-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TTOFLZfzz7sOPIgxTGd9D5V2HP5TABs3oEgtif1sefSqDlcLDA3J+9S5vy99g9e6 R2aoX+ZxLpa/YJDwRRfHXQ== 0000201801-99-000013.txt : 19991130 0000201801-99-000013.hdr.sgml : 19991130 ACCESSION NUMBER: 0000201801-99-000013 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991129 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FEDERATED MUNICIPAL SECURITIES FUND INC CENTRAL INDEX KEY: 0000201801 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 251304971 STATE OF INCORPORATION: MD FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-02677 FILM NUMBER: 99764998 BUSINESS ADDRESS: STREET 1: FEDERATED INVESTORS TWR CITY: PITTSBURGH STATE: PA ZIP: 15222-3779 BUSINESS PHONE: 8003417400 MAIL ADDRESS: STREET 1: FEDERATED INVESTORS TWR CITY: PITTSBURGH STATE: PA ZIP: 15222-3779 FORMER COMPANY: FORMER CONFORMED NAME: LIBERTY MUNICIPAL SECURITIES FUND INC DATE OF NAME CHANGE: 19930517 FORMER COMPANY: FORMER CONFORMED NAME: FEDERATED TAX FREE INCOME FUND INC DATE OF NAME CHANGE: 19920703 N-30D 1 SEMI-ANNUAL REPORT [Graphic] J. CHRISTOPHER DONAHUE President Federated Municipal Securities Fund, Inc. President's Message Dear Fellow Shareholder: Federated Municipal Securities Fund, Inc. was created in 1976, and for over two decades, investors who want to pursue tax-free income from a high-quality municipal bond portfolio have received generous monthly income. 1 I am pleased to present the fund's 23rd Semi-Annual Report. On September 30, 1999, the fund's net assets of $595.8 million were invested across 124 tax-free securities issued by municipalities across the U.S. The fund's weighted average effective maturity was 11.89 years. This report covers the first half of the fund's fiscal year which is the six-month period from April 1, 1999 through September 30, 1999. It begins with an interview with J. Scott Albrecht, Vice President, who co-manages the fund with Mary Jo Ochson, Senior Vice President, both of Federated Investment Management Company. Following their discussion are three additional items of shareholder interest. First is a series of graphs showing the fund's long-term investment performance. Second is a complete listing of high-quality tax-free municipal securities that comprise the fund's holdings, and third is the publication of the fund's financial statements. Over the six-month reporting period, the overall bond market was weak from a total return perspective as rising interest rates caused bond prices to decline. While municipal bond prices also suffered from this trend, municipal bonds continued to offer historically high yields compared to the yields available on U.S. Treasury securities. As a result, Federated Municipal Securities Fund, Inc. produced a competitive stream of tax-free income. 1 Income may be subject to the federal alternative minimum tax and state and local taxes. Federated Municipal Securities Fund, Inc. was able to deliver to shareholders a yield advantage over the average municipal bond fund. The fund's 30-day SEC yield for Class A Shares on September 30, 1999 was 4.45%, based on offering price. 2 This is the equivalent of a 7.37% yield on a taxable bond investment for an investor in the 39.6% federal income tax bracket and equivalent to taxable yields of 6.95% and 6.45% for investors in the 36% and 31% tax brackets, respectively. Individual share class total return performance for the six-month reporting period, including income distributions, follows. 3
TOTAL RETURN INCOME NET ASSET VALUE CHANGE Class A Shares (5.35%) $0.26 $10.87 to $10.04 = (7.63%) Class B Shares (5.77%) $0.21 $10.87 to $10.04 = (7.63%) Class C Shares (5.76%) $0.21 $10.87 to $10.04 = (7.63%)
Thank you for entrusting a portion of your wealth in Federated Municipal Securities Fund, Inc. The fund is a convenient way to invest in a broad array of municipal securities. You can receive income from the fund or increase your wealth by reinvesting your monthly dividends so they may compound tax-free. As always, we welcome your comments and suggestions. Sincerely yours, [Graphic] J. Christopher Donahue President November 15, 1999 2 The SEC yields are compounded and annualized. The 30-day SEC yields on September 30, 1999 for Class B and C Shares were 3.77% and 3.78%, based on offering price (i.e., less any applicable sales charge), respectively. The taxable yield equivalents, based on offering price (i.e., less any applicable sales charge), for investors in 31.0%, 36.0% and 39.6% federal tax brackets were as follows: Class B Shares-5.46%, 5.89% and 6.24%, respectively; Class C Shares-5.48%, 5.91%, and 6.26%, respectively. 