Shares redeemed | (1,727,397) | (18,703,377) | (6,232,251) | (65,280,679) |
| NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS | 916,683 | $10,080,560 | (2,391,690) | $(24,943,568) |
| Six Months Ended 2/29/2012 | Year Ended 8/31/2011 | ||
| Class B Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 10,147 | $109,394 | 42,567 | $448,445 |
| Shares issued to shareholders in payment of distributions declared | 8,386 | 90,707 | 30,078 | 314,913 |
| Shares redeemed | (169,185) | (1,826,130) | (850,706) | (8,899,047) |
| NET CHANGE RESULTING FROM CLASS B SHARE TRANSACTIONS | (150,652) | $(1,626,029) | (778,061) | $(8,135,689) |
| NET CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS | 766,031 | $8,454,531 | (3,169,751) | $(33,079,257) |
4. Federal Tax Information
At February 29, 2012, the cost of investments for federal tax purposes was $240,779,977. The net unrealized appreciation of investments for federal tax purposes was $13,413,265. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $15,140,676 and net unrealized depreciation from investments for those securities having an excess of cost over value of $1,727,411.
At August 31, 2011, the Fund had a capital loss carryforward of $20,020,638 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, thereby reducing the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal income tax. Pursuant to the Code, a net capital loss incurred in taxable years beginning on or before December 22, 2010 is characterized as short-term and may be carried forward for a maximum of eight tax years (“Carryforward Limit”), whereas a net capital loss incurred in taxable years beginning after December 22, 2010 retains its character as either short-term or long-term, does not expire and is required to be utilized prior to the losses which have a Carryforward Limit.
The following schedule summarizes the Fund's capital loss carryforwards and expiration years:
| Expiration Year | Short-Term | Long-Term | Total |
| 2012 | $236,977 | N/A | $236,977 |
| 2013 | $1,984,510 | N/A | $1,984,510 |
| 2016 | $213,566 | N/A | $213,566 |
| 2017 | $7,730,607 | N/A | $7,730,607 |
| 2018 | $9,851,417 | N/A | $9,851,417 |
| 2019 | $3,561 | N/A | $3,561 |
Semi-Annual Shareholder Report
5. Investment Adviser Fee and Other Transactions with AffiliatesInvestment Adviser Fee
Federated Investment Management Company is the Fund's investment adviser (the “Adviser”). The advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.40% of the Fund's average daily net assets. Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee. For the six months ended February 29, 2012, the Adviser voluntarily waived $102,717 of its fee.
Administrative Fee
Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FAS is based on the average aggregate daily net assets of certain Federated funds as specified below:
| Administrative Fee | Average Aggregate Daily Net Assets of the Federated Funds |
| 0.150% | on the first $5 billion |
| 0.125% | on the next $5 billion |
| 0.100% | on the next $10 billion |
| 0.075% | on assets in excess of $20 billion |
The administrative fee received during any fiscal year shall be at least $150,000 per portfolio and $40,000 per each additional class of Shares. Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the six months ended February 29, 2012, the net fee paid to FAS was 0.076% of average daily net assets of the Fund. FAS waived $2,402 of its fee.
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 at the following percentages of average daily net assets annually, to compensate FSC:
| Share Class Name | Percentage of Average Daily Net Assets of Class |
| Class A Shares | 0.05% |
| Class B Shares | 0.75% |
Semi-Annual Shareholder Report
Subject to the terms described in the Expense Limitation note, FSC may voluntarily choose to waive any portion of its fee. For the six months ended February 29, 2012, distribution services fees for the Fund were as follows:| Distribution Services Fees Incurred |
| Class B Shares | $24,318 |
When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares. For the six months ended February 29, 2012, FSC retained $4,072 of fees paid by the Fund. For the six months ended February 29, 2012, the Fund's Class A Shares did not incur a distribution services fee; however it may begin to incur the fee upon approval of the Trustees.
Sales Charges
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. For the six months ended February 29, 2012, FSC retained $30,945 in sales charges from the sale of the Fund's Class A Shares.
Shareholder Services Fee
The Fund may pay fees (“Service Fees”) up to 0.25% of the average daily net assets of the Fund's Class A Shares and Class B Shares to financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for Service Fees. For the six months ended February 29, 2012, Service Fees for the Fund were as follows:
| Service Fees Incurred | Service Fees Reimbursed |
| Class A Shares | $299,459 | $(24,208) |
| Class B Shares | 8,106 | — |
| TOTAL | $307,565 | $(24,208) |
For the six months ended February 29, 2012, FSSC did not receive any fees paid by the Fund.
Interfund Transactions
During the six months ended February 29, 2012, 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 $27,250,000 and $26,100,000, respectively.
Semi-Annual Shareholder Report
Expense LimitationThe Adviser and its affiliates (which may include FSC, FAS and FSSC) have voluntarily agreed to waive their fees and/or reimburse expenses so that the total annual fund operating expenses (as shown in the financial highlights) paid by the Fund's Class A Shares and Class B Shares (after the voluntary waivers and reimbursements) will not exceed 0.75% and 1.52% (the “Fee Limit”), respectively, up to but not including the later of (the “Termination Date”): (a) November 1, 2012; or (b) the date of the Fund's next effective Prospectus. While the Adviser and its affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Trustees.
General
Certain 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, for the six months ended February 29, 2012, were as follows:
| Purchases | $15,612,246 |
| Sales | $21,179,965 |
7. Concentration of 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 29, 2012, 34.9% 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 15.7% of total investments.
8. Line of Credit
The Fund participates in a $100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement with PNC Bank. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings are charged interest at a rate offered to the Fund by PNC Bank at the time of the borrowing. As of February 29, 2012, there were no outstanding loans. During the six months ended February 29, 2012, the Fund did not utilize the LOC.
Semi-Annual Shareholder Report
9. Interfund LendingPursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of February 29, 2012, there were no outstanding loans. During the six months ended February 29, 2012, the program was not utilized.
10. Recent Accounting Pronouncements
In April 2011, the Financial Accounting Standards Board (FASB) released Accounting Standards Update (ASU) No. 2011-03, “Reconsideration of Effective Control for Repurchase Agreements.” This ASU amends FASB Accounting Standards Codification (ASC) Topic 860, “Transfers and Servicing”; specifically the criteria required to determine whether a repurchase agreement and similar agreements should be accounted for as sales of financial assets or secured borrowings with commitments. This ASU is effective for fiscal years and interim periods beginning after December 15, 2011. Management has concluded that the adoption of ASU No. 2011-03 is not expected to have a material impact on the Fund's financial statements and the accompanying notes, net assets or results of operations.
In addition, in May 2011, FASB released ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” This ASU amends FASB ASC Topic 820, “Fair Value Measurement,” to establish common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP. This ASU is effective for fiscal years and interim periods beginning after December 15, 2011. Management has concluded that the adoption of ASU No. 2011-04 is not expected to have a material impact on the Fund's financial statements and the accompanying notes.
Semi-Annual Shareholder ReportShareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase or redemption payments; and (2) ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or shareholder services fees and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from September 1, 2011 to February 29, 2012.
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 required to be provided to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Semi-Annual Shareholder Report
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 9/1/2011 | Ending Account Value 2/29/2012 | Expenses Paid During Period1 |
| Actual: |
| Class A Shares | $1,000 | $1,052.50 | $3.83 |
| Class B Shares | $1,000 | $1,048.40 | $7.74 |
| Hypothetical (assuming a 5% return before expenses): |
| Class A Shares | $1,000 | $1,021.13 | $3.77 |
| Class B Shares | $1,000 | $1,017.30 | $7.62 |
| 1 | Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half-year period). The annualized net expense ratios are as follows: |
| Class A Shares | 0.75% |
| Class B Shares | 1.52% |
Evaluation and Approval of Advisory Contract – May 2011
federated pennsylvania municipal income fund (the “Fund”)
The Fund's Board reviewed the Fund's investment advisory contract at meetings held in May 2011. The Board's decision regarding the contract reflects the exercise of its business judgment on whether to continue the existing arrangements.
In this connection, the Federated Funds' Board had previously appointed a Senior Officer, whose duties include specified responsibilities relating to the process by which advisory fees are to be charged to a Federated fund. The Senior Officer has the authority to retain consultants, experts, or staff as may be reasonably necessary to assist in the performance of his duties, reports directly to the Board, and may be terminated only with the approval of a majority of the independent members of the Board. The Senior Officer prepared and furnished to the Board an independent, written evaluation that covered topics discussed below (the “Evaluation”). The Board considered that Evaluation, along with other information, in deciding to approve the advisory contract.
During its review of the contract, the Board considered compensation and benefits received by the Adviser. This included the fees received for services provided to the Fund by other entities in the Federated organization and research services (if any) received by the Adviser from brokers that execute Federated fund trades, as well as advisory fees. The Board is also familiar with and considered judicial decisions concerning allegedly excessive investment advisory fees, which have indicated that the following factors may be relevant to an Adviser's fiduciary duty with respect to its receipt of compensation from a fund: the nature and quality of the services provided by the Adviser, including the performance of the fund; the Adviser's cost of providing the services; the extent to which the Adviser may realize “economies of scale” as a fund grows larger; any indirect benefits that may accrue to the Adviser and its affiliates as a result of the Adviser's relationship with a fund; performance and expenses of comparable funds; and the extent to which the independent Board members are fully informed about all facts the Board deems relevant bearing on the Adviser's services and fees. The Board further considered management fees (including any components thereof) charged to institutional and other clients of the Adviser for what might be viewed as like services, and the cost to the Adviser and its affiliates of supplying services pursuant to the management fee agreements, excluding any intra-corporate profit and profit margins of the Adviser and its affiliates for supplying such services. The Board was aware of these factors and was guided by them in its review of the Fund's advisory contract to the extent it considered them to be appropriate and relevant, as discussed further below.
Semi-Annual Shareholder Report
The Board considered and weighed these circumstances in light of its substantial accumulated experience in governing the Fund and working with Federated on matters relating to the Federated funds, and was assisted in its deliberations by independent legal counsel. Throughout the year, the Board has requested and received substantial and detailed information about the Fund and the Federated organization that was in addition to the extensive materials that comprise and accompany the Senior Officer's Evaluation. Federated provided much of this information at each regular meeting of the Board, and furnished additional information in connection with the particular meeting at which the Board's formal review of the advisory contract occurred. Between regularly scheduled meetings, the Board also received information on particular matters as the need arose. Thus, the Board's consideration of the advisory contract included review of the Senior Officer's Evaluation, accompanying data and additional information covering such matters as: the Adviser's investment philosophy, revenue, profitability, personnel and processes; investment and operating strategies; the Fund's short- and long-term performance (in absolute terms, both on a gross basis and net of expenses, as well as in relationship to its particular investment program and certain competitor or “peer group” funds and/or other benchmarks, as appropriate), and comments on the reasons for performance; the Fund's investment objectives; the Fund's expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for contractual or voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities (if any); and the nature, quality and extent of the advisory and other services provided to the Fund by the Adviser and its affiliates. The Board also considered the preferences and expectations of Fund shareholders and their relative sophistication; the continuing state of competition in the mutual fund industry and market practices; the range of comparable fees for similar funds in the mutual fund industry; the Fund's relationship to the Federated family of funds which include a comprehensive array of funds with different investment objectives, policies and strategies which are available for exchange without the incurrence of additional sales charges; compliance and audit reports concerning the Federated funds and the Federated companies that service them (including communications from regulatory agencies), as well as Federated's responses to any issues raised therein; and relevant developments in the mutual fund industry and how the Federated funds and/or Federated are responding to them. The Board's evaluation process is evolutionary. The criteria considered and the emphasis placed on relevant criteria change in recognition of changing circumstances in the mutual fund marketplace.With respect to the Fund's performance and expenses in particular, the Board has found the use of comparisons to other mutual funds with comparable investment programs to be relevant, given the high degree of competition in the mutual fund business. The Board focused on comparisons with other similar Semi-Annual Shareholder Report
mutual funds more heavily than non-mutual fund products or services because it is believed that they are more relevant. For example, other mutual funds are the products most like the Fund, they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle in fact chosen and maintained by the Fund's investors. The range of their fees and expenses therefore appears to be a generally reliable indication of what consumers have found to be reasonable in the precise marketplace in which the Fund competes. The Fund's ability to deliver competitive performance when compared to its peer group was a useful indicator of how the Adviser is executing the Fund's investment program, which in turn assisted the Board in reaching a conclusion that the nature, extent, and quality of the Adviser's investment management services were such as to warrant continuation of the advisory contract. In this regard, the Senior Officer has reviewed Federated's fees for providing advisory services to products outside the Federated family of funds (e.g., institutional and separate accounts). He concluded that mutual funds and institutional accounts are inherently different products. Those differences include, but are not limited to, different types of targeted investors; being subject to different laws and regulations; different legal structures; different average account sizes; different associated costs; different portfolio management techniques made necessary by different cash flows; and portfolio manager time spent in review of securities pricing. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund advisory contracts.The Senior Officer reviewed information compiled by Federated, using data supplied by independent fund ranking organizations, regarding the performance of, and fees charged by, other mutual funds, noting his view that comparisons to fund peer groups are relevant in judging the reasonableness of proposed fees.
The Fund's performance fell below the median of the relevant peer group for the one-year, three-year and five-year periods covered by the Evaluation. The Board discussed the Fund's performance with the Adviser and recognized the efforts being undertaken by the Adviser. The Board will continue to monitor these efforts and the performance of the Fund.
The Board also received financial information about Federated, including information regarding the compensation and benefits Federated derived from its relationships with the Federated funds. This information covered not only the fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds' administrator). The information also detailed any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades. In addition, the Board considered the fact that, in order for a fund to be competitive in the marketplace, Federated and its affiliates frequently waived fees Semi-Annual Shareholder Report
and/or reimbursed expenses and have disclosed to fund investors and/or indicated to the Board their intention to do so in the future, where appropriate. Moreover, the Board receives regular reporting as to the institution or elimination of these voluntary waivers.Federated furnished information, requested by the Senior Officer, that reported revenues on a fund-by-fund basis and made estimates of the allocation of expenses on a fund-by-fund basis, using allocation methodologies specified by the Senior Officer. The Senior Officer noted that, although they may apply consistent allocation processes, the inherent difficulties in allocating costs (and the unavoidable arbitrary aspects of that exercise) and the lack of consensus on how to allocate those costs may render such allocation information unreliable. The allocation information was considered in the analysis by the Board but was determined to be of limited use.
The Board and the Senior Officer also reviewed information compiled by Federated comparing profitability information for Federated to other publicly held fund management companies. In this regard, the Senior Officer noted the limited availability of such information, but nonetheless concluded that Federated's profit margins did not appear to be excessive and the Board agreed.
The Senior Officer's Evaluation also discussed the notion of possible realization of “economies of scale” as a fund grows larger. The Board considered in this regard that the Adviser has made significant and long-term investments in areas that support all of the Federated funds, such as personnel and processes for the portfolio management, compliance, internal audit, and risk management functions; and systems technology; and that the benefits of these efforts (as well as any economies, should they exist) were likely to be enjoyed by the fund complex as a whole. Finally, the Board also noted the absence of any applicable regulatory or industry guidelines on this subject, which (as discussed in the Senior Officer's Evaluation) is compounded by the lack of any common industry practice or general pattern with respect to structuring fund advisory fees with “breakpoints” that serve to reduce the fee as the fund attains a certain size. The Senior Officer did not recommend institution of breakpoints in pricing Federated's fund advisory services at this time.
It was noted in the materials for the Board meeting that for the period covered by the Evaluation, the Fund's investment advisory fee, after waivers and expense reimbursements, if any, was below the median of the relevant peer group. The Board reviewed the fees and other expenses of the Fund with the Adviser and was satisfied that the overall expense structure of the Fund remained competitive.
The Senior Officer noted that, considering the totality of the circumstances, and all of the factors referenced within his Evaluation, he had concluded that, subject to comments and recommendations made within his Evaluation, his observations and the information accompanying the Evaluation supported a finding by the Board that the management fees for each of the funds was reasonable and that Federated appeared to provide appropriate administrative Semi-Annual Shareholder Report
services to the Fund for the fees paid. Under these circumstances, no changes were recommended to, and no objection was raised to, the continuation of the Fund's advisory contract. The Board concluded that the nature, quality and scope of services provided the Fund by the Adviser and its affiliates were satisfactory.In its decision to continue an existing investment advisory contract, the Board was mindful of the potential disruptions of the Fund's operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew an advisory contract. In particular, the Board recognized that many shareholders have invested in the Fund on the strength of the Adviser's industry standing and reputation and with the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's approval of the advisory contract reflected the fact that it is the shareholders who have effectively selected the Adviser by virtue of having invested in the Fund.
The Board based its decision to approve the advisory contract on the totality of the circumstances and relevant factors and with a view to past and future long-term considerations. Not all of the factors and considerations identified above were necessarily relevant to the Fund, nor did the Board consider any one of them to be determinative. With respect to the factors that were relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.
Semi-Annual Shareholder ReportVoting Proxies on Fund Portfolio Securities
A description of the policies and procedures that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. A report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available from Federated's website at FederatedInvestors.com. To access this information from the home page, select “All” under “Asset Classes.” Select a fund name and share class, if applicable, to go to the Fund Overview page. On the Fund Overview page, select the “Documents” tab. At the bottom of that page, select “Proxy Voting Record Report (Form N-PX).” Form N-PX filings are also available at the SEC's website at www.sec.gov.
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. From the home page, select “All” under “Asset Classes.” Select a fund name and share class, if applicable, to go to the Fund Overview page. On the Fund Overview page, select the “Documents” tab. At the bottom of that page, select “Form N-Q.”
Semi-Annual Shareholder ReportMutual funds are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal.
This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund's Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.
IMPORTANT NOTICE ABOUT FUND DOCUMENT 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 Pennsylvania Municipal Income Fund
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
CUSIP 313923708
CUSIP 313923807
2032304 (4/12)
Federated is a registered trademark of Federated Investors, Inc.
2012 © Federated Investors, Inc.
| Semi-Annual Shareholder Report | ||
| February 29, 2012 | ||
| Share Class | Ticker |
| A | FMOAX |
| B | FMOBX |
| C | FMNCX |
| F | FHTFX |
Federated Municipal High Yield Advantage Fund
Fund Established 1987
A Portfolio of Federated Municipal Securities Income Trust
Dear Valued Shareholder,
I am pleased to present the Semi-Annual Shareholder Report for your fund covering the period from September 1, 2011 through February 29, 2012. This report includes a complete listing of your fund's holdings, performance information and financial statements along with other important fund information.
In addition, our website, FederatedInvestors.com, offers easy access to Federated resources that include timely fund updates, economic and market insights from our investment strategists, and financial planning tools. We invite you to register to take full advantage of its capabilities.
Thank you for investing with Federated. I hope you find this information useful and look forward to keeping you informed.
Sincerely,
J. Christopher Donahue, President
May Lose Value No Bank GuaranteeCONTENTS
Portfolio of Investments Summary Table (unaudited)
At February 29, 2012, the Fund's sector composition1 was as follows:
| Sector Composition | Percentage of Total Net Assets |
| Hospital | 16.1% |
| Special Tax | 12.0% |
| Senior Care | 11.2% |
| Industrial Development Bond/Pollution Control Revenue Bond | 9.8% |
| Electric and Gas | 8.2% |
| Education | 7.0% |
| Transportation | 5.4% |
| Tobacco | 5.0% |
| Water and Sewer | 4.4% |
| Pre-refunded | 3.2% |
| Derivative Contracts2,3 | (0.0)% |
| Other4 | 16.0% |
| Other Assets and Liabilities — Net5 | 1.7% |
| TOTAL | 100.0% |
| 1 | Sector classifications, and the assignment of holdings to such sectors, are based upon the economic sector and/or revenue source of the underlying obligor, as determined by the Fund's Adviser. For securities that have been enhanced by a third-party, including bond insurers and banks, such as a guarantor, sector classifications are based upon the economic sector and/or revenue source of the underlying obligor, as determined by the Fund's Adviser. Pre-refunded securities are those whose debt service is paid from escrowed assets, usually U.S. government securities. |
| 2 | Based upon net unrealized appreciation (depreciation) or value of the derivative contracts as applicable. Derivative contracts may consist of futures, forwards, options and swaps. The impact of a derivative contract on the Fund's performance may be larger than its unrealized appreciation (depreciation) or value may indicate. In many cases, the notional value or amount of a derivative contract may provide a better indication of the contract's significance to the portfolio. More complete information regarding the Fund's direct investments in derivative contracts, including unrealized appreciation (depreciation), value, and notional values or amounts of such contracts, can be found in the table at the end of the Portfolio of Investments included in this Report. |
| 3 | Represents less than 0.1% |
| 4 | For purposes of this table, sector classifications constitute 82.3% of the Fund's total net assets. Remaining sectors have been aggregated under the designation “Other.” |
| 5 | Assets, other than investments in securities and derivative contracts, less liabilities. See Statement of Assets and Liabilities. |
February 29, 2012 (unaudited)
| Principal Amount | Value |
| MUNICIPAL BONDS – 96.8% |
| Alabama – 1.8% |
| $2,000,000 | Alabama State Port Authority, Docks Facilities Revenue Bonds (Series 2010), 6.00% (Original Issue Yield: 6.25%), 10/1/2040 | 2,217,680 |
| 2,000,000 | Courtland, AL IDB, Solid Waste Disposal Revenue Refunding Bonds (Series 2005B), 5.20% (International Paper Co.), 6/1/2025 | 2,042,120 |
| 500,000 | Huntsville, AL Special Care Facilities Financing Authority, Retirement Facilities Revenue Bonds (Series 2011A), 7.50% (Redstone Village)/(Original Issue Yield: 7.625%), 1/1/2047 | 520,020 |
| 1,500,000 | Huntsville, AL Special Care Facilities Financing Authority, Retirement Facility Revenue Bonds (Series 2007), 5.50% (Redstone Village)/(Original Issue Yield: 5.60%), 1/1/2043 | 1,215,330 |
| 835,000 | Selma, AL IDB, Gulf Opportunity Zone Bonds (Series 2010A), 5.80% (International Paper Co.), 5/1/2034 | 889,091 |
| 2,100,000 | Sylacauga, AL Health Care Authority, Revenue Bonds (Series 2005A), 6.00% (Coosa Valley Medical Center)/(Original Issue Yield: 6.05%), 8/1/2035 | 1,945,965 |
| TOTAL | 8,830,206 |
| Alaska – 0.8% |
| 1,000,000 | Alaska Industrial Development and Export Authority, Community Provider Revenue Bonds (Series 2007C), 6.00% (Boys & Girls Home & Family Services, Inc.), 12/1/2036 | 529,990 |
| 1,195,000 | Alaska Industrial Development and Export Authority, Power Revenue Bonds, 5.875% (Upper Lynn Canal Regional Power Supply System)/(Original Issue Yield: 6.00%), 1/1/2032 | 1,181,377 |
| 2,000,000 | 1,2 | Koyukuk, AK, Revenue Bonds (Series 2011), 7.75% (Tanana Chiefs Conference Health Care)/(Original Issue Yield: 8.125%), 10/1/2041 | 2,104,960 |
| TOTAL | 3,816,327 |
| Arizona – 2.0% |
| 4,000,000 | Maricopa County, AZ Pollution Control Corp., Refunding PCRBs (Series 2003A), 6.25% (Public Service Co., NM), 1/1/2038 | 4,143,720 |
| 1,500,000 | Maricopa County, AZ Pollution Control Corp., Refunding PCRBs (Series 2009A), 7.25% (El Paso Electric Co.), 2/1/2040 | 1,776,240 |
| 1,385,000 | Pima County, AZ IDA, PCRBs (Series 2009A), 4.95% (Tucson Electric Power Co.), 10/1/2020 | 1,481,881 |
| 2,000,000 | Pima County, AZ IDA, Revenue Bonds (Series 2008B), 5.75% (Tucson Electric Power Co.), 9/1/2029 | 2,089,360 |
| TOTAL | 9,491,201 |
| California – 8.3% |
| 2,500,000 | 1,2 | California PCFA, Solid Waste Disposal Revenue Bonds (Series 2002B), 5.00% (Waste Management, Inc.), 7/1/2027 | 2,547,900 |
| Principal Amount | Value |
| $1,000,000 | 1,2 | California PCFA, Solid Waste Disposal Revenue Bonds (Series 2005A-2), 5.40% (Waste Management, Inc.), 4/1/2025 | 1,038,760 |
| 2,000,000 | California State Public Works Board, Lease Revenue Bonds (Series 2009I), 6.625%, 11/1/2034 | 2,384,560 |
| 2,500,000 | California State, Various Purpose UT GO Bonds, 5.00%, 9/1/2041 | 2,667,525 |
| 2,500,000 | California State, Various Purpose UT GO Bonds, 5.25%, 10/1/2029 | 2,796,350 |
| 2,500,000 | California State, Various Purpose UT GO Bonds, 6.00% (Original Issue Yield: 6.10%), 4/1/2038 | 2,896,075 |
| 1,180,000 | 1,2 | California Statewide CDA, MFH Revenue Bonds (Series 1999X), 6.65% (Magnolia City Lights Project), 7/1/2039 | 1,165,663 |
| 2,000,000 | Chula Vista, CA, COP, 5.50% (Original Issue Yield: 5.88%), 3/1/2033 | 2,133,200 |
| 2,000,000 | Golden State Tobacco Securitization Corp., CA, Enhanced Tobacco Settlement Asset-Backed Bonds (Series 2005A), 5.00% (California State), 6/1/2045 | 2,005,200 |
| 530,000 | Golden State Tobacco Securitization Corp., CA, Tobacco Settlement Asset-Backed Bonds (Series 2007A-1), 5.75%, 6/1/2047 | 405,063 |
| 6,000,000 | Golden State Tobacco Securitization Corp., CA, Tobacco Settlement Asset-Backed Revenue Bonds (Series 2007A-1), 5.125% (Original Issue Yield: 5.27%), 6/1/2047 | 4,132,620 |
| 750,000 | Golden State Tobacco Securitization Corp., CA, Tobacco Settlement Revenue Bonds (Series 2003A-2), 7.90% (United States Treasury Bill PRF 6/1/2013@100), 6/1/2042 | 820,110 |
| 2,500,000 | M-S-R Energy Authority, CA, Gas Revenue Bonds (Series 2009A), 7.00% (Citigroup, Inc. GTD), 11/1/2034 | 3,234,075 |
| 985,000 | Oxnard, CA Community Facilities District No. 3, Special Tax Bonds (Series 2005), 5.00% (Seabridge at Mandalay Bay)/(Original Issue Yield: 5.22%), 9/1/2035 | 987,748 |
| 2,000,000 | Riverside County, CA Redevelopment Agency, Tax Allocation Bonds (Series 2010D), 6.00% (Desert Communities Redevelopment Project Area)/(Original Issue Yield: 6.02%), 10/1/2037 | 2,101,120 |
| 1,500,000 | Riverside County, CA Redevelopment Agency, Tax Allocation Bonds (Series 2010E), 6.50% (Interstate 215 Corridor Redevelopment Project Area)/(Original Issue Yield: 6.53%), 10/1/2040 | 1,634,700 |
| 349,000 | 3 | San Bernardino County, CA Housing Authority, Subordinated Revenue Bonds, 7.25% (Glen Aire Park & Pacific Palms), 4/15/2042 | 171,164 |
| 1,250,000 | San Buenaventura, CA, Revenue Bonds (Series 2011), 8.00% (Community Memorial Health System), 12/1/2031 | 1,479,187 |
| 1,000,000 | San Diego, CA Public Facilities Authority, Lease Revenue Refunding Bonds (Series 2010A), 5.25% (San Diego, CA)/(Original Issue Yield: 5.37%), 3/1/2040 | 1,046,760 |
| 1,000,000 | San Francisco, CA City & County Redevelopment Finance Agency, Tax Allocation Bonds (Series 2011C), 6.75% (Mission Bay North Redevelopment)/(Original Issue Yield: 6.86%), 8/1/2041 | 1,126,510 |
| 2,000,000 | San Jose, CA Airport, Airport Revenue Bonds (Series 2011A-1), 6.25%, 3/1/2034 | 2,306,420 |
| Principal Amount | Value |
| $1,000,000 | Western Hills Water District, CA, Special Tax Revenue Bonds, 6.875% (Diablo Grande Community Facilities No. 1)/(Original Issue Yield: 6.954%), 9/1/2031 | 672,430 |
| TOTAL | 39,753,140 |
| Colorado – 5.2% |
| 2,000,000 | Beacon Point, CO Metropolitan District, Revenue Bonds (Series 2005A), 6.25% (Original Issue Yield: 6.375%), 12/1/2035 | 1,975,400 |
| 536,000 | Castle Oaks, CO Metropolitan District, LT GO Bonds (Series 2005), 6.125%, 12/1/2035 | 447,029 |
| 775,000 | Colorado Educational & Cultural Facilities Authority, Charter School Revenue Bonds (Series 2007A), 5.70% (Windsor Charter Academy)/(Original Issue Yield: 5.70%), 5/1/2037 | 703,034 |
| 835,000 | Colorado Educational & Cultural Facilities Authority, Charter School Revenue Bonds (Series 2007A), 5.75% (Northeast Academy Charter School), 5/15/2037 | 673,695 |
| 1,000,000 | Colorado Educational & Cultural Facilities Authority, Charter School Revenue Bonds (Series 2007A), 6.00% (Monument Academy Charter School), 10/1/2037 | 943,910 |
| 1,610,000 | Colorado Educational & Cultural Facilities Authority, Revenue Refunding Bonds (Series A), 7.125% (Denver Academy)/(Original Issue Yield: 7.375%), 11/1/2028 | 1,636,758 |
| 1,000,000 | Colorado Health Facilities Authority, Health & Residential Care Facilities Revenue Bonds (Series 2007), 5.30% (Volunteers of America Care Facilities), 7/1/2037 | 873,010 |
| 1,100,000 | Colorado Health Facilities Authority, Revenue Bonds (Series 2010A), 6.25% (Total Longterm Care National Obligated Group), 11/15/2040 | 1,195,238 |
| 2,000,000 | Colorado Springs Urban Renewal Authority, Tax Increment Revenue Bonds (Series 2007), 7.00% (University Village Colorado), 12/1/2029 | 1,309,640 |
| 1,000,000 | Conservatory Metropolitan District, CO, LT GO Bonds, 7.55% (United States Treasury Bill PRF 12/1/2013@102), 12/1/2032 | 1,142,710 |
| 1,540,000 | Denver, CO City & County Department of Aviation, Airport System Revenue Bonds (Series 2011A), 5.25% (Original Issue Yield: 5.35%), 11/15/2022 | 1,801,523 |
| 450,000 | Eagle County, CO Air Terminal Corp., Airport Terminal Project Revenue Improvement Bonds (Series 2006B), 5.25%, 5/1/2020 | 443,192 |
| 750,000 | Eagle County, CO Air Terminal Corp., Revenue Refunding Bonds (Series 2011A), 6.00%, 5/1/2027 | 771,225 |
| 1,000,000 | Granby Ranch, CO Metropolitan District, LT GO Bonds (Series 2006), 6.75%, 12/1/2036 | 985,670 |
| 500,000 | Maher Ranch, CO Metropolitan District No. 4, LT GO Bonds (Series 2006), 7.00% (United States Treasury Bill PRF 12/1/2013@102), 12/1/2036 | 565,145 |
| 1,000,000 | Maher Ranch, CO Metropolitan District No. 4, LT GO Bonds, 7.875% (United States Treasury Bill PRF 12/1/2013@102), 12/1/2033 | 1,145,060 |
| Principal Amount | Value |
| $2,235,000 | Northwest, CO Metropolitan District No. 3, LT GO Bonds (Series 2005), 6.25%, 12/1/2035 | 2,066,190 |
| 2,000,000 | Public Authority for Colorado Energy, Natural Gas Purchase Revenue Bonds (Series 2008), 6.25% (Merrill Lynch & Co., Inc. GTD)/(Original Issue Yield: 6.63%), 11/15/2028 | 2,336,520 |
| 1,500,000 | Southlands, CO Metropolitan District No. 1, LT GO Bonds (Series 2004), 7.125% (United States Treasury Bill PRF 12/1/2014@100)/(Original Issue Yield: 7.18%), 12/1/2034 | 1,772,550 |
| 2,000,000 | Three Springs Metropolitan District No. 3, CO, Property Tax Supported Revenue Bonds (Series 2010), 7.75%, 12/1/2039 | 2,047,140 |
| TOTAL | 24,834,639 |
| Connecticut – 0.2% |
| 1,000,000 | Connecticut Development Authority, Airport Facility Revenue Bonds, 7.95% (Bombardier, Inc.), 4/1/2026 | 1,080,040 |
| Delaware – 0.4% |
| 1,905,000 | Delaware EDA, Gas Facilities Refunding Bonds, 5.40% (Delmarva Power and Light Co.), 2/1/2031 | 2,064,010 |
| Florida – 5.3% |
| 3,000,000 | Alachua County, FL, IDRB (Series 2007A), 5.875% (North Florida Retirement Village, Inc,), 11/15/2042 | 2,496,090 |
| 1,405,000 | Arborwood, FL Community Development District, Capital Improvement Revenue Bonds (Series 2005A), 5.35%, 5/1/2036 | 1,052,471 |
| 109,219 | 3 | Capital Trust Agency, FL, Housing Revenue Notes, 5.95% (Atlantic Housing Foundation Properties), 1/15/2039 | 21,836 |
| 785,000 | East Homestead, FL Community Development District, Special Assessment Revenue Bonds (Series 2005), 5.45%, 5/1/2036 | 724,571 |
| 40,000 | Fishhawk Community Development District II, Special Assessment Revenue Bonds (Series 2004B), 7.04% (Original Issue Yield: 7.087%), 11/1/2014 | 39,457 |
| 1,000,000 | Greater Orlando, FL Aviation Authority, Special Purpose Airport Facilities Revenue Bonds (Series 2005), 6.50% (Jet Blue Airways Corp.)/(Original Issue Yield: 6.811%), 11/15/2036 | 1,000,190 |