3 Performance quoted is based on net asset value, reflects past performance and is no guarantee of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Total returns for the six-month reporting period, based on offering price (i.e., less any applicable sales charge), for Class A, B and C Shares were (9.59%), (10.85%) and (6.69%), respectively. [Graphic] J. SCOTT ALBRECHT Vice President Federated Investment Management Company [Graphic] MARY JO OCHSON Senior Vice President Federated Investment Management Company Investment Review FROM A TOTAL RETURN PERSPECTIVE, THE FIRST HALF OF THE FUND'S FISCAL YEAR WAS A RELATIVELY DIFFICULT ONE FOR BONDS IN GENERAL, ALTHOUGH MUNICIPAL BONDS REMAINED ATTRACTIVE RELATIVE TO U.S. TREASURY SECURITIES. WHAT ARE YOUR COMMENTS ON THE MUNICIPAL BOND MARKETPLACE OVER THE REPORTING PERIOD? From a total return standpoint, the past six months were relatively difficult, reflecting a rise in interest rates across the maturity spectrum. The continued strong growth of the domestic economy and diminished concerns about international economic problems were the primary reasons for this rise in yields. For example, yields on the 30-year Treasury moved up 0.38% since April 1999, while the Bond Buyer's Revenue Bond Index ("RBI") was up 0.67% over the same period. 1 The reduced appetite for tax-exempt securities from traditional crossover buyers (corporations and insurance companies) was also a driver of the upward trend in municipal yields. Demand was weak from crossover buyers due to the large supply of pre-Year 2000 ("Y2K") corporate debt issuance, which has created attractive relative value opportunities in the corporate market. Although direct retail demand has been powerful, it was not able to support the trading of larger blocks of municipal bonds, which normally would support bond prices. Municipal yields as a percentage of Treasury yields are down from last year's record levels, but remain high when compared to any year except 1998. The RBI/30-Year Treasury ratio is now 98.5% compared to an historical average of about 88%. We believe that at these levels, municipal bonds offer attractive relative value. 1 The Bond Buyer Revenue Bond Index is a standard against which municipal bonds are measured. This index is unmanaged and investments cannot be made in an index. HOW HAS FEDERATED MUNICIPAL SECURITIES FUND, INC. PERFORMED WITH RESPECT TO TOTAL RETURN AND INCOME FOR THE SIX-MONTH REPORTING PERIOD ENDED SEPTEMBER 30, 1999? The fund's return was consistent with the market over the reporting period. For the six-month reporting period ended September 30, 1999, the fund's total return for Class A Shares was (5.35%), based on net asset value. 2 This return lagged the Lipper General Municipal Fund Average3 total return of (3.63%) and the (2.16%) return of the Lehman Brothers Municipal Bond Index.4 The income of this fund was very competitive during the reporting period. The fund's current 30-day SEC yield on September 30, 1999 was 4.45% for Class A Shares, based on offering price, which was competitive with the 4.50% 30-day SEC yield of other funds with Class A Shares in its Lipper peer group. Tax- equivalent yields for the fund's Class A Shares ranged from 6.45% for an investor in the 31% tax bracket to 7.37% for an investor in the 39.6% tax bracket. 5 WHAT STRATEGIES ARE YOU EMPLOYING TO TAKE ADVANTAGE OF THE CURRENT MARKET ENVIRONMENT? The fund's objective is to provide for its shareholders a high level of current income which is exempt from federal regular income tax. We pursue this objective by taking advantage of relative value opportunities in both individual security selection and overall portfolio structure. The rising interest rate environment has provided an opportunity to take advantage of tax-loss swaps. These swaps build a pool of tax-loss carry-forwards that can be used to offset any recognized capital gains within the portfolio, and also provide an opportunity to increase the overall yield of the portfolio. We concentrate the fund's security selection on credit quality. Credit spreads continue to be narrow by historical standards, providing little incentive to buy lower quality paper. We continuously look for securities with favorable liquidity characteristics and structural features. Call protection and coupon selection are important