| 990,000 | Lakes by the Bay South Community Development District, FL, Special Assessment Revenue Bonds (Series 2004A), 6.25% (Original Issue Yield: 6.277%), 5/1/2034 | 995,821 |
| 2,000,000 | Lee County, FL IDA, Health Care Facilities Revenue Bond (Series A), 6.75% (Cypress Cove at Healthpark)/(Original Issue Yield: 6.98%), 10/1/2032 | 1,493,580 |
| 2,000,000 | Martin County, FL Health Facilities Authority, Hospital Revenue Bonds (Series 2012), 5.50% (Martin Memorial Medical Center)/(Original Issue Yield: 5.53%), 11/15/2042 | 2,062,060 |
| 1,000,000 | Miami Beach, FL Health Facilities Authority, Hospital Revenue Bonds (Series 2001A), 6.70% (Mt. Sinai Medical Center, FL)/(Original Issue Yield: 6.80%), 11/15/2019 | 1,011,640 |
| Principal Amount | Value |
| $1,000,000 | Miami-Dade County, FL Water & Sewer Authority, Water & Sewer System Revenue Bonds (Series 2010), 5.00% (Original Issue Yield: 5.05%), 10/1/2034 | 1,101,060 |
| 1,000,000 | Midtown Miami, FL Community Development District, Special Assessment Bonds (Series 2004A), 6.25% (Original Issue Yield: 6.30%), 5/1/2037 | 1,008,580 |
| 600,000 | Orlando, FL Urban Community Development District, Capital Improvement Revenue Bonds, 6.25%, 5/1/2034 | 560,472 |
| 2,000,000 | 1,2 | Palm Beach County, FL, Tax-Exempt Revenue Bonds (Series 2005A), 6.75% (G-Star School of the Arts for Motion Pictures and Broadcasting Charter School), 5/15/2035 | 1,897,840 |
| 1,405,000 | Pinellas County, FL Educational Facilities Authority, Revenue Bonds (Series 2011A), 7.125% (Pinellas Preparatory Academy), 9/15/2041 | 1,448,836 |
| 690,000 | Reunion East Community Development District, FL, Special Assessment Bonds (Series 2002A-1), 7.375%, 5/1/2033 | 686,585 |
| 310,000 | Reunion East Community Development District, FL, Special Assessment Bonds (Series 2002A-2), 7.375%, 5/1/2033 | 152,163 |
| 1,000,000 | South Lake County, FL Hospital District, Revenue Bonds (Series 2009A), 6.25% (South Lake Hospital, Inc.)/(Original Issue Yield: 6.30%), 4/1/2039 | 1,073,790 |
| 1,200,000 | South Lake County, FL Hospital District, Revenue Bonds, 6.625% (South Lake Hospital, Inc.), 10/1/2023 | 1,245,384 |
| 1,620,000 | Tolomato Community Development District, FL, Special Assessment Revenue Bonds (Series 2006), 5.40%, 5/1/2037 | 1,349,282 |
| 1,000,000 | Tolomato Community Development District, FL, Special Assessment Revenue Bonds (Series 2007), 6.55% (Original Issue Yield: 6.60%), 5/1/2027 | 426,050 |
| 950,000 | Verandah East, FL Community Development District, Capital Improvement Revenue Bonds (Series 2006A), 5.40%, 5/1/2037 | 548,103 |
| 765,000 | Verandah West, FL Community Development District, Capital Improvement Revenue Bonds (Series 2003A), 6.625% (Original Issue Yield: 6.75%), 5/1/2033 | 769,269 |
| $1,630,000 | Volusia County, FL Education Facility Authority, Educational Facilities Refunding Revenue Bonds (Series 2005), 5.00% (Embry-Riddle Aeronautical University, Inc.)/(Radian Asset Assurance, Inc. INS), 10/15/2025 | 1,664,572 |
| 470,000 | Winter Garden Village at Fowler Groves Community Development District, FL, Special Assessment Bonds (Series 2006), 5.65%, 5/1/2037 | 474,996 |
| TOTAL | 25,304,698 |
| Georgia – 1.8% |
| 4,000,000 | Atlanta, GA Water & Wastewater, Revenue Bonds (Series 2009A), 6.25% (Original Issue Yield: 6.38%), 11/1/2039 | 4,674,200 |
| 770,000 | Atlanta, GA, Tax Allocation Bonds (Series 2005B), 5.60% (Eastside Tax Allocation District)/(Original Issue Yield: 5.65%), 1/1/2030 | 787,548 |
| Principal Amount | Value |
| $1,695,000 | Augusta, GA HFA, MFH Refunding Revenue Bonds, 6.55% (Forest Brook Apartments), 12/1/2030 | 1,634,777 |
| 750,000 | Fulton County, GA Residential Care Facilities, Revenue Bonds (Series 2004A), 6.00% (Canterbury Court), 2/15/2022 | 745,545 |
| 1,000,000 | Medical Center Hospital Authority, GA, Revenue Refunding Bonds (Series 2007), 5.25% (Spring Harbor at Green Island), 7/1/2037 | 877,000 |
| TOTAL | 8,719,070 |
| Guam – 0.5% |
| 500,000 | Guam Government LO (Section 30), Bonds (Series 2009A), 5.75% (Original Issue Yield: 6.00%), 12/1/2034 | 531,745 |
| 1,000,000 | Guam Government, GO Bonds (Series 2009A), 7.00% (Original Issue Yield: 7.18%), 11/15/2039 | 1,085,930 |
| 1,000,000 | Guam Government, UT GO Bonds (Series 2007A), 5.25% (Original Issue Yield: 5.45%), 11/15/2037 | 953,960 |
| TOTAL | 2,571,635 |
| Hawaii – 1.4% |
| 3,660,000 | Hawaii State Department of Budget & Finance, Special Purpose Revenue Bonds (Series 2009), 6.50% (Hawaiian Electric Co., Inc.), 7/1/2039 | 4,067,028 |
| 295,000 | Hawaii State Department of Budget & Finance, Special Purpose Revenue Bonds (Series A), 7.00% (Kahala Nui)/(Original Issue Yield: 7.00%), 11/15/2012 | 299,850 |
| 1,000,000 | Hawaii State Department of Budget & Finance, Special Purpose Revenue Bonds (Series A), 8.00% (Kahala Nui)/(Original Issue Yield: 8.175%), 11/15/2033 | 1,043,350 |
| 1,000,000 | Hawaii State Department of Budget & Finance, Special Purpose Senior Living Revenue Bonds (Series A), 9.00% (15 Craigside)/(Original Issue Yield: 9.15%), 11/15/2044 | 1,176,130 |
| TOTAL | 6,586,358 |
| Illinois – 4.3% |
| 1,750,000 | Chicago, IL O'Hare International Airport, General Airport Third Lien Revenue Bonds (Series 2011A), 5.75% (Original Issue Yield: 5.94%), 1/1/2039 | 2,008,318 |
| 2,500,000 | Chicago, IL O'Hare International Airport, General Airport Third Lien Revenue Bonds (Series 2011C), 6.50%, 1/1/2041 | 3,008,850 |
| 415,000 | DuPage County, IL, Special Tax Bonds (Series 2006), 5.625% (Naperville Campus LLC), 3/1/2036 | 351,650 |
| 1,500,000 | Illinois Finance Authority, Charter School Refunding & Improvement Revenue Bonds (Series 2011A), 7.125% (Uno Charter School Network, Inc.), 10/1/2041 | 1,560,900 |
| 1,000,000 | Illinois Finance Authority, MFH Revenue Bonds (Series 2007), 6.10% (Dekalb Supportive Living Facility), 12/1/2041 | 902,810 |
| Principal Amount | Value |
| $1,000,000 | Illinois Finance Authority, Revenue Bonds (Series 2005A), 5.625% (Friendship Village of Schaumburg)/(Original Issue Yield: 5.70%), 2/15/2037 | 860,260 |
| 1,250,000 | Illinois Finance Authority, Revenue Bonds (Series 2005A), 6.00% (Landing at Plymouth Place)/(Original Issue Yield: 6.04%), 5/15/2037 | 1,053,700 |
| 1,500,000 | Illinois Finance Authority, Revenue Bonds (Series 2005A), 6.25% (Smith Village), 11/15/2035 | 1,331,895 |
| 1,000,000 | Illinois Finance Authority, Revenue Bonds (Series 2010), 7.25% (Friendship Village of Schaumburg)/(Original Issue Yield: 7.375%), 2/15/2045 | 1,020,200 |
| 600,000 | 3,4 | Illinois Finance Authority, Revenue Bonds (Series 2010B) (Clare at Water Tower)/(Original Issue Yield: 5.00%), 5/15/2050 | 1,050 |
| 1,400,000 | 3,4 | Illinois Finance Authority, Revenue Bonds {Series 2010A}, 6.125% (Clare at Water Tower), 5/15/2041 | 209,762 |
| 1,000,000 | Illinois Finance Authority, Solid Waste Disposal Revenue Bonds, 5.05% (Waste Management, Inc.), 8/1/2029 | 1,011,530 |
| 1,000,000 | Illinois Finance Authority, Water Facilities Revenue Bonds (Series 2009), 5.25% (American Water Capital Corp.), 10/1/2039 | 1,036,660 |
| 2,250,000 | Illinois State, UT GO Bonds (Series 2006), 5.00%, 1/1/2027 | 2,347,942 |
| 1,000,000 | Quad Cities, IL Regional EDA, MFH Revenue Bonds (Series 2006), 6.00% (Heritage Woods of Moline SLF), 12/1/2041 | 867,670 |
| 1,600,000 | Railsplitter Tobacco Settlement Authority, IL, Tobacco Settlement Revenue Bonds (Series 2010), 6.00% (Original Issue Yield: 6.10%), 6/1/2028 | 1,790,208 |
| 1,500,000 | Will-Kankakee, IL Regional Development Authority, MFH Revenue Bonds (Series 2007), 7.00% (Senior Estates Supportive Living), 12/1/2042 | 1,500,660 |
| TOTAL | 20,864,065 |
| Indiana – 2.1% |
| 1,000,000 | Goshen, IN, Revenue Bonds (Series 1998), 5.75% (Greencroft Obligated Group)/(Original Issue Yield: 5.87%), 8/15/2028 | 917,280 |
| 2,000,000 | Indiana Health Facility Financing Authority, Revenue Refunding Bonds (Series 1998), 5.625% (Greenwood Village South Project)/(Original Issue Yield: 5.802%), 5/15/2028 | 1,732,200 |
| 1,305,000 | Indiana State Finance Authority (Environmental Improvement Bonds), Revenue Refunding Bonds (Series 2010), 6.00% (United States Steel Corp.), 12/1/2026 | 1,331,217 |
| 1,000,000 | Jasper County, IN, PCR Refunding Bonds (Series 2003), 5.70% (Northern Indiana Public Service Company)/(AMBAC INS), 7/1/2017 | 1,155,990 |
| 2,000,000 | Rockport, IN, Revenue Refunding Bonds (Series 2012-A), 7.00% (AK Steel Corp.), 6/1/2028 | 2,024,060 |
| 1,000,000 | South Bend, IN, EDRBs (Series 1999A), 6.25% (Southfield Village)/(Original Issue Yield: 6.375%), 11/15/2029 | 953,710 |
| Principal Amount | Value |
| $1,247,800 | 3,4 | St. Joseph County, IN Hospital Authority, Health Facilities Revenue Bonds (Series 2005), 5.375% (Madison Center Obligated Group), 2/15/2034 | 213,711 |
| 2,000,000 | Vigo County, IN Hospital Authority, Hospital Revenue Bond (Series 2007), 5.80% (Union Hospital)/(Original Issue Yield: 5.82%), 9/1/2047 | 1,927,860 |
| TOTAL | 10,256,028 |
| Iowa – 0.6% |
| 1,715,000 | Iowa Finance Authority, Senior Living Facility Revenue Refunding Bonds (Series 2007A), 5.50% (Deerfield Retirement Community, Inc.), 11/15/2037 | 1,227,219 |
| 1,785,000 | Wapello County, IA, Revenue Bonds, 6.25% (Ottumwa Regional Health Center)/(United States Treasury Bill PRF 10/1/2012@100)/(Original Issue Yield: 6.40%), 10/1/2022 | 1,847,975 |
| TOTAL | 3,075,194 |
| Kansas – 1.6% |
| 2,000,000 | Kansas State Development Finance Authority, Revenue Bonds, 5.75% (Adventist Health System/Sunbelt Obligated Group)/(Original Issue Yield: 5.95%), 11/15/2038 | 2,284,280 |
| 790,000 | Manhattan, KS IDRB, Industrial Revenue Bonds (Series 1999), 7.00% (Farrar Corp. Project), 8/1/2014 | 789,945 |
| 1,000,000 | Manhattan, KS IDRB, Industrial Revenue Bonds (Series 2007), 5.50% (Farrar Corp. Project)/(Original Issue Yield: 5.55%), 8/1/2021 | 865,480 |
| 2,015,000 | Norwich, KS, Industrial Revenue Bonds (Series 2006), 5.90% (Farrar Corp. Project), 8/1/2021 | 1,807,334 |
| 2,000,000 | Olathe, KS, Senior Living Facility Revenue Bonds (Series 2006A), 6.00% (Catholic Care Campus, Inc.), 11/15/2038 | 2,014,440 |
| 85,000 | Sedgwick & Shawnee Counties, KS, SFM Revenue Bonds (Series 1997A-1), 6.95% (GNMA Home Mortgage Program COL), 6/1/2029 | 86,136 |
| TOTAL | 7,847,615 |
| Kentucky – 0.7% |
| 1,990,000 | Kentucky EDFA, Hospital System Refunding Revenue Bonds, 5.875% (Appalachian Regional Health Center)/(Original Issue Yield: 5.92%), 10/1/2022 | 1,936,748 |
| 1,250,000 | Kentucky EDFA, Revenue Bonds (Series 2011A), 7.375% (Miralea)/(Original Issue Yield: 7.40%), 5/15/2046 | 1,316,150 |
| TOTAL | 3,252,898 |
| Louisiana – 2.0% |
| 1,000,000 | DeSoto Parish, LA Environmental Improvement Authority, Revenue Bonds, Series A, 5.00% (International Paper Co.), 11/1/2018 | 1,008,360 |
| 1,500,000 | Jefferson Parish, LA Hospital Service District No. 1, Hospital Revenue Refunding Bonds (Series 2011A), 6.00% (West Jefferson Medical Center)/(Original Issue Yield: 6.05%), 1/1/2039 | 1,608,210 |
| Principal Amount | Value |
| $981,000 | 3,4 | Lakeshore Villages Master Community Development District, LA, Special Assessment Bonds (Series 2007), 5.25% (Original Issue Yield: 5.378%), 7/1/2017 | 392,341 |
| 1,000,000 | Louisiana Public Facilities Authority, 6.50% (Ochsner Clinic Foundation)/(Original Issue Yield: 6.65%), 5/15/2037 | 1,138,850 |
| 3,000,000 | Louisiana Public Facilities Authority, Revenue Bonds (Series 2010A), 5.00% (Entergy Gulf States Louisiana LLC), 9/1/2028 | 3,147,240 |
| 2,000,000 | Louisiana State Citizens Property Insurance Corp., Assessment Revenue Bonds (Series 2006C), 6.125% (Assured Guaranty Corp. INS)/(Original Issue Yield: 6.33%), 6/1/2025 | 2,329,160 |
| TOTAL | 9,624,161 |
| Maine – 0.3% |
| 1,335,000 | Maine Health & Higher Educational Facilities Authority, Revenue Bonds (Series 2011), 7.50% (MaineGeneral Medical Center), 7/1/2032 | 1,536,265 |
| Maryland – 1.5% |
| 1,555,000 | Baltimore, MD, SO Revenue Bonds (Series 2008A), 7.00% (East Baltimore Research Park), 9/1/2038 | 1,642,873 |
| 1,060,000 | Maryland State Economic Development Corp., Port Facilities Refunding Revenue Bonds (Series 2010), 5.75% (CONSOL Energy, Inc.), 9/1/2025 | 1,100,693 |
| 2,385,000 | Maryland State Economic Development Corp., Revenue Bonds (Series B), 5.75% (Ports America Chesapeake, Inc.)/(Original Issue Yield: 5.875%), 6/1/2035 | 2,518,942 |
| 395,000 | Maryland State Health & Higher Educational Facilities Authority, Revenue Bonds (Series 2007A), 5.25% (King Farm Presbyterian Retirement Community), 1/1/2027 | 350,646 |
| 1,100,000 | Maryland State Health & Higher Educational Facilities Authority, Revenue Bonds (Series 2007A), 5.30% (King Farm Presbyterian Retirement Community)/(Original Issue Yield: 5.35%), 1/1/2037 | 908,116 |
| 500,000 | Maryland State IDFA, EDRBs (Series 2005A), 6.00% (Our Lady of Good Counsel High School), 5/1/2035 | 508,740 |
| TOTAL | 7,030,010 |
| Massachusetts – 1.6% |
| 1,063,562 | Massachusetts Development Finance Agency, Revenue Bonds (Series 2011 A-1), 6.25% (Linden Ponds, Inc.), 11/15/2046 | 762,127 |
| 56,460 | Massachusetts Development Finance Agency, Revenue Bonds (Series 2011 A-2), 5.50% (Linden Ponds, Inc.), 11/15/2046 | 34,554 |
| 280,825 | Massachusetts Development Finance Agency, Revenue Bonds (Series 2011B) (Linden Ponds, Inc.), 11/15/2056 | 1,486 |
| 2,000,000 | Massachusetts Development Finance Agency, Revenue Bonds (Series 2011I), 7.25% (Tufts Medical Center), 1/1/2032 | 2,381,200 |
| 500,000 | 1,2 | Massachusetts Development Finance Agency, Senior Living Facility Revenue Bonds (Series 2009A), 7.75% (The Groves in Lincoln)/(Original Issue Yield: 7.90%), 6/1/2039 | 496,540 |
| Principal Amount | Value |
| $1,000,000 | 1,2 | Massachusetts Development Finance Agency, Senior Living Facility Revenue Bonds (Series 2009A), 7.875% (The Groves in Lincoln)/(Original Issue Yield: 8.00%), 6/1/2044 | 996,330 |
| 2,000,000 | Massachusetts HEFA, Revenue Bonds (Series 1998D), 5.25% (Jordan Hospital)/(Original Issue Yield: 5.53%), 10/1/2023 | 2,000,140 |
| 1,000,000 | Massachusetts HEFA, Revenue Bonds (Series 2003E), 6.75% (Jordan Hospital)/(Original Issue Yield: 7.00%), 10/1/2033 | 1,018,710 |
| TOTAL | 7,691,087 |
| Michigan – 4.1% |
| 1,000,000 | Dearborn, MI Economic Development Corp., Revenue Refunding Bonds, 7.125% (Henry Ford Village)/(Original Issue Yield: 7.25%), 11/15/2043 | 1,004,700 |
| 4,000,000 | Detroit, MI Water Supply System, Second Lien Refunding Revenue Bonds (Series 2006C), 5.00% (Assured Guaranty Municipal Corp. INS), 7/1/2033 | 4,093,640 |
| 1,000,000 | Iron River, MI Hospital Finance Authority, Hospital Revenue & Refunding Bonds (Series 2008), 6.50% (Iron County Community Hospitals, Inc.)/(Original Issue Yield: 6.61%), 5/15/2033 | 989,670 |
| 2,500,000 | Kent Hospital Finance Authority, MI, Revenue Bonds (Series 2005A), 6.25% (Metropolitan Hospital), 7/1/2040 | 2,565,825 |
| 2,665,000 | Michigan Finance Authority, State Aid Revenue Notes (Series 2011A-2), 6.65% (Detroit, MI City School District), 3/20/2012 | 2,671,876 |
| 3,165,000 | Michigan State HFA, Refunding Revenue Bonds, 5.75% (Henry Ford Health System, MI)/(Original Issue Yield: 6.00%), 11/15/2039 | 3,443,773 |
| 5,000,000 | Michigan Tobacco Settlement Finance Authority, Tobacco Settlement Asset-Backed Bonds (Series 2007A), 6.00% (Original Issue Yield: 6.25%), 6/1/2048 | 3,775,800 |
| 1,500,000 | Plymouth, MI Educational Center Charter School, Public School Academy Revenue Refunding Bonds, Series 2005, 5.625%, 11/1/2035 | 1,306,545 |
| TOTAL | 19,851,829 |
| Minnesota – 3.5% |
| 1,000,000 | Baytown Township, MN, Lease Revenue Bonds (Series 2008A), 7.00% (St. Croix Preparatory Academy)/(Original Issue Yield: 7.05%), 8/1/2038 | 1,016,420 |
| 4,000,000 | Becker, MN, PCRBs (Series 2000-A), 8.50% (Northern States Power Co., MN), 4/1/2030 | 4,165,640 |
| 1,300,000 | Meeker County, MN, Gross Revenue Hospital Facilities Bonds (Series 2007), 5.75% (Meeker County Memorial Hospital), 11/1/2037 | 1,328,860 |
| 1,000,000 | Pine City, MN Lease Revenue, Lease Revenue Bonds (Series 2006A), 6.25% (Lakes International Language Academy), 5/1/2035 | 965,530 |
| 500,000 | Ramsey, MN, Lease Revenue Bonds (Series 2004A), 6.75% (Pact Charter School), 12/1/2033 | 502,215 |
| Principal Amount | Value |
| $800,000 | St. Paul, MN Housing & Redevelopment Authority, Refunding Revenue Bonds (Series 2003A), 6.75% (Achieve Language Academy), 12/1/2022 | 804,408 |
| 1,000,000 | St. Paul, MN Housing & Redevelopment Authority, Refunding Revenue Bonds (Series 2003A), 7.00% (Achieve Language Academy), 12/1/2032 | 1,000,010 |
| 1,700,000 | St. Paul, MN Housing & Redevelopment Authority, Revenue Bonds (Series 2002B), 7.00% (Upper Landing Project)/(Original Issue Yield: 7.05%), 3/1/2029 | 1,705,814 |
| 665,000 | Tobacco Securitization Authority, MN, Minnesota Tobacco Settlement Revenue Bonds (Series 2011B), 5.25% (Original Issue Yield: 5.291%), 3/1/2031 | 723,261 |
| 1,865,000 | Winona, MN Port Authority, Lease Revenue Bonds (Series 2007A), 6.00% (Bluffview Montessori School Project), 11/1/2027 | 1,775,741 |
| 2,920,000 | Winona, MN Port Authority, Lease Revenue Bonds (Series 2007A), 6.15% (Bluffview Montessori School Project), 11/1/2037 | 2,703,978 |
| TOTAL | 16,691,877 |
| Mississippi – 0.2% |
| 945,000 | Warren County, MS Gulf Opportunity Zone, Gulf Opportunity Zone Bonds (Series 2011A), 5.375% (International Paper Co.), 12/1/2035 | 990,615 |
| Missouri – 2.4% |
| 2,445,000 | 1,2 | Kansas City, MO IDA, MFH Revenue Bonds, 6.90% (Woodbridge Apartments Project), 8/1/2030 | 2,424,217 |
| 1,000,000 | Kirkwood, MO IDA, Retirement Community Revenue Bonds (Series 2010A), 8.25% (Aberdeen Heights Project)/(Original Issue Yield: 8.40%), 5/15/2039 | 1,098,500 |
| 3,000,000 | Kirkwood, MO IDA, Retirement Community Revenue Bonds (Series 2010A), 8.25% (Aberdeen Heights Project)/(Original Issue Yield: 8.50%), 5/15/2045 | 3,289,530 |
| 3,000,000 | Missouri Development Finance Board, Infrastructure Facilities Revenue Bonds (Series 2005A), 5.00% (Branson, MO), 6/1/2035 | 3,074,880 |
| 1,000,000 | St. Joseph, MO IDA, Healthcare Revenue Bonds, 7.00% (Living Community St. Joseph Project), 8/15/2032 | 980,810 |
| 500,000 | West Plains, MO IDA, Hospital Revenue Bonds, 6.75% (Ozarks Medical Center)/(Original Issue Yield: 6.78%), 11/15/2024 | 500,305 |
| TOTAL | 11,368,242 |
| Nevada – 1.8% |
| 1,000,000 | Clark County, NV Improvement District, Special Assessment Revenue Refunding Bonds (Series 2006B), 5.30% (Southern Highlands SID No.121-B)/(Original Issue Yield: 5.33%), 12/1/2029 | 869,820 |
| 4,000,000 | Clark County, NV School District, LT GO Building Bonds (Series 2008A), 5.00%, 6/15/2025 | 4,492,440 |
| 905,000 | Clark County, NV, LO Improvement Bonds (Series 2003), 6.375% (Mountains Edge SID No. 142)/(Original Issue Yield: 6.40%), 8/1/2023 | 936,096 |
| Principal Amount | Value |
| $825,000 | Clark County, NV, Local Improvement Bonds (Series 2001), 6.875% (Summerlin-South SID No. 132)/(Original Issue Yield: 6.92%), 2/1/2021 | 835,659 |
| 475,000 | Clark County, NV, Special Assessment Revenue Bonds (Series 2005), 5.00% (Summerlin-Mesa SID No. 151), 8/1/2025 | 363,213 |
| 475,000 | Las Vegas, NV, Local Improvement Special Assessment Bonds (Series 2004), 6.00% (Providence SID No. 607), 6/1/2019 | 475,532 |
| 905,000 | North Las Vegas, NV SID No. 60, Subordinate LT Obligation Refunding Bonds (Series 2006B), 5.10% (Aliante SID No. 60), 12/1/2022 | 869,714 |
| TOTAL | 8,842,474 |
| New Jersey – 2.7% |
| 1,650,000 | New Jersey EDA, Kapkowski Road Landfill Revenue Bonds, 6.50% (New Jersey Metromall Urban Renewal, Inc.)/(Original Issue Yield: 6.55%), 4/1/2018 | 1,776,671 |
| 1,550,000 | New Jersey EDA, Revenue Bonds (Series 1997A), 5.875% (Host Marriott Corp.), 12/1/2027 | 1,466,424 |
| 2,000,000 | New Jersey EDA, Revenue Bonds, 6.25% (Continental Airlines, Inc.), 9/15/2019 | 2,005,200 |
| 3,000,000 | New Jersey EDA, Revenue Bonds, Series 2004, 5.50% (NJ Dedicated Cigarette Excise Tax), 6/15/2016 | 3,291,060 |
| 1,000,000 | New Jersey EDA, Special Facilities Revenue Bonds (Series 2000), 7.20% (Continental Airlines, Inc.)/(Original Issue Yield: 7.25%), 11/15/2030 | 1,001,260 |
| 141,937 | 3,4 | New Jersey Health Care Facilities Financing Authority, Revenue Bonds, 6.50% (Pascack Valley Hospital Association)/(Original Issue Yield: 6.72%), 7/1/2023 | 1 |
| 2,000,000 | New Jersey Health Care Facilities Financing Authority, Revenue Bonds, 6.625% (Palisades Medical Center)/(Original Issue Yield: 6.67%), 7/1/2031 | 2,006,980 |
| 1,200,000 | New Jersey State Transportation Trust Fund Authority, Transportation System Bonds (Series 2011A), 6.00% (New Jersey State), 6/15/2035 | 1,447,848 |
| TOTAL | 12,995,444 |
| New Mexico – 0.6% |
| 850,000 | Bernalillo County, NM MFH, Refunding Housing Revenue Bonds (Series 2001C), 7.50% (Valencia Retirement)/(SunAmerica, Inc. GTD), 12/1/2021 | 849,932 |
| 2,240,000 | Dona Ana County, NM, MFH Revenue Bonds (Series 2001A), 7.00% (Montana Meadows Apartments), 12/1/2030 | 2,249,520 |
| TOTAL | 3,099,452 |
| New York – 7.2% |
| 1,495,000 | Brooklyn Arena Local Development Corporation, NY, Pilot Revenue Bonds (Series 2009), 6.375% (Original Issue Yield: 6.476%), 7/15/2043 | 1,615,273 |
| 1,285,000 | Hudson Yards Infrastructure Corp. NY, Hudson Yards Senior Revenue Bonds (Series 2012A), 5.75%, 2/15/2047 | 1,451,896 |
| Principal Amount | Value |
| $2,000,000 | Nassau County, NY IDA, Continuing Care Retirement Community Fixed Rate Revenue Bonds (Series 2007A), 6.70% (Amsterdam at Harborside), 1/1/2043 | 1,561,940 |
| 2,000,000 | 1,2 | New York City, NY IDA, Liberty Revenue Bonds (Series A), 6.50% (7 World Trade Center LLC), 3/1/2035 | 2,002,620 |
| 2,000,000 | 1,2 | New York City, NY IDA, Liberty Revenue Bonds (Series B), 6.75% (7 World Trade Center LLC), 3/1/2015 | 2,005,200 |
| 1,000,000 | New York City, NY IDA, Special Facilities Revenue Bonds (Series 2006), 5.125% (Jet Blue Airways Corp.)/(Original Issue Yield: 5.35%), 5/15/2030 | 865,190 |
| 1,500,000 | New York City, NY IDA, Special Facility Revenue Bonds (Series 2002), 7.625% (British Airways)/(Original Issue Yield: 7.976%), 12/1/2032 | 1,501,065 |
| 5,500,000 | 5 | New York City, NY IDA, Special Facility Revenue Bonds (Series 2005), 8.00% (American Airlines, Inc.)/(Original Issue Yield: 8.095%), 8/1/2028 | 5,197,665 |
| 5,000,000 | New York City, NY Municipal Water Finance Authority, Water and Sewer System Second General Resolution Revenue Bonds (Series 2012AA), 5.00%, 6/15/2034 | 5,611,500 |
| 1,820,000 | New York City, NY TFA, Future Tax Secured Subordinate Bonds (Series 2011C), 5.50%, 11/1/2035 | 2,155,935 |
| 5,550,000 | New York City, NY, (Fiscal 1995 Series B-7) Daily VRDNs (JPMorgan Chase Bank, N.A. LIQ), (AMBAC INS), 0.140%, 3/1/2012 | 5,550,000 |
| 2,000,000 | New York Liberty Development Corporation, Liberty Revenue Bonds (Series 2011), 5.75% (4 World Trade Center), 11/15/2051 | 2,272,340 |
| 2,500,000 | Port Authority of New York and New Jersey, Special Project Bonds (Series 8), 6.00% (JFK International Air Terminal LLC)/(Original Issue Yield: 6.15%), 12/1/2042 | 2,789,400 |
| TOTAL | 34,580,024 |
| North Carolina – 1.1% |
| 2,335,000 | North Carolina Eastern Municipal Power Agency, Power System Revenue Bonds (Series 2009C), 5.00%, 1/1/2026 | 2,615,574 |
| 500,000 | North Carolina Medical Care Commission, Health Care Facilities Revenue Bonds (Series 2005A), 5.65% (Pennybyrn at Maryfield)/(Original Issue Yield: 5.85%), 10/1/2025 | 436,275 |
| 1,200,000 | North Carolina Medical Care Commission, Health Care Housing Revenue Bonds (Series 2004A), 5.80% (Arc of North Carolina Projects), 10/1/2034 | 1,221,660 |
| 1,000,000 | North Carolina Medical Care Commission, Retirement Facilities First Mortgage Revenue Bonds (Series 2011A), 7.75% (Whitestone Project)/(Original Issue Yield: 8.00%), 3/1/2041 | 1,067,350 |
| TOTAL | 5,340,859 |
| Ohio – 3.7% |
| 2,050,000 | Allen County, OH, (Series 2008A) Daily VRDNs (Catholic Healthcare Partners)/(Bank of America N.A. LOC), 0.140%, 3/1/2012 | 2,050,000 |
| Principal Amount | Value |
| $2,000,000 | Buckeye Tobacco Settlement Financing Authority, OH, Tobacco Settlement Asset-Backed Bonds (Series 2007A-2), 5.875% (Original Issue Yield: 5.95%), 6/1/2030 | 1,547,760 |
| 3,655,000 | Buckeye Tobacco Settlement Financing Authority, OH, Tobacco Settlement Asset-Backed Bonds (Series A-2), 6.50%, 6/1/2047 | 2,979,922 |
| 1,500,000 | Hamilton County, OH, Healthcare Revenue Bonds (Series 2011A), 6.625% (Life Enriching Communities)/(Original Issue Yield: 6.75%), 1/1/2046 | 1,630,965 |
| 2,000,000 | Lucas County, OH, Revenue Bonds (Series 2011A), 6.00% (ProMedica Healthcare Obligated Group)/(Original Issue Yield: 6.22%), 11/15/2041 | 2,336,680 |
| 2,910,000 | Ohio State Air Quality Development Authority, Revenue Bonds (Series 2009A), 5.70% (FirstEnergy Solutions Corp.), 8/1/2020 | 3,332,299 |
| 2,355,000 | Ohio State Higher Educational Facility Commission, Hospital Facilities Revenue Bonds (Series 2010), 5.75% (Summa Health System)/(Original Issue Yield: 5.92%), 11/15/2040 | 2,513,397 |
| 1,500,000 | 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 | 1,252,935 |
| TOTAL | 17,643,958 |
| Oklahoma – 0.9% |
| 1,000,000 | Oklahoma County, OK Finance Authority, Retirement Facility Revenue Bonds (Series 2005), 6.00% (Concordia Life Care Community)/(Original Issue Yield: 6.15%), 11/15/2038 | 970,140 |
| 1,000,000 | Oklahoma County, OK Finance Authority, Retirement Facility Revenue Bonds (Series 2005), 6.125% (Concordia Life Care Community), 11/15/2025 | 1,011,670 |
| 2,000,000 | Tulsa, OK Industrial Authority, Senior Living Community Revenue Bonds (Series 2010A), 7.25% (Montereau, Inc.)/(Original Issue Yield: 7.50%), 11/1/2045 | 2,150,720 |
| TOTAL | 4,132,530 |
| Oregon – 0.4% |
| 1,000,000 | 1,2 | Cow Creek Band of Umpqua Tribe of Indians, Tax-Exempt Tax Revenue Bonds (Series 2006C), 5.625%, 10/1/2026 | 812,540 |
| 1,000,000 | Yamhill County, OR Hospital Authority, Revenue Bonds, 7.00% (Friendsview Retirement Community)/(United States Treasury Bill PRF 12/1/2013@101)/(Original Issue Yield: 7.125%), 12/1/2034 | 1,121,540 |
| TOTAL | 1,934,080 |
| Pennsylvania – 5.7% |
| 1,700,000 | 1,2 | 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 | 1,506,931 |
| 1,120,000 | Allegheny County, PA IDA, Charter School Revenue Bonds (Series 2004A), 7.50% (Propel Schools)/(Original Issue Yield: 7.75%), 12/15/2029 | 1,151,774 |
| Principal Amount | Value |
| $865,000 | Allegheny County, PA IDA, Environmental Improvement Refunding Revenue Bonds (Series 2005), 5.50% (United States Steel Corp.), 11/1/2016 | 884,385 |
| 2,000,000 | Allegheny County, PA IDA, Environmental Improvement Revenue Refunding Bonds (Series 2009), 6.875% (United States Steel Corp.), 5/1/2030 | 2,158,360 |
| 1,715,000 | Allegheny County, PA Port Authority, Special Revenue Transportation Refunding Bonds (Series 2011), 5.75%, 3/1/2029 | 2,006,533 |
| 200,000 | Carbon County, PA IDA, Refunding Revenue Bonds, 6.70% (Panther Creek Partners Project), 5/1/2012 | 200,152 |
| 1,500,000 | Centre County, PA Hospital Authority, Hospital Revenue Bonds, 6.25% (Mount Nittany Medical Center)/(Assured Guaranty Corp. INS)/(Original Issue Yield: 6.30%), 11/15/2044 | 1,580,655 |
| 1,500,000 | Chartiers Valley, PA Industrial & Commercial Development Authority, First Mortgage Revenue Refunding Bonds (Series 1999), 6.375% (Asbury Health Center)/(Original Issue Yield: 6.52%), 12/1/2024 | 1,500,915 |
| 1,500,000 | Chester County, PA IDA, Revenue Bonds (Series 2007A), 6.375% (Avon Grove Charter School)/(Original Issue Yield: 6.45%), 12/15/2037 | 1,450,155 |
| 3,000,000 | Harrisburg, PA Authority, Water Revenue Refunding Bonds (Series 2008), 5.25% (Original Issue Yield: 5.35%), 7/15/2031 | 2,505,900 |
| 1,500,000 | Monroe County, PA Hospital Authority, Hospital Revenue Bonds (Series 2007), 5.125% (Pocono Medical Center)/(Original Issue Yield: 5.20%), 1/1/2037 | 1,526,565 |
| 4,000,000 | Pennsylvania EDFA, Exempt Facilities Revenue Bonds (Series 2009), 7.00% (Allegheny Energy Supply Company LLC), 7/15/2039 | 4,599,960 |
| 900,000 | Philadelphia Authority for Industrial Development, Senior Living Revenue Bonds (Series 2005A), 5.625% (PresbyHomes Germantown/Morrisville), 7/1/2035 | 849,213 |
| 1,000,000 | Philadelphia, PA Authority for Industrial Development, Revenue Bonds (Series 2010), 6.375% (Global Leadership Academy Charter School), 11/15/2040 | 1,010,520 |
| 2,000,000 | Philadelphia, PA, GO Bonds (Series 2011), 6.50%, 8/1/2041 | 2,402,000 |
| 1,500,000 | Reading Area Water Authority, PA, Water Revenue Bonds (Series 2011), 5.25% (Original Issue Yield: 5.27%), 12/1/2036 | 1,607,520 |
| 660,000 | Washington County, PA Redevelopment Authority, Redevelopment Bonds (Series 2006A), 5.45% (Victory Centre Project-Tanger Outlet Development), 7/1/2035 | 662,673 |