determinants of how a bond will perform as interest rates vary. We have not been active buyers of coupon bonds of less than 5% due to the tax risks associated with market discounted securities. The municipal yield curve offers the best "roll down" value in the 15-year range. The value of this "roll down the curve" effect combined with the municipal yield curve's flatness beyond the 20-year sector has forced us to concentrate purchases in the 15-20 year area. 2 Performance quoted is based on net asset value, represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Total returns for the six-month reporting period, based on net asset value, for Class B and C Shares were (5.77%) and (5.76%), respectively. Total returns for the six-month reporting period, based on offering price (i.e., less any applicable sales charge), for Class A, B and C Shares were (9.59%), (10.85%) and (6.69%), respectively. 3 Lipper figures represent the average of the total returns reported by all of the mutual funds designated by Lipper Analytical Services, Inc. as falling into the category indicated. Lipper figures do not take sales charges into account. 4 The Lehman Brothers Municipal Bond Index is a broad-based total return performance benchmark for the long-term, investment grade bond market. This index is unmanaged, and investments cannot be made in an index. 5 The SEC yields are compounded and annualized. The 30-day SEC yields on September 30, 1999 for Class B and C Shares were 3.77% and 3.78%, based on offering price (i.e., less any applicable sales charge), respectively. The taxable yield equivalents, based on offering price, for investors in 31.0%, 36.0%, and 39.6% federal tax brackets were as follows: Class B Shares- 5.46%, 5.89% and 6.24%, respectively; Class C Shares-5.48%, 5.91% and 6.26%, respectively. WHAT WERE THE FUND'S TOP FIVE HOLDINGS AS OF SEPTEMBER 30, 1999?
PERCENTAGE OF ISSUER/COUPON/MATURITY NET ASSETS Indianapolis, IN Airport Authority-FDX Corp., 7.100% due 1/15/2017 3.45% Salt Lake City, UT Hospital Authority-IHC Hospitals, 8.125% due 5/15/2015 2.78% Springfield, TN Health & Educational Facilities Board-NorthCrest Medical Center, 8.500% due 4/1/2024 2.66% Dallas-Ft. Worth, TX International Airport Facilities Authority- American Airlines, 7.250% due 11/1/2030 2.27% Illinois Health Facilities Authority- Edgewater Hospital & Medical Center, 9.250% due 7/1/2024 2.24% TOTAL 13.40%
HOW WERE THE FUND'S ASSETS ALLOCATED IN TERMS OF CREDIT QUALITY AS OF SEPTEMBER 30, 1999?
PERCENTAGE OF NET ASSETS AAA 35.83% AA 24.48% A 11.29% BBB 18.05% Non-Rated 9.15%
WHAT IS YOUR OUTLOOK FOR MUNICIPAL CREDIT QUALITY AND CREDIT SPREADS AS WE APPROACH THE YEAR 2000? Municipal credit quality, in general, has benefited from the strong U.S. economy. Municipal tax receipts at all levels of government have exceeded forecasts, which has allowed municipal fund balances and reserves to expand. There are sectors of the municipal revenue bond market that have experienced credit weakness. For example, the hospital sector, in particular, has experienced credit downgrades as a result of the reductions in Medicare reimbursement by the federal government and overly ambitious expansion plans. Y2K spending by municipal governments is a potential credit factor that must be taken into consideration as far as both the cost and effectiveness of their Y2K preparedness. While the market does not expect any material interruptions in the supply of necessary municipal services, there does remain the potential for some functions to suffer temporary disruptions. Last Meeting of Shareholders The Special Meeting of shareholders of Federated Municipal Securities Fund, Inc. (the "Fund") was held on June 30, 1999. On April 15, 1999, the record date for shareholders voting at the meeting, there were 61,255,009 total outstanding shares. The following items were considered by shareholders and the results of their voting were as follows. AGENDA ITEM 1 Election of Directors: 1
SHARES VOTED SHARES FOR WITHHELD John F. Cunningham 44,127,562 979,099 Charles F. Mansfield, Jr. 44,149,187 957,474 John S. Walsh 44,174,466 932,195
1 The following Directors continued their terms as Directors: John F. Donahue, Thomas G. Bigley, John T. Conroy, Nicholas P. Constantakis, J. Christopher Donahue, Lawrence D. Ellis, M.D., Peter E. Madden, John E. Murray, Jr., J.D., S.J.D., and Marjorie P. Smuts. AGENDA ITEM 2 To ratify the selection of Deloitte and Touche LLP as the Fund's independent auditors.