| TOTAL | 27,604,211 |
| Puerto Rico – 0.2% |
| 890,000 | Puerto Rico Commonwealth Aqueduct & Sewer Authority, Senior Lien Revenue Bonds (Series 2012A), 5.25% (Original Issue Yield: 5.42%), 7/1/2042 | 889,128 |
| Principal Amount | Value |
| Rhode Island – 1.0% |
| $4,000,000 | Rhode Island State Health and Educational Building Corp., Hospital Financing Revenue Bonds (Series 2009A), 7.00% (Lifespan Obligated Group)/(Assured Guaranty Corp. INS), 5/15/2039 | 4,760,440 |
| South Carolina – 1.6% |
| 55,838 | Connector 2000 Association, Inc., SC, Capital Appreciation Senior Revenue Bonds (Series 2011A) (Original Issue Yield: 3.75%), 1/1/2013 | 52,354 |
| 58,405 | Connector 2000 Association, Inc., SC, Capital Appreciation Senior Revenue Bonds (Series 2011A) (Original Issue Yield: 4.00%), 1/1/2014 | 50,194 |
| 63,152 | Connector 2000 Association, Inc., SC, Capital Appreciation Senior Revenue Bonds (Series 2011A) (Original Issue Yield: 4.25%), 1/1/2015 | 48,941 |
| 70,394 | Connector 2000 Association, Inc., SC, Capital Appreciation Senior Revenue Bonds (Series 2011A) (Original Issue Yield: 4.75%), 1/1/2016 | 30,482 |
| 95,235 | Connector 2000 Association, Inc., SC, Capital Appreciation Senior Revenue Bonds (Series 2011A) (Original Issue Yield: 5.00%), 1/1/2017 | 38,073 |
| 105,248 | Connector 2000 Association, Inc., SC, Capital Appreciation Senior Revenue Bonds (Series 2011A) (Original Issue Yield: 5.50%), 1/1/2018 | 38,386 |
| 114,579 | Connector 2000 Association, Inc., SC, Capital Appreciation Senior Revenue Bonds (Series 2011A) (Original Issue Yield: 5.75%), 1/1/2019 | 38,557 |
| 124,628 | Connector 2000 Association, Inc., SC, Capital Appreciation Senior Revenue Bonds (Series 2011A) (Original Issue Yield: 5.75%), 1/1/2020 | 39,358 |
| 147,824 | Connector 2000 Association, Inc., SC, Capital Appreciation Senior Revenue Bonds (Series 2011A) (Original Issue Yield: 6.00%), 1/1/2021 | 42,965 |
| 156,322 | Connector 2000 Association, Inc., SC, Capital Appreciation Senior Revenue Bonds (Series 2011A) (Original Issue Yield: 6.00%), 1/1/2022 | 42,681 |
| 787,813 | 6 | Connector 2000 Association, Inc., SC, Capital Appreciation Senior Revenue Bonds (Series 2011A) (Original Issue Yield: 6.50%), 1/1/2032 | 401,989 |
| 610,233 | 6 | Connector 2000 Association, Inc., SC, Capital Appreciation Senior Revenue Bonds (Series 2011A) (Original Issue Yield: 7.00%), 1/1/2042 | 310,523 |
| 352,808 | 6 | Connector 2000 Association, Inc., SC, Capital Appreciation Senior Revenue Bonds (Series 2011A) (Original Issue Yield: 7.50%), 7/22/2051 | 179,992 |
| 272,065 | 6 | Connector 2000 Association, Inc., SC, Capital Appreciation Senior Subordinate Bonds (Series 2011B) (Original Issue Yield: 8.50%), 1/1/2032 | 83,434 |
| 136,889 | 6 | Connector 2000 Association, Inc., SC, Capital Appreciation Senior Subordinate Bonds (Series 2011B) (Original Issue Yield: 9.00%), 7/22/2051 | 39,033 |
| 700,000 | Lancaster County, SC, Assessment Revenue Bonds (Series 2006), 5.45% (Sun City Carolina Lakes Improvement District), 12/1/2037 | 629,510 |
| 900,000 | Myrtle Beach, SC, Tax Increment Bonds (Series 2006A), 5.25% (Myrtle Beach Air Force Base Redevelopment Project Area)/(Original Issue Yield: 5.27%), 10/1/2026 | 776,628 |
| 750,000 | Myrtle Beach, SC, Tax Increment Bonds (Series 2006A), 5.30% (Myrtle Beach Air Force Base Redevelopment Project Area)/(Original Issue Yield: 5.325%), 10/1/2035 | 605,947 |
| Principal Amount | Value |
| $2,000,000 | South Carolina Jobs-EDA, Refunding & Improvement Revenue Bonds (Series 2009), 5.75% (Palmetto Health Alliance)/(Original Issue Yield: 5.90%), 8/1/2039 | 2,173,280 |
| 2,000,000 | South Carolina Jobs-EDA, Refunding Revenue Bonds (Series 2003A), 6.25% (Palmetto Health Alliance)/(Original Issue Yield: 6.47%), 8/1/2031 | 2,112,800 |
| TOTAL | 7,735,127 |
| South Dakota – 0.6% |
| 2,605,000 | Educational Enhancement Funding Corp., SD, Tobacco Revenue Bonds (Series 2002B), 6.50%, 6/1/2032 | 2,667,390 |
| Tennessee – 1.9% |
| 3,000,000 | Elizabethton, TN Health & Educational Facilities Board, First Mortgage Hospital Revenue Refunding & Improvement Bonds (Series 2000B), 8.00% (Mountain States Health Alliance)/(United States Treasury Bill PRF 7/1/2012@103), 7/1/2033 | 3,152,100 |
| 1,000,000 | Johnson City, TN Health & Education Facilities Board, Hospital Refunding Bonds (Series 2010A), 5.625% (Mountain States Health Alliance)/(Original Issue Yield: 5.90%), 7/1/2030 | 1,083,220 |
| 1,500,000 | Johnson City, TN Health & Education Facilities Board, Hospital Revenue Bonds (Series 2010), 6.50% (Mountain States Health Alliance), 7/1/2038 | 1,694,325 |
| 2,725,000 | Tennessee Energy Acquisition Corp., Gas Revenue Bonds (Series 2006A), 5.25% (Goldman Sachs & Co. GTD), 9/1/2023 | 2,956,734 |
| TOTAL | 8,886,379 |
| Texas – 7.3% |
| 1,000,000 | Austin, TX Convention Center Enterprises, Inc., Convention Center Hotel Second Tier Revenue Refunding Bonds (Series 2006B), 5.75%, 1/1/2024 | 1,009,990 |
| 1,000,000 | Austin, TX Convention Center Enterprises, Inc., Convention Center Hotel Second Tier Revenue Refunding Bonds (Series 2006B), 5.75%, 1/1/2034 | 979,220 |
| 755,000 | Bexar County, Health Facilities Development Corp., Revenue Bonds (Series 2010), 6.20% (Army Retirement Residence Foundation), 7/1/2045 | 820,391 |
| 2,000,000 | Cass County, TX IDC, Environmental Improvement Revenue Bonds (Series 2009A), 9.50% (International Paper Co.), 3/1/2033 | 2,518,100 |
| 1,000,000 | Central Texas Regional Mobility Authority, Senior Lien Revenue Bonds (Series 2011), 6.00% (Original Issue Yield: 6.13%), 1/1/2041 | 1,072,880 |
| 1,000,000 | Central Texas Regional Mobility Authority, Senior Lien Revenue Bonds (Series 2011), 6.25% (Original Issue Yield: 6.30%), 1/1/2046 | 1,072,100 |
| 750,000 | Clifton Higher Education Finance Corporation, TX, Education Revenue Bonds (Series 2011), 5.75% (Idea Public Schools)/(Original Issue Yield: 6.00%), 8/15/2041 | 773,715 |
| 2,000,000 | Dallas-Fort Worth, TX International Airport, Joint Revenue Refunding Bonds (Series 2012B), 5.00%, 11/1/2035 | 2,178,880 |
| Principal Amount | Value |
| $2,000,000 | Decatur, TX Hospital Authority, Hospital Revenue Bonds (Series 2004A), 7.125% (Wise Regional Health System), 9/1/2034 | 2,023,640 |
| 2,000,000 | Harris County, TX HFDC, Hospital Revenue Refunding Bonds (Series 2008B), 7.25% (Memorial Hermann Healthcare System)/(Original Issue Yield: 7.30%), 12/1/2035 | 2,389,140 |
| 765,000 | HFDC of Central Texas, Inc., Retirement Facility Revenue Bonds (Series 2006A), 5.50% (Village at Gleannloch Farms, Inc.), 2/15/2027 | 650,150 |
| 1,265,000 | HFDC of Central Texas, Inc., Retirement Facility Revenue Bonds (Series 2006A), 5.50% (Village at Gleannloch Farms, Inc.), 2/15/2037 | 975,492 |
| 1,000,000 | HFDC of Central Texas, Inc., Retirement Facility Revenue Bonds (Series 2006A), 5.75% (Legacy at Willow Bend), 11/1/2036 | 904,920 |
| 1,500,000 | Houston, TX Airport System, Special Facilities Revenue & Refunding Bonds (Series 2011), 6.625% (Continental Airlines, Inc.)/(Original Issue Yield: 6.875%), 7/15/2038 | 1,547,910 |
| 1,000,000 | Houston, TX Airport System, Special Facilities Revenue Bonds (Series 2001), 7.00% (Continental Airlines, Inc.), 7/1/2029 | 1,004,180 |
| 535,000 | Houston, TX Higher Education Finance Corp., Education Revenue Bonds (Series 2011A), 6.875% (Cosmos Foundation, Inc.), 5/15/2041 | 609,119 |
| 2,000,000 | Kerrville, TX HFDC, Hospital Revenue Bonds, 5.375% (Sid Peterson Memorial Hospital), 8/15/2035 | 2,018,020 |
| 4,000,000 | Lufkin, TX HFDC, Revenue Refunding and Improvement Bonds (Series 2009), 6.25% (Memorial Health System of East Texas)/(Original Issue Yield: 6.50%), 2/15/2037 | 4,065,200 |
| 1,000,000 | Matagorda County, TX Navigation District No. 1, PCRBs (Series 2001A), 6.30% (AEP Texas Central Co.), 11/1/2029 | 1,148,180 |
| 1,500,000 | North Texas Tollway Authority, Special Projects System Revenue Bonds (Series 2011), 6.00% (North Texas Toll Authority Special Projects System), 9/1/2041 | 1,803,705 |
| 1,000,000 | San Juan Higher Education Finance Authority, TX, Education Revenue Bonds (Series 2010A), 6.70% (Idea Public Schools), 8/15/2040 | 1,124,170 |
| 2,000,000 | 3 | Tarrant County, TX Cultural Education Facilities Finance Corp., Hospital Revenue Bonds (Series 2006), 6.375% (Doctors Hospital)/(Original Issue Yield: 6.60%), 11/1/2036 | 699,720 |
| 200,000 | Tarrant County, TX Cultural Education Facilities Finance Corp., Revenue Bonds, Series 2006A, 6.00% (Northwest Senior Housing Corp. Edgemere Project), 11/15/2026 | 204,830 |
| 1,150,000 | Tarrant County, TX Cultural Education Facilities Finance Corp., Revenue Bonds, Series 2006A, 6.00% (Northwest Senior Housing Corp. Edgemere Project), 11/15/2036 | 1,162,075 |
| 2,000,000 | Texas State Public Finance Authority Charter School Finance Corporation, Education Revenue Bonds (Series 2010A), 6.20% (Cosmos Foundation, Inc.), 2/15/2040 | 2,169,640 |
| TOTAL | 34,925,367 |
| Principal Amount | Value |
| Utah – 0.7% |
| $800,000 | Spanish Fork City, UT, Charter School Revenue Bonds (Series 2006), 5.55% (American Leadership Academy), 11/15/2026 | 726,504 |
| 1,750,000 | Spanish Fork City, UT, Charter School Revenue Bonds (Series 2006), 5.70% (American Leadership Academy), 11/15/2036 | 1,522,815 |
| 1,315,000 | 1,2 | Utah State Charter School Finance Authority, Charter School Revenue Bonds (Series 2007A), 6.00% (Channing Hall), 7/15/2037 | 1,194,401 |
| TOTAL | 3,443,720 |
| Virginia – 2.4% |
| 555,000 | Broad Street CDA, VA, Revenue Bonds, 7.10% (United States Treasury Bill PRF 6/1/2013@102)/(Original Issue Yield: 7.15%), 6/1/2016 | 609,096 |
| 800,000 | Broad Street CDA, VA, Revenue Bonds, 7.50% (United States Treasury Bill PRF 6/1/2013@102)/(Original Issue Yield: 7.625%), 6/1/2033 | 881,896 |
| 1,500,000 | Chesterfield County, VA EDA, Refunding PCRBs (Series 2009A), 5.00% (Virginia Electric & Power Co.), 5/1/2023 | 1,727,760 |
| 1,380,000 | Mosaic District CDA, VA, Revenue Bonds (Series 2011A), 6.875% (Original Issue Yield: 6.93%), 3/1/2036 | 1,498,045 |
| 1,500,000 | Peninsula Port Authority, VA, Residential Care Facility Revenue Bonds (Series 2003A), 7.375% (Virginia Baptist Homes Obligated Group)/(United States Treasury Bill PRF 12/1/2013@100)/(Original Issue Yield: 7.625%), 12/1/2032 | 1,683,600 |
| 1,500,000 | Peninsula Town Center CDA, VA, Special Obligation Bonds (Series 2007), 6.35%, 9/1/2028 | 1,430,790 |
| 1,000,000 | Peninsula Town Center CDA, VA, Special Obligation Bonds (Series 2007), 6.45%, 9/1/2037 | 910,820 |
| 4,250,000 | Tobacco Settlement Financing Corp., VA, Tobacco Settlement Asset-Backed Bonds (Series 2007B-1), 5.00% (Original Issue Yield: 5.12%), 6/1/2047 | 2,773,423 |
| TOTAL | 11,515,430 |
| Washington – 1.5% |
| 3,000,000 | Tobacco Settlement Authority, WA, Tobacco Settlement Asset Backed Revenue Bonds, 6.625% (Original Issue Yield: 6.875%), 6/1/2032 | 3,121,500 |
| 1,500,000 | 1,2 | Washington State Health Care Facilities Authority, Revenue Bonds (Series 2007A), 6.25% (Virginia Mason Medical Center)/(Original Issue Yield: 6.375%), 8/15/2042 | 1,587,135 |
| 2,000,000 | Washington State Health Care Facilities Authority, Revenue Bonds (Series 2011A), 6.75% (Swedish Health Services), 11/15/2041 | 2,360,940 |
| TOTAL | 7,069,575 |
| West Virginia – 0.6% |
| 640,000 | Ohio County, WV County Commission, Special District Excise Tax Revenue Refunding & Improvement Bonds (Series 2006A), 5.625% (Fort Henry Economic Opportunity Development District), 3/1/2036 | 666,362 |
| 1,000,000 | Ohio County, WV County Commission, Tax Increment Revenue Bonds (Series 2005A), 5.625% (Fort Henry Centre Tax Increment Financing District No. 1), 6/1/2034 | 1,003,290 |
| Principal Amount | Value |
| $1,000,000 | Ohio County, WV County Commission, Tax Increment Revenue Bonds (Series 2007A), 5.85% (Fort Henry Centre Tax Increment Financing District No. 1), 6/1/2034 | 1,013,410 |
| TOTAL | 2,683,062 |
| Wisconsin – 2.3% |
| 490,000 | Badger, WI Tobacco Asset Securitization Corp., Asset-Backed Revenue Bonds, 6.125% (United States Treasury Bill PRF 6/1/2012@100)/(Original Issue Yield: 6.35%), 6/1/2027 | 497,419 |
| 750,000 | Milwaukee, WI Redevelopment Authority, Redevelopment Education Revenue Bonds (Series 2005A), 5.75% (Milwaukee Science Education Consortium, Inc.)/(Original Issue Yield: 5.93%), 8/1/2035 | 705,908 |
| 5,335,000 | Wisconsin State General Fund Appropriation, Revenue Bonds (Series 2009A), 5.75% (Wisconsin State)/(Original Issue Yield: 5.950%), 5/1/2033 | 6,282,709 |
| 1,400,000 | Wisconsin State HEFA, Revenue Bonds (Series 2004), 6.125% (Eastcastle Place, Inc.)/(Original Issue Yield: 6.25%), 12/1/2034 | 864,220 |
| 1,000,000 | Wisconsin State HEFA, Revenue Bonds (Series 2004A), 6.75% (Beaver Dam Community Hospitals, Inc.)/(Original Issue Yield: 6.95%), 8/15/2034 | 1,018,260 |
| 1,250,000 | Wisconsin State HEFA, Revenue Bonds, 5.80% (Beaver Dam Community Hospitals, Inc.), 8/15/2028 | 1,240,812 |
| 500,000 | Wisconsin State HEFA, Revenue Bonds, 6.625% (Tomah Memorial Hospital, Inc.)/(Original Issue Yield: 6.875%), 7/1/2028 | 504,985 |
| TOTAL | 11,114,313 |
| TOTAL MUNICIPAL BONDS (IDENTIFIED COST $463,460,100) | 464,994,173 |
| CORPORATE BOND – 0.6% |
| Multi State – 0.6% |
| 4,000,000 | 1 | Non-Profit Preferred Funding Trust I, Partnership, 9/15/2037 (IDENTIFIED COST $3,990,148) | 2,898,200 |
| SHORT-TERM MUNICIPALS – 0.9%7 |
| Georgia – 0.7% |
| 3,300,000 | Burke County, GA Development Authority, (1st Series 2009) Daily VRDNs (Georgia Power Co.), 0.170%, 3/1/2012 | 3,300,000 |
| Principal Amount | Value |
| Texas – 0.2% |
| $1,000,000 | Texas State, PUTTERs (Series 3953) Daily VRDNs (JPMorgan Chase & Co. LIQ), 0.130%, 3/1/2012 | 1,000,000 |
| TOTAL SHORT-TERM MUNICIPALS (AT AMORTIZED COST) | 4,300,000 |
| TOTAL MUNICIPAL INVESTMENTS — 98.3% (IDENTIFIED COST $471,750,248)8 | 472,192,373 |
| OTHER ASSETS AND LIABILITIES - NET — 1.7%9 | 7,928,220 |
| TOTAL NET ASSETS — 100% | $480,120,593 |
At February 29, 2012, the Fund had the following open futures contracts:
| Description | Number of Contracts | Notional Value | Expiration Date | Unrealized Depreciation |
| 3 U.S. Treasury Notes, 10-Year Short Futures | 75 | $9,821,484 | June 2012 | $(2,531) |
Unrealized Depreciation on Futures Contracts is included in “Other Assets and Liabilities – Net.”
Securities that are subject to the federal alternative minimum tax (AMT) represent 10.4% of the Fund's portfolio as calculated based upon total market value.
| 1 | Denotes a restricted security that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) is subject to a contractual restriction on public sales. At February 29, 2012, these restricted securities amounted to $24,679,237, which represented 5.1% of total net assets. |
| 2 | Denotes a restricted security that may be resold without restriction to “qualified institutional buyers” as defined in Rule 144A under the Securities Act of 1933 and that the Fund has determined to be liquid under criteria established by the Fund's Board of Trustees (the “Trustees”). At February 29, 2012, these liquid restricted securities amounted to $21,781,037, which represented 4.5% of total net assets. |
| 3 | Non-income producing security. |
| 4 | Security in default. |
| 5 | Obligor had filed for bankruptcy protection. |
| 6 | Market quotations and price evaluations are not available. Fair value determined in accordance with procedures established by and under the general supervision of the Trustees. |
| 7 | Current rate and next reset date shown for Variable Rate Demand Notes. |
| 8 | The cost of investments for federal tax purposes amounts to $471,502,795. |
| 9 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Note: The categories of investments are shown as a percentage of total net assets at February 29, 2012.
Semi-Annual Shareholder Report
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:Level 1 — quoted prices in active markets for identical securities, including investment companies with daily net asset values, if applicable.
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.
Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used, as of February 29, 2012, in valuing the Fund's assets carried at fair value:
| Valuation Inputs | ||||
| Level 1 — Quoted Prices and Investments In Mutual Funds | Level 2 — Other Significant Observable Inputs | Level 3 — Significant Unobservable Inputs | Total | |
| Debt Securities: | ||||
| Municipal Bonds | $ — | $463,979,202 | $1,014,971 | $464,994,173 |
| Corporate Bond | — | 2,898,200 | — | 2,898,200 |
| Short-Term Municipals | — | 4,300,000 | — | 4,300,000 |
| TOTAL SECURITIES | $ — | $471,177,402 | $1,014,971 | $472,192,373 |
| OTHER FINANCIAL INSTRUMENTS* | $(2,531) | $ — | $ — | $(2,531) |
| * | Other financial instruments include futures contracts. |
Following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value:
| Investments in Debt Securities |
| Balance as of September 1, 2011 | $916,133 |
| Change in unrealized appreciation/depreciation | 98,838 |
| Balance as of February 29, 2012 | $1,014,971 |
| The total change in unrealized appreciation (depreciation) included in the Statement of Operations attributable to investments still held at February 29, 2012 | $98,838 |
Semi-Annual Shareholder Report
The following acronyms are used throughout this portfolio:| AMBAC | — American Municipal Bond Assurance Corporation |
| CDA | — Community Development Authority |
| COL | — Collateralized |
| COP | — Certificate of Participation |
| EDA | — Economic Development Authority |
| EDFA | — Economic Development Finance Authority |
| EDRBs | — Economic Development Revenue Bonds |
| GNMA | — Government National Mortgage Association |
| GO | — General Obligation |
| GTD | — Guaranteed |
| HEFA | — Health and Education Facilities Authority |
| HFA | — Housing Finance Authority |
| HFDC | — Health Facility Development Corporation |
| IDA | — Industrial Development Authority |
| IDB | — Industrial Development Bond |
| IDC | — Industrial Development Corporation |
| IDFA | — Industrial Development Finance Authority |
| IDRB | — Industrial Development Revenue Bond |
| INS | — Insured |
| LIQ | — Liquidity Agreement |
| LO | — Limited Obligation |
| LOC | — Letter of Credit |
| LT | — Limited Tax |
| MFH | — Multi-Family Housing |
| PCFA | — Pollution Control Finance Authority |
| PCR | — Pollution Control Revenue |
| PCRBs | — Pollution Control Revenue Bonds |
| PRF | — Pre-refunded |
| PUTTERs | — Puttable Tax-Exempt Receipts |
| SFM | — Single Family Mortgage |
| SID | — Special Improvement District |
| SO | — Special Obligation |
| TFA | — Transitional Finance Authority |
| UT | — Unlimited Tax |
| VRDNs | — Variable Rate Demand Notes |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportFinancial Highlights – Class A Shares1
(For a Share Outstanding Throughout Each Period)
| Six Months Ended (unaudited) 2/29/2012 | Year Ended August 31, | ||||
| 2011 | 20102 | 2009 | 2008 | 2007 | |
| Net Asset Value, Beginning of Period | $8.21 | $8.59 | $7.76 | $8.72 | $9.58 | $10.02 |
| Income From Investment Operations: | |||||
| Net investment income | 0.22 | 0.45 | 0.49 | 0.49 | 0.50 | 0.51 |
| Net realized and unrealized gain (loss) on investments, futures contracts and swap contracts | 0.42 | (0.36) | 0.83 | (0.96) | (0.86) | (0.45) |
| TOTAL FROM INVESTMENT OPERATIONS | 0.64 | 0.09 | 1.32 | (0.47) | (0.36) | 0.06 |
| Less Distributions: | |||||
| Distributions from net investment income | (0.22) | (0.47) | (0.49) | (0.49) | (0.50) | (0.50) |
| Net Asset Value, End of Period | $8.63 | $8.21 | $8.59 | $7.76 | $8.72 | $9.58 |
| Total Return3 | 7.91% | 1.29% | 17.42% | (4.87)% | (3.86)% | 0.48% |
| Ratios to Average Net Assets: | |||||
| Net expenses | 0.89%4 | 0.85% | 0.77% | 0.79%5 | 0.81%5,6 | 1.15%6 |
| Net investment income | 5.18%4 | 5.57% | 5.93% | 6.65% | 5.50% | 5.05% |
| Expense waiver/reimbursement7 | 0.15%4 | 0.22% | 0.28% | 0.29% | 0.28% | 0.29% |
| Supplemental Data: | |||||
| Net assets, end of period (000 omitted) | $217,123 | $190,003 | $229,217 | $180,422 | $208,302 | $231,817 |
| Portfolio turnover | 6% | 28% | 18% | 24% | 34% | 47% |
| 1 | The Fund is the successor to the Federated Municipal High Yield Advantage Fund, Inc. (“Predecessor Fund”). The Predecessor Fund was reorganized into the Fund, a series of Federated Municipal Securities Income Trust, as of the close of business on November 10, 2006. Please see the Fund's Prospectus and Statement of Additional Information for further information regarding the reorganization. |
| 2 | Beginning with the year ended August 31, 2010, the Fund was audited by KPMG LLP. The previous years were audited by another independent registered public accounting firm. |
| 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 | The net expense ratio is calculated without reduction for expense offset arrangements. The net expense ratios are 0.79% and 0.81% for the years ended August 31, 2009 and 2008, respectively, after taking into account these expense reductions. |
| 6 | Includes interest and trust expenses related to the Fund's participation in certain inverse floater structures of 0.03% and 0.37% for the years ended August 31, 2008 and 2007, respectively. |
| 7 | This expense decrease is reflected in both the net expense and net investment income ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportFinancial Highlights – Class B Shares1
(For a Share Outstanding Throughout Each Period)
| Six Months Ended (unaudited) 2/29/2012 | Year Ended August 31, | ||||
| 2011 | 20102 | 2009 | 2008 | 2007 | |
| Net Asset Value, Beginning of Period | $8.21 | $8.59 | $7.75 | $8.71 | $9.57 | $10.01 |
| Income From Investment Operations: | |||||
| Net investment income | 0.19 | 0.41 | 0.44 | 0.45 | 0.44 | 0.43 |
| Net realized and unrealized gain (loss) on investments, futures contracts and swap contracts | 0.41 | (0.38) | 0.82 | (0.97) | (0.87) | (0.45) |
| TOTAL FROM INVESTMENT OPERATIONS | 0.60 | 0.03 | 1.26 | (0.52) | (0.43) | (0.02) |
| Less Distributions: | |||||
| Distributions from net investment income | (0.19) | (0.41) | (0.42) | (0.44) | (0.43) | (0.42) |
| Net Asset Value, End of Period | $8.62 | $8.21 | $8.59 | $7.75 | $8.71 | $9.57 |
| Total Return3 | 7.39% | 0.55% | 16.69% | (5.59)% | (4.59)% | (0.27)% |
| Ratios to Average Net Assets: | |||||
| Net expenses | 1.64%4 | 1.60% | 1.53% | 1.54%5 | 1.56%5,6 | 1.91%6 |
| Net investment income | 4.42%4 | 4.82% | 5.19% | 5.90% | 4.74% | 4.28% |
| Expense waiver/reimbursement7 | 0.15%4 | 0.22% | 0.28% | 0.29% | 0.28% | 0.29% |
| Supplemental Data: | |||||
| Net assets, end of period (000 omitted) | $22,957 | $24,122 | $36,952 | $41,094 | $58,798 | $80,957 |
| Portfolio turnover | 6% | 28% | 18% | 24% | 34% | 47% |
| 1 | The Fund is the successor to the Predecessor Fund. The Predecessor Fund was reorganized into the Fund, a series of Federated Municipal Securities Income Trust, as of the close of business on November 10, 2006. Please see the Fund's Prospectus and Statement of Additional Information for further information regarding the reorganization. |
| 2 | Beginning with the year ended August 31, 2010, the Fund was audited by KPMG LLP. The previous years were audited by another independent registered public accounting firm. |
| 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 | The net expense ratio is calculated without reduction for expense offset arrangements. The net expense ratios are 1.54% and 1.56% for the years ended August 31, 2009 and 2008, respectively, after taking into account these expense reductions. |
| 6 | Includes interest and trust expenses related to the Fund's participation in certain inverse floater structures of 0.03% and 0.37% for the years ended August 31, 2008 and 2007, respectively. |
| 7 | This expense decrease is reflected in both the net expense and net investment income ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportFinancial Highlights – Class C Shares1
(For a Share Outstanding Throughout Each Period)
| Six Months Ended (unaudited) 2/29/2012 | Year Ended August 31, | ||||
| 2011 | 20102 | 2009 | 2008 | 2007 | |
| Net Asset Value, Beginning of Period | $8.21 | $8.59 | $7.75 | $8.72 | $9.57 | $10.01 |
| Income From Investment Operations: | |||||
| Net investment income | 0.18 | 0.39 | 0.43 | 0.44 | 0.43 | 0.43 |
| Net realized and unrealized gain (loss) on investments, futures contracts and swap contracts | 0.42 | (0.36) | 0.83 | (0.97) | (0.85) | (0.45) |
| TOTAL FROM INVESTMENT OPERATIONS | 0.60 | 0.03 | 1.26 | (0.53) | (0.42) | (0.02) |
| Less Distributions: | |||||
| Distributions from net investment income | (0.19) | (0.41) | (0.42) | (0.44) | (0.43) | (0.42) |
| Net Asset Value, End of Period | $8.62 | $8.21 | $8.59 | $7.75 | $8.72 | $9.57 |
| Total Return3 | 7.39% | 0.54% | 16.69% | (5.69)% | (4.48)% | (0.27)% |
| Ratios to Average Net Assets: | |||||
| Net expenses | 1.64%4 | 1.60% | 1.53% | 1.54%5 | 1.56%5,6 | 1.90%6 |
| Net investment income | 4.43%4 | 4.82% | 5.18% | 5.91% | 4.75% | 4.30% |
| Expense waiver/reimbursement7 | 0.15%4 | 0.22% | 0.28% | 0.29% | 0.28% | 0.29% |
| Supplemental Data: | |||||
| Net assets, end of period (000 omitted) | $51,803 | $46,925 | $52,785 | $40,630 | $48,495 | $56,448 |
| Portfolio turnover | 6% | 28% | 18% | 24% | 34% | 47% |
| 1 | The Fund is the successor to the Predecessor Fund. The Predecessor Fund was reorganized into the Fund, a series of Federated Municipal Securities Income Trust, as of the close of business on November 10, 2006. Please see the Fund's Prospectus and Statement of Additional Information for further information regarding the reorganization. |
| 2 | Beginning with the year ended August 31, 2010, the Fund was audited by KPMG LLP. The previous years were audited by another independent registered public accounting firm. |
| 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 | The net expense ratio is calculated without reduction for expense offset arrangements. The net expense ratios are 1.54% and 1.56% for the years ended August 31, 2009 and 2008, respectively, after taking into account these expense reductions. |
| 6 | Includes interest and trust expenses related to the Fund's participation in certain inverse floater structures of 0.03% and 0.37% for the years ended August 31, 2008 and 2007, respectively. |
| 7 | This expense decrease is reflected in both the net expense and net investment income ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportFinancial Highlights – Class F Shares1
(For a Share Outstanding Throughout Each Period)
| Six Months Ended (unaudited) 2/29/2012 | Year Ended August 31, | ||||
| 2011 | 20102 | 2009 | 2008 | 2007 | |
| Net Asset Value, Beginning of Period | $8.21 | $8.59 | $7.76 | $8.72 | $9.58 | $10.02 |
| Income From Investment Operations: | |||||
| Net investment income | 0.21 | 0.45 | 0.49 | 0.49 | 0.50 | 0.51 |
| Net realized and unrealized gain (loss) on investments, futures contracts and swap contracts | 0.42 | (0.36) | 0.83 | (0.96) | (0.86) | (0.45) |
| TOTAL FROM INVESTMENT OPERATIONS | 0.63 | 0.09 | 1.32 | (0.47) | (0.36) | 0.06 |
| Less Distributions: | |||||
| Distributions from net investment income | (0.22) | (0.47) | (0.49) | (0.49) | (0.50) | (0.50) |
| Net Asset Value, End of Period | $8.62 | $8.21 | $8.59 | $7.76 | $8.72 | $9.58 |
| Total Return3 | 7.79% | 1.29% | 17.42% | (4.87)% | (3.86)% | 0.48% |
| Ratios to Average Net Assets: | |||||
| Net expenses | 0.89%4 | 0.85% | 0.77% | 0.79%5 | 0.81%5,6 | 1.15%6 |
| Net investment income | 5.18%4 | 5.57% | 5.93% | 6.66% | 5.50% | 5.05% |
| Expense waiver/reimbursement7 | 0.15%4 | 0.22% | 0.28% | 0.29% | 0.28% | 0.29% |
| Supplemental Data: | |||||
| Net assets, end of period (000 omitted) | $188,237 | $177,290 | $200,948 | $162,315 | $190,686 | $208,724 |
| Portfolio turnover | 6% | 28% | 18% | 24% | 34% | 47% |
| 1 | The Fund is the successor to the Predecessor Fund. The Predecessor Fund was reorganized into the Fund, a series of Federated Municipal Securities Income Trust, as of the close of business on November 10, 2006. Please see the Fund's Prospectus and Statement of Additional Information for further information regarding the reorganization. |
| 2 | Beginning with the year ended August 31, 2010, the Fund was audited by KPMG LLP. The previous years were audited by another independent registered public accounting firm. |
| 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 | The net expense ratio is calculated without reduction for expense offset arrangements. The net expense ratios are 0.79% and 0.81% for the years ended August 31, 2009 and 2008, respectively, after taking into account these expense reductions. |
| 6 | Includes interest and trust expenses related to the Fund's participation in certain inverse floater structures of 0.03% and 0.37% for the years ended August 31, 2008 and 2007, respectively. |
| 7 | This expense decrease is reflected in both the net expense and net investment income ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportStatement of Assets and Liabilities
| Assets: |
| Total investments in securities, at value (identified cost $471,750,248) | $472,192,373 |
| Cash | 15,726 |
| Restricted cash (Note 2) | 82,500 |
| Income receivable | 7,987,853 |
| Receivable for investments sold | 1,649,788 |
| Receivable for shares sold | 1,272,613 |
| Receivable for daily variation margin | 32,812 |
| TOTAL ASSETS | 483,233,665 |
| Liabilities: |
| Payable for investments purchased | $2,169,148 |
| Payable for shares redeemed | 707,198 |
| Payable for shareholder services fee (Note 5) | 97,883 |
| Payable for distribution services fee (Note 5) | 43,923 |
| Accrued expenses | 94,920 |
| TOTAL LIABILITIES | 3,113,072 |
| Net assets for 55,671,598 shares outstanding | $480,120,593 |
| Net Assets Consist of: |
| Paid-in capital | $558,805,821 |
| Net unrealized appreciation of investments and futures contracts | 439,594 |
| Accumulated net realized loss on investments and futures contracts | (79,348,079) |
| Undistributed net investment income | 223,257 |
| TOTAL NET ASSETS | $480,120,593 |
| Net Asset Value, Offering Price and Redemption Proceeds Per Share |
| Class A Shares: |
| Net asset value per share ($217,122,970 ÷ 25,172,708 shares outstanding), no par value, unlimited shares authorized | $8.63 |
| Offering price per share (100/95.50 of $8.63) | $9.04 |
| Redemption proceeds per share | $8.63 |
| Class B Shares: |
| Net asset value per share ($22,956,887 ÷ 2,663,418 shares outstanding), no par value, unlimited shares authorized | $8.62 |
| Offering price per share | $8.62 |
| Redemption proceeds per share (94.50/100 of $8.62) | $8.15 |
| Class C Shares: |
| Net asset value per share ($51,803,482 ÷ 6,009,873 shares outstanding), no par value, unlimited shares authorized | $8.62 |
| Offering price per share | $8.62 |
| Redemption proceeds per share (99.00/100 of $8.62) | $8.53 |
| Class F Shares: |
| Net asset value per share ($188,237,254 ÷ 21,825,599 shares outstanding), no par value, unlimited shares authorized | $8.62 |
| Offering price per share (100/99.00 of $8.62) | $8.71 |
| Redemption proceeds per share (99.00/100 of $8.62) | $8.53 |
See Notes which are an integral part of the Financial Statement
Semi-Annual Shareholder ReportSix Months Ended February 29, 2012 (unaudited)
| Investment Income: |
| Interest | $13,643,684 |
| Expenses: |
| Investment adviser fee (Note 5) | $1,348,399 |