SHARES VOTED SHARES VOTED SHARES FOR AGAINST ABSTAINED 43,345,620 362,713 1,398,328
AGENDA ITEM 3 To make changes to the Fund's fundamental investment policies: (a) To approve amending the Fund's fundamental investment policy regarding diversification.
SHARES VOTED SHARES VOTED SHARES FOR AGAINST ABSTAINED 33,876,423 1,291,520 2,370,152
(b) To approve amending the Fund's fundamental investment policy regarding borrowing money and issuing senior securities.
SHARES VOTED SHARES VOTED SHARES FOR AGAINST ABSTAINED 32,868,723 2,323,780 2,645,593
(c) To approve amending the Fund's fundamental investment policy regarding investments in real estate.
SHARES VOTED SHARES VOTED SHARES FOR AGAINST ABSTAINED 33,022,028 2,301,341 2,514,727
(d) To approve amending the Fund's fundamental investment policy concerning investments in commodities.
SHARES VOTED SHARES VOTED SHARES FOR AGAINST ABSTAINED 32,332,705 2,849,503 2,655,888
(e) To approve amending the Fund's fundamental investment policy regarding underwriting securities.
SHARES VOTED SHARES VOTED SHARES FOR AGAINST ABSTAINED 33,281,313 2,018,272 2,538,510
(f) To approve amending the Fund's fundamental investment policy regarding lending assets by the Fund.
SHARES VOTED SHARES VOTED SHARES FOR AGAINST ABSTAINED 32,707,007 2,370,372 2,760,716
(g) To approve amending the Fund's fundamental investment policy regarding concentration of the Fund's investments in the securities of companies in the same industry.
SHARES VOTED SHARES VOTED SHARES FOR AGAINST ABSTAINED 33,219,925 2,099,241 2,518,930
(h) To approve amending the Fund's fundamental investment policy regarding investments in municipal securities.
SHARES VOTED SHARES VOTED SHARES FOR AGAINST ABSTAINED 34,024,862 1,504,770 2,308,464
(i) To approve amending and making non-fundamental, the Fund's fundamental investment policy regarding buying securities on margin.
SHARES VOTED SHARES VOTED SHARES FOR AGAINST ABSTAINED 31,970,723 3,055,625 2,811,747
(j) To approve amending and making non-fundamental, the Fund's fundamental investment policy regarding pledging assets.
SHARES VOTED SHARES VOTED SHARES FOR AGAINST ABSTAINED 32,178,686 2,881,539 2,777,871
(k) To approve making non-fundamental the Fund's fundamental investment policies regarding permissible investments.
SHARES VOTED SHARES VOTED SHARES FOR AGAINST ABSTAINED 32,640,857 2,353,418 2,844,820
(l) To approve making non-fundamental the Fund's fundamental investment policy regarding temporary investments.
SHARES VOTED SHARES VOTED SHARES FOR AGAINST ABSTAINED 32,983,279 2,128,564 2,726,252
(m) To approve making non-fundamental the Fund's fundamental investment policy regarding engaging in when-issued and delayed delivery transactions.
SHARES VOTED SHARES VOTED SHARES FOR AGAINST ABSTAINED 32,873,734 2,046,460 2,917,902
(n) To make non-fundamental the Fund's fundamental investment policy regarding investing in securities of other investment companies.