| Administrative fee (Note 5) | 175,364 |
| Custodian fees | 10,953 |
| Transfer and dividend disbursing agent fees and expenses | 131,632 |
| Directors'/Trustees' fees | 2,388 |
| Auditing fees | 13,178 |
| Legal fees | 2,309 |
| Portfolio accounting fees | 53,008 |
| Distribution services fee (Note 5) | 267,194 |
| Shareholder services fee (Note 5) | 559,373 |
| Account administration fee (Note 2) | 1,785 |
| Share registration costs | 29,882 |
| Printing and postage | 20,115 |
| Insurance premiums | 2,383 |
| Miscellaneous | 3,310 |
| TOTAL EXPENSES | 2,621,273 |
| Waivers (Note 5): |
| Waiver of investment adviser fee | $(339,275) |
| Waiver of administrative fee | (4,342) |
| TOTAL WAIVERS | (343,617) |
| Net expenses | 2,277,656 |
| Net investment income | 11,366,028 |
| Realized and Unrealized Gain (Loss) on Investments and Futures Contracts: |
| Net realized loss on investments | (3,442,377) |
| Net realized loss on futures contracts | (10,234) |
| Net change in unrealized depreciation of investments | 26,031,236 |
| Net change in unrealized depreciation of futures contracts | (2,531) |
| Net realized and unrealized gain on investments and futures contracts | 22,576,094 |
| Change in net assets resulting from operations | $33,942,122 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder ReportStatement of Changes in Net Assets
| Six Months Ended (unaudited) 2/29/2012 | Year Ended 8/31/2011 |
| Increase (Decrease) in Net Assets |
| Operations: |
| Net investment income | $11,366,028 | $25,119,832 |
| Net realized loss on investments and futures contracts | (3,452,611) | (21,677,564) |
| Net change in unrealized appreciation/depreciation of investments and futures contracts | 26,028,705 | (2,061,000) |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 33,942,122 | 1,381,268 |
| Distributions to Shareholders: |
| Distributions from net investment income |
| Class A Shares | (5,207,464) | (11,698,595) |
| Class B Shares | (519,310) | (1,498,494) |
| Class C Shares | (1,089,833) | (2,449,536) |
| Class F Shares | (4,712,805) | (10,715,888) |
| CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | (11,529,412) | (26,362,513) |
| Share Transactions: |
| Proceeds from sale of shares | 40,998,363 | 65,671,044 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 9,548,577 | 20,780,268 |
| Cost of shares redeemed | (31,178,573) | (143,032,996) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | 19,368,367 | (56,581,684) |
| Change in net assets | 41,781,077 | (81,562,929) |
| Net Assets: |
| Beginning of period | 438,339,516 | 519,902,445 |
| End of period (including undistributed net investment income of $223,257 and $386,641, respectively) | $480,120,593 | $438,339,516 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report1. 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 five portfolios. The financial statements included herein are only those of Federated Municipal High Yield Advantage Fund (the “Fund”), a non-diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. Each portfolio pays its own expenses. The Fund offers four classes of shares: Class A Shares, Class B Shares, Class C Shares, and Class F Shares. All shares of the Fund have equal rights with respect to voting, except on class-specific matters. The investment objective of the Fund is to provide a high level of current income which is generally exempt from federal regular income tax. Interest income from the Fund's investments may be subject to the federal AMT for individuals and corporations and state and local taxes.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with U.S. generally accepted accounting principles (GAAP).
Investment Valuation
In calculating its net asset value (NAV), the Fund generally values investments as follows:
- Fixed-income securities acquired with remaining maturities greater than 60 days are fair valued using price evaluations provided by a pricing service approved by the Trustees.
- Fixed-income securities acquired with remaining maturities of 60 days or less are valued at their cost (adjusted for the accretion of any discount or amortization of any premium), which approximates market value.
- Shares of other mutual funds are valued based upon their reported NAVs.
- Derivative contracts listed on exchanges are valued at their reported settlement or closing price.
- Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Trustees.
- For securities that are fair valued in accordance with procedures established by and under the general supervision of the Trustees, certain factors may be considered such as: the purchase price of the security, information obtained by contacting the issuer, analysis of the issuer's financial statements or other available documents, fundamental analytical data, the nature and duration of restrictions on disposition, the movement of the market in which the security is normally traded and public trading in similar securities of the issuer or comparable issuers.
If the Fund cannot obtain a price or price evaluation from a pricing service for an investment, the Fund may attempt to value the investment based upon the mean of bid and asked quotations or fair value the investment based on price evaluations, from one or more dealers. If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, the Fund uses the fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund could purchase or sell an investment at the price used to calculate the Fund's NAV.
Semi-Annual Shareholder Report
Fair Valuation and Significant Events ProceduresThe Trustees have authorized the use of pricing services to provide evaluations of the current fair value of certain investments for purposes of calculating the NAV. Factors considered by pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and asked for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for other types of fixed-income securities and OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Trustees.
The Trustees also have adopted procedures requiring an investment to be priced at its fair value whenever the Adviser determines that a significant event affecting the value of the investment has occurred between the time as of which the price of the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both an affirmative expectation that the investment's value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security is traded, or after the time of a price evaluation provided by a pricing service or a dealer, include:
- With respect to price evaluations of fixed-income securities determined before the close of regular trading on the NYSE, actions by the Federal Reserve Open Market Committee and other significant trends in U.S. fixed-income markets;
- Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded; and
- Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, a natural disaster affecting the issuer's operations or regulatory changes or market developments affecting the issuer's industry.
The Fund may seek to obtain more current quotations or price evaluations from alternative pricing sources. If a reliable alternative pricing source is not available, the Fund will determine the fair value of the investment using another method approved by the Trustees.
Investment Income, Gains and Losses, Expenses and Distributions
Investment transactions are accounted for on a trade date basis. Realized gains and losses from investment transactions are recorded on an identified cost basis. Interest income and expenses are accrued daily. Distributions to shareholders are recorded on the ex-dividend date. Distributions of net investment income are declared and paid monthly. Non-cash 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 Class A Shares, Class B Shares, Class C Shares and Class F Shares may bear account administration fees, distribution services fees and shareholder services fees unique to those classes.
Semi-Annual Shareholder Report
For the six months ended February 29, 2012, account administration fees for the Fund were as follows:| Account Administration Fees Incurred |
| Class A Shares | $1,022 |
| Class F Shares | 763 |
| TOTAL | $1,785 |
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 using the effective interest rate method.
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. As of and during the six months ended February 29, 2012, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of February 29, 2012, tax years 2008 through 2011 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts.
When-Issued and Delayed Delivery Transactions
The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.
Restricted Securities
The Fund may purchase securities which are considered restricted. Restricted securities are securities that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) are subject to contractual restrictions on public sales. In some cases, when a security cannot be offered for public sale without first being registered, the issuer of the restricted security has agreed to register such securities for resale, at the issuer's expense, either upon demand by the Fund or in connection with another registered offering of the securities. Many such restricted securities may be resold in the secondary market in transactions exempt from registration. Restricted securities may be determined to be liquid under criteria established by the Trustees. The Fund will not incur any registration costs upon such resales. The Fund's restricted securities are valued at the price provided by dealers in the secondary market or, if no market prices are available, at the fair value as determined in accordance with procedures established by and under the general supervision of the Trustees.
Semi-Annual Shareholder Report
Additional information on restricted securities, excluding securities purchased under Rule 144A, if applicable, that have been deemed liquid by the Trustees, held at February 29, 2012, is as follows:| Security | Acquisition Date | Cost | Market Value |
| Non-Profit Preferred Funding Trust I, Partnership, 9/15/2037 | 10/26/2006-2/16/2007 | $3,989,000 | $2,898,200 |
Futures Contracts
The Fund purchases and sells financial futures contracts to manage cash flows, enhance yield and to potentially reduce transaction costs. Upon entering into a financial 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. There is minimal counterparty risk to the Fund since futures are exchange traded and the exchange's clearing house, as counterparty to all exchange traded futures, guarantees the futures against default.
The average notional value of short futures contracts held by the Fund throughout the period was $1,403,069. This is based on amounts held as of each month-end throughout the fiscal period.
Futures contracts outstanding at period end are listed after the Fund's portfolio of investments.
Additional Disclosure Related to Derivative Instruments
| Fair Value of Derivative Instruments | ||
| Asset | ||
| Statement of Assets and Liabilities Location | Fair Value | |
| Derivatives not accounted for as hedging instruments under ASC Topic 815 | ||
| Interest rate contracts | Receivable for daily variation margin | $(2,531)* |
| * | Includes cumulative appreciation/depreciation of futures contracts as reported in the footnotes to the Portfolio of Investments. Only the current day's variation margin is reported within the Statement of Assets and Liabilities. |
Semi-Annual Shareholder Report
The Effect of Derivative Instruments on the Statement of Operations for the Period Ended February 29, 2012| Amount of Realized Gain/(Loss) on Derivatives Recognized in Income | |
| Futures | |
| Interest rate contracts | $(10,234) |
| Change in Unrealized Appreciation/(Depreciation) on Derivatives Recognized in Income | |
| Futures | |
| Interest rate contracts | $(2,531) |
Other
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated.
3. Shares of Beneficial Interest
The following tables summarize share activity:
| Six Months Ended 2/29/2012 | Year Ended 8/31/2011 | ||
| Class A Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 3,134,484 | $26,289,423 | 4,820,706 | $39,181,804 |
| Shares issued to shareholders in payment of distributions declared | 519,605 | 4,322,568 | 1,136,642 | 9,221,844 |
| Shares redeemed | (1,614,091) | (13,480,419) | (9,496,538) | (76,613,825) |
| NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS | 2,039,998 | $17,131,572 | (3,539,190) | $(28,210,177) |
| Six Months Ended 2/29/2012 | Year Ended 8/31/2011 | ||
| Class B Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 161,193 | $1,350,411 | 360,066 | $2,952,430 |
| Shares issued to shareholders in payment of distributions declared | 54,137 | 449,912 | 147,721 | 1,197,844 |
| Shares redeemed | (490,783) | (4,083,394) | (1,871,240) | (15,111,718) |
| NET CHANGE RESULTING FROM CLASS B SHARE TRANSACTIONS | (275,453) | $(2,283,071) | (1,363,453) | $(10,961,444) |
| Six Months Ended 2/29/2012 | Year Ended 8/31/2011 | ||
| Class C Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 607,112 | $5,099,981 | 1,074,606 | $8,838,758 |
| Shares issued to shareholders in payment of distributions declared | 110,545 | 919,137 | 237,234 | 1,921,040 |
| Shares redeemed | (424,494) | (3,533,459) | (1,740,770) | (13,999,071) |
| NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS | 293,163 | $2,485,659 | (428,930) | $(3,239,273) |
| Six Months Ended 2/29/2012 | Year Ended 8/31/2011 | ||
| Class F Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 981,449 | $8,258,548 | 1,791,610 | $14,698,052 |
| Shares issued to shareholders in payment of distributions declared | 463,826 | 3,856,960 | 1,041,903 | 8,439,540 |
| Shares redeemed | (1,206,431) | (10,081,301) | (4,630,615) | (37,308,382) |
| NET CHANGE RESULTING FROM CLASS F SHARE TRANSACTIONS | 238,844 | $2,034,207 | (1,797,102) | $(14,170,790) |
| NET CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS | 2,296,552 | $19,368,367 | (7,128,675) | $(56,581,684) |
4. Federal Tax Information
At February 29, 2012, the cost of investments for federal tax purposes was $471,502,795. The net unrealized appreciation of investments for federal tax purposes excluding any unrealized depreciation on futures contracts was $689,578. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $25,286,971 and net unrealized depreciation from investments for those securities having an excess of cost over value of $24,597,393.
At August 31, 2011, the Fund had a capital loss carryforward of $55,106,392 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, thereby reducing the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal income tax. Pursuant to the Code, a net capital loss incurred in taxable years beginning on or before December 22, 2010, is characterized as short-term and may be carried forward for a maximum of eight tax years (“Carryforward Limit”), whereas a net capital loss incurred in taxable years beginning after December 22, 2010, retains its character as either short-term or long-term, does not expire and is required to be utilized prior to the losses which have a Carryforward Limit.
Semi-Annual Shareholder Report
The following schedule summarizes the Fund's capital loss carryforwards and expiration years:| Expiration Year | Short-Term | Long-Term | Total |
| 2012 | $ 3,341,471 | N/A | $ 3,341,471 |
| 2013 | $ 7,976,021 | N/A | $ 7,976,021 |
| 2014 | $ 1,161,133 | N/A | $ 1,161,133 |
| 2017 | $20,198,309 | N/A | $20,198,309 |
| 2018 | $19,483,511 | N/A | $19,483,511 |
| 2019 | $2,945,947 | N/A | $2,945,947 |
5. Investment Adviser Fee and Other Transactions with Affiliates
Investment Adviser Fee
Federated Investment Management Company is the Fund's investment adviser (the “Adviser”). The advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.60% of the Fund's average daily net assets. Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee. For the six months ended February 29, 2012, the Adviser waived $339,275 of its fee.
Pursuant to a settlement with the New York Attorney General, the Adviser had agreed to waive investment adviser fees in compliance with an Assurance of Discontinuance dated November 17, 2005. The net adviser fee was reduced to 0.3233% effective January 1, 2006 and could not be increased until after December 31, 2010, at which time the obligation expired.
Administrative Fee
Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FAS is based on the average aggregate daily net assets of certain Federated funds as specified below:
Administrative Fee | Average Aggregate Daily Net Assets of the Federated Funds |
| 0.150% | on the first $5 billion |
| 0.125% | on the next $5 billion |
| 0.100% | on the next $10 billion |
| 0.075% | on assets in excess of $20 billion |
The administrative fee received during any fiscal year shall be at least $150,000 per portfolio and $40,000 per each additional class of Shares. Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the six months ended February 29, 2012, the net fee paid to FAS was 0.076% of average daily net assets of the Fund. FAS waived $4,342 of its fee.
Semi-Annual Shareholder Report
Distribution Services FeeThe 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, Class B Shares, Class C Shares and Class F Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses at the following percentages of average daily net assets annually, to compensate FSC:
| Share Class Name | Percentage of Average Daily Net Assets of Class |
| Class A Shares | 0.05% |
| Class B Shares | 0.75% |
| Class C Shares | 0.75% |
| Class F Shares | 0.05% |
Subject to the terms described in the Expense Limitation note, FSC may voluntarily choose to waive any portion of its fee. For the six months ended February 29, 2012, distribution services fees for the Fund were as follows:
| Distribution Services Fees Incurred |
| Class B Shares | $86,155 |
| Class C Shares | 181,039 |
| TOTAL | $267,194 |
When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares. For the six months ended February 29, 2012, FSC retained $36,311 of fees paid by the Fund. For the six months ended February 29, 2012, the Fund's Class A Shares and Class F Shares did not incur a distribution services fee; however, they may begin to incur this fee upon approval of the Trustees.
Sales Charges
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. For the six months ended February 29, 2012, FSC retained $31,406 in sales charges from the sale of Class A Shares and $254 from the sale of Class F Shares. FSC also retained $848 of CDSC related to redemptions of Class B Shares, $592 related to redemptions of Class C Shares and $17,885 related to redemptions of Class F Shares.
Semi-Annual Shareholder Report
Shareholder Services FeeThe Fund may pay fees (“Service Fees”) up to 0.25% of the average daily net assets of the Fund's Class A Shares, Class B Shares, Class C Shares and Class F Shares to financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for Service Fees. This waiver can be modified or terminated at any time. For the six months ended February 29, 2012, Service Fees for the Fund were as follows:
| Service Fees Incurred |
| Class A Shares | $246,998 |
| Class B Shares | 28,718 |
| Class C Shares | 60,363 |
| Class F Shares | 223,294 |
| TOTAL | $559,373 |
For the six months ended February 29, 2012, FSSC received $13,402 of fees paid by the Fund.
Interfund Transactions
During the six months ended February 29, 2012, 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 $72,200,000 and $65,000,000, respectively.
Expense Limitation
The Adviser and its affiliates (which may include FSC, FAS and FSSC) have voluntarily agreed to waive their fees and/or reimburse expenses so that the total annual fund operating expenses (as shown in the financial highlights) paid by the Fund's Class A Shares, Class B Shares, Class C Shares and Class F Shares (after the voluntary waivers and reimbursements) will not exceed 0.89%, 1.64%, 1.64% and 0.89% (the “Fee Limit”), respectively, up to but not including the later of (the “Termination Date”): (a) November 1, 2012; or (b) the date of the Fund's next effective Prospectus. While the Adviser and its affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Fund's Trustees.
Semi-Annual Shareholder Report
GeneralCertain Officers and Trustees of the Fund are Officers and Directors or Trustees of the above companies.
6. Investment Risk
Although the Fund has a diversified portfolio, the Fund has 43.0% of its portfolio invested in lower rated and comparable quality unrated high-yield securities. Investments in higher yield securities may be subject to a greater degree of credit risk and the risk tends to be more sensitive to economic conditions than higher rated securities. The risk of loss due to default by the issuer may be significantly greater for the holders of high yielding securities because such securities are generally unsecured and often subordinated to other creditors of the issuer.
7. Investment Transactions
Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations, for the six months ended February 29, 2012, were as follows:
| Purchases | $41,394,670 |
| Sales | $24,617,134 |
8. Line of Credit
The Fund participates in a $100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement with PNC Bank. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings are charged interest at a rate offered to the Fund by PNC Bank at the time of the borrowing. As of February 29, 2012, there were no outstanding loans. During the six months ended February 29, 2012, the Fund did not utilize the LOC.
9. Interfund Lending
Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of February 29, 2012, there were no outstanding loans. During the six months ended February 29, 2012, the program was not utilized.
Semi-Annual Shareholder Report
10. Recent Accounting PronouncementsIn April 2011, the Financial Accounting Standards Board (FASB) released Accounting Standards Update (ASU) No. 2011-03, “Reconsideration of Effective Control for Repurchase Agreements.” This ASU amends FASB Accounting Standards Codification (ASC) Topic 860, “Transfers and Servicing”; specifically the criteria required to determine whether a repurchase agreement and similar agreements should be accounted for as sales of financial assets or secured borrowings with commitments. This ASU is effective for fiscal years and interim periods beginning after December 15, 2011. Management has concluded that the adoption of ASU No. 2011-03 is not expected to have a material impact on the Fund's financial statements and the accompanying notes, net assets or results of operations.
In addition, in May 2011, FASB released ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” This ASU amends FASB ASC Topic 820, “Fair Value Measurement,” to establish common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP. This ASU is effective for fiscal years and interim periods beginning after December 15, 2011. Management has concluded that the adoption of ASU No. 2011-04 is not expected to have a material impact on the Fund's financial statements and the accompanying notes.
Semi-Annual Shareholder ReportShareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase or redemption payments; and (2) ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or shareholder services fees and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from September 1, 2011 to February 29, 2012.
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 required to be provided to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Semi-Annual Shareholder Report
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 9/1/2011 | Ending Account Value 2/29/2012 | Expenses Paid During Period1 |
| Actual: |
| Class A Shares | $1,000 | $1,079.10 | $4.60 |
| Class B Shares | $1,000 | $1,073.90 | $8.46 |
| Class C Shares | $1,000 | $1,073.90 | $8.46 |
| Class F Shares | $1,000 | $1,077.90 | $4.60 |
| Hypothetical (assuming a 5% return before expenses): |
| Class A Shares | $1,000 | $1,020.44 | $4.47 |
| Class B Shares | $1,000 | $1,016.71 | $8.22 |
| Class C Shares | $1,000 | $1,016.71 | $8.22 |
| Class F Shares | $1,000 | $1,020.44 | $4.47 |
| 1 | Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half-year period). The annualized net expense ratios are as follows: |
| Class A Shares | 0.89% |
| Class B Shares | 1.64% |
| Class C Shares | 1.64% |
| Class F Shares | 0.89% |
Evaluation and Approval of Advisory Contract – May 2011
Federated Municipal High Yield Advantage Fund (the “Fund”)
The Fund's Board reviewed the Fund's investment advisory contract at meetings held in May 2011. The Board's decision regarding the contract reflects the exercise of its business judgment on whether to continue the existing arrangements.
In this connection, the Federated Funds' Board had previously appointed a Senior Officer, whose duties include specified responsibilities relating to the process by which advisory fees are to be charged to a Federated fund. The Senior Officer has the authority to retain consultants, experts, or staff as may be reasonably necessary to assist in the performance of his duties, reports directly to the Board, and may be terminated only with the approval of a majority of the independent members of the Board. The Senior Officer prepared and furnished to the Board an independent, written evaluation that covered topics discussed below (the “Evaluation”). The Board considered that Evaluation, along with other information, in deciding to approve the advisory contract.
During its review of the contract, the Board considered compensation and benefits received by the Adviser. This included the fees received for services provided to the Fund by other entities in the Federated organization and research services (if any) received by the Adviser from brokers that execute Federated fund trades, as well as advisory fees. The Board is also familiar with and considered judicial decisions concerning allegedly excessive investment advisory fees, which have indicated that the following factors may be relevant to an Adviser's fiduciary duty with respect to its receipt of compensation from a fund: the nature and quality of the services provided by the Adviser, including the performance of the fund; the Adviser's cost of providing the services; the extent to which the Adviser may realize “economies of scale” as a fund grows larger; any indirect benefits that may accrue to the Adviser and its affiliates as a result of the Adviser's relationship with a fund; performance and expenses of comparable funds; and the extent to which the independent Board members are fully informed about all facts the Board deems relevant bearing on the Adviser's services and fees. The Board further considered management fees (including any components thereof) charged to institutional and other clients of the Adviser for what might be viewed as like services, and the cost to the Adviser and its affiliates of supplying services pursuant to the management fee agreements, excluding any intra-corporate profit and profit margins of the Adviser and its affiliates for supplying such services. The Board was aware of these factors and was guided by them in its review of the Fund's advisory contract to the extent it considered them to be appropriate and relevant, as discussed further below.
Semi-Annual Shareholder Report
The Board considered and weighed these circumstances in light of its substantial accumulated experience in governing the Fund and working with Federated on matters relating to the Federated funds, and was assisted in its deliberations by independent legal counsel. Throughout the year, the Board has requested and received substantial and detailed information about the Fund and the Federated organization that was in addition to the extensive materials that comprise and accompany the Senior Officer's Evaluation. Federated provided much of this information at each regular meeting of the Board, and furnished additional information in connection with the particular meeting at which the Board's formal review of the advisory contract occurred. Between regularly scheduled meetings, the Board also received information on particular matters as the need arose. Thus, the Board's consideration of the advisory contract included review of the Senior Officer's Evaluation, accompanying data and additional information covering such matters as: the Adviser's investment philosophy, revenue, profitability, personnel and processes; investment and operating strategies; the Fund's short- and long-term performance (in absolute terms, both on a gross basis and net of expenses, as well as in relationship to its particular investment program and certain competitor or “peer group” funds and/or other benchmarks, as appropriate), and comments on the reasons for performance; the Fund's investment objectives; the Fund's expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for contractual or voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities (if any); and the nature, quality and extent of the advisory and other services provided to the Fund by the Adviser and its affiliates. The Board also considered the preferences and expectations of Fund shareholders and their relative sophistication; the continuing state of competition in the mutual fund industry and market practices; the range of comparable fees for similar funds in the mutual fund industry; the Fund's relationship to the Federated family of funds which include a comprehensive array of funds with different investment objectives, policies and strategies which are available for exchange without the incurrence of additional sales charges; compliance and audit reports concerning the Federated funds and the Federated companies that service them (including communications from regulatory agencies), as well as Federated's responses to any issues raised therein; and relevant developments in the mutual fund industry and how the Federated funds and/or Federated are responding to them. The Board's evaluation process is evolutionary. The criteria considered and the emphasis placed on relevant criteria change in recognition of changing circumstances in the mutual fund marketplace.With respect to the Fund's performance and expenses in particular, the Board has found the use of comparisons to other mutual funds with comparable investment programs to be relevant, given the high degree of competition in the mutual fund business. The Board focused on comparisons with other similar Semi-Annual Shareholder Report
mutual funds more heavily than non-mutual fund products or services because it is believed that they are more relevant. For example, other mutual funds are the products most like the Fund, they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle in fact chosen and maintained by the Fund's investors. The range of their fees and expenses therefore appears to be a generally reliable indication of what consumers have found to be reasonable in the precise marketplace in which the Fund competes. The Fund's ability to deliver competitive performance when compared to its peer group was a useful indicator of how the Adviser is executing the Fund's investment program, which in turn assisted the Board in reaching a conclusion that the nature, extent, and quality of the Adviser's investment management services were such as to warrant continuation of the advisory contract. In this regard, the Senior Officer has reviewed Federated's fees for providing advisory services to products outside the Federated family of funds (e.g., institutional and separate accounts). He concluded that mutual funds and institutional accounts are inherently different products. Those differences include, but are not limited to, different types of targeted investors; being subject to different laws and regulations; different legal structures; different average account sizes; different associated costs; different portfolio management techniques made necessary by different cash flows; and portfolio manager time spent in review of securities pricing. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund advisory contracts.The Senior Officer reviewed information compiled by Federated, using data supplied by independent fund ranking organizations, regarding the performance of, and fees charged by, other mutual funds, noting his view that comparisons to fund peer groups are relevant in judging the reasonableness of proposed fees.
The Fund's performance fell below the median of the relevant peer group for the one-year, three-year and five-year periods covered by the Evaluation. The Board discussed the Fund's performance with the Adviser and recognized the efforts being undertaken by the Adviser. The Board will continue to monitor these efforts and the performance of the Fund.
The Board also received financial information about Federated, including information regarding the compensation and benefits Federated derived from its relationships with the Federated funds. This information covered not only the fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds' administrator). The information also detailed any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades. In addition, the Board considered the fact that, in order for a fund to be competitive in the marketplace, Federated and its affiliates frequently waived fees Semi-Annual Shareholder Report
and/or reimbursed expenses and have disclosed to fund investors and/or indicated to the Board their intention to do so in the future, where appropriate. Moreover, the Board receives regular reporting as to the institution or elimination of these voluntary waivers.Federated furnished information, requested by the Senior Officer, that reported revenues on a fund-by-fund basis and made estimates of the allocation of expenses on a fund-by-fund basis, using allocation methodologies specified by the Senior Officer. The Senior Officer noted that, although they may apply consistent allocation processes, the inherent difficulties in allocating costs (and the unavoidable arbitrary aspects of that exercise) and the lack of consensus on how to allocate those costs may render such allocation information unreliable. The allocation information was considered in the analysis by the Board but was determined to be of limited use.
The Board and the Senior Officer also reviewed information compiled by Federated comparing profitability information for Federated to other publicly held fund management companies. In this regard, the Senior Officer noted the limited availability of such information, but nonetheless concluded that Federated's profit margins did not appear to be excessive and the Board agreed.
The Senior Officer's Evaluation also discussed the notion of possible realization of “economies of scale” as a fund grows larger. The Board considered in this regard that the Adviser has made significant and long-term investments in areas that support all of the Federated funds, such as personnel and processes for the portfolio management, compliance, internal audit, and risk management functions; and systems technology; and that the benefits of these efforts (as well as any economies, should they exist) were likely to be enjoyed by the fund complex as a whole. Finally, the Board also noted the absence of any applicable regulatory or industry guidelines on this subject, which (as discussed in the Senior Officer's Evaluation) is compounded by the lack of any common industry practice or general pattern with respect to structuring fund advisory fees with “breakpoints” that serve to reduce the fee as the fund attains a certain size. The Senior Officer did not recommend institution of breakpoints in pricing Federated's fund advisory services at this time.
It was noted in the materials for the Board meeting that for the period covered by the Evaluation, the Fund's investment advisory fee, after waivers and expense reimbursements, if any, was below the median of the relevant peer group. The Board reviewed the fees and other expenses of the Fund with the Adviser and was satisfied that the overall expense structure of the Fund remained competitive.
The Senior Officer noted that, considering the totality of the circumstances, and all of the factors referenced within his Evaluation, he had concluded that, subject to comments and recommendations made within his Evaluation, his observations and the information accompanying the Evaluation supported a finding by the Board that the management fees for each of the funds are reasonable and that Federated appeared to provide appropriate administrative Semi-Annual Shareholder Report
services to the Fund for the fees paid. Under these circumstances, no changes were recommended to, and no objection was raised to, the continuation of the Fund's advisory contract. The Board concluded that the nature, quality and scope of services provided the Fund by the Adviser and its affiliates were satisfactory.In its decision to continue an existing investment advisory contract, the Board was mindful of the potential disruptions of the Fund's operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew an advisory contract. In particular, the Board recognized that many shareholders have invested in the Fund on the strength of the Adviser's industry standing and reputation and with the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's approval of the advisory contract reflected the fact that it is the shareholders who have effectively selected the Adviser by virtue of having invested in the Fund.
The Board based its decision to approve the advisory contract on the totality of the circumstances and relevant factors and with a view to past and future long-term considerations. Not all of the factors and considerations identified above were necessarily relevant to the Fund, nor did the Board consider any one of them to be determinative. With respect to the factors that were relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.
Semi-Annual Shareholder ReportVoting Proxies on Fund Portfolio Securities
A description of the policies and procedures that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. A report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available from Federated's website at FederatedInvestors.com. To access this information from the home page, select “All” under “Asset Classes.” Select a fund name and share class, if applicable, to go to the Fund Overview page. On the Fund Overview page, select the “Documents” tab. At the bottom of that page, select “Proxy Voting Record Report (Form N-PX).” Form N-PX filings are also available at the SEC's website at www.sec.gov.
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. From the home page, select “All” under “Asset Classes.” Select a fund name and share class, if applicable, to go to the Fund Overview page. On the Fund Overview page, select the “Documents” tab. At the bottom of that page, select “Form N-Q.”
Semi-Annual Shareholder ReportMutual funds are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal.
This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund's Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.
IMPORTANT NOTICE ABOUT FUND DOCUMENT 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 Municipal High Yield Advantage Fund
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
CUSIP 313923864
CUSIP 313923856
CUSIP 313923849
CUSIP 313923831
8040407 (4/12)
Federated is a registered trademark of Federated Investors, Inc.
2012 © 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
(a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this form.
(b) Not Applicable; Fund had no divestments during the reporting period covered since the previous Form N-CSR filing.
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 second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits
(a)(1) Code of Ethics- Not Applicable to this Semi-Annual Report.
(a)(2) Certifications of Principal Executive Officer and Principal Financial Officer.
(a)(3) Not Applicable.
(b) Certifications pursuant to 18 U.S.C. Section 1350.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant Federated Municipal Securities Income Trust
By /S/ Richard A. Novak
Richard A. Novak, Principal Financial Officer
Date April 23, 2012
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By /S/ J. Christopher Donahue
J. Christopher Donahue, Principal Executive Officer
Date April 23, 2012
By /S/ Richard A. Novak
Richard A. Novak, Principal Financial Officer
Date April 23, 2012