SHARES VOTED SHARES VOTED SHARES FOR AGAINST ABSTAINED 32,676,806 2,342,671 2,818,619
AGENDA ITEM 4 To remove certain of the Fund's fundamental investment policies: (a) To approve eliminating the Fund's fundamental investment policy on investing in oil, gas and minerals.
SHARES VOTED SHARES VOTED SHARES FOR AGAINST ABSTAINED 32,613,713 2,701,398 2,522,984
(b) To approve eliminating the Fund's fundamental investment policy on selling securities short.
SHARES VOTED SHARES VOTED SHARES FOR AGAINST ABSTAINED 32,181,728 2,969,319 2,687,049
(c) To approve eliminating the Fund's fundamental investment policy regarding trading portfolio securities.
SHARES VOTED SHARES VOTED SHARES FOR AGAINST ABSTAINED 32,856,376 2,289,302 2,692,418
AGENDA ITEM 5 To approve amendments to the Fund's Articles of Incorporation to permit the Board of Directors to liquidate assets of a series or class without seeking shareholder approval to the extent permitted under Maryland law.
SHARES VOTED SHARES VOTED SHARES FOR AGAINST ABSTAINED 32,192,752 3,130,435 2,514,909
Two Ways You May Seek to Invest for Success: INITIAL INVESTMENT IF YOU HAD MADE AN INITIAL INVESTMENT OF $23,000 IN THE CLASS A SHARES OF FEDERATED MUNICIPAL SECURITIES FUND, INC. ON 10/4/76, REINVESTED YOUR DIVIDENDS AND CAPITAL GAINS, AND DID NOT REDEEM ANY SHARES, YOUR ACCOUNT WOULD HAVE BEEN WORTH $85,507 ON 9/30/99. YOU WOULD HAVE EARNED A 5.88% 1 AVERAGE ANNUAL TOTAL RETURN FOR THE INVESTMENT LIFE SPAN. One key to investing wisely is to reinvest all tax-free distributions in fund shares. This increases the number of shares on which you can earn future tax-free dividends, and you gain the benefit of compounding tax free. As of 9/30/99, the Class A Shares' average annual 1-year, 5-year, and 10-year total returns were (9.56%), 3.31%, and 5.35%, respectively. Class B Shares' average annual 1-year, 5-year and since inception (7/26/94) total returns were (11.13%), 3.02% and 2.98%, respectively. Class C Shares' average annual 1-year, 5-year, and since inception (4/21/93) total returns were (7.06%), 3.35%, and 2.77%, respectively. 2 The graphic presentation here displayed consists of a legend in the upper left quadrant indicating the components of the corresponding mountain chart. The color coded mountain chart is a visual representation of the narrative text above it. The "x" axis reflects computation periods from 10/4/76 to 9/30/99. The "y" axis is measured in increments of $20,000 ranging from $0 to $100,000 and indicates that the ending value of a hypothetical initial investment of $23,000 in the fund's Class A Shares, assuming all sales charges and the reinvestment of capital gains and dividends, would have grown to $85,507 on 9/30/99. 1 Total return represents the change in the value of an investment in Class A Shares after reinvesting all income and capital gains, and takes into account the 4.50% sales charge applicable to an initial investment in Class A Shares. Data quoted represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. 2 The total returns stated take into account all applicable sales charges. The maximum sales charge and contingent deferred sales charges for the fund are as follows: Class A Shares, 4.50% sales charge; Class B Shares, 5.50% contingent deferred sales charge; Class C Shares, 1.00% contingent deferred sales charge. ONE STEP AT A TIME $1,000 INITIAL INVESTMENT AND SUBSEQUENT INVESTMENTS OF $1,000 EACH YEAR FOR 22 YEARS (REINVESTING ALL DIVIDENDS AND CAPITAL GAINS) GREW TO $56,311. With this approach, the key is consistency. If you had started investing $1,000 annually in the Class A Shares of Federated Municipal Securities Fund, Inc. on 10/4/76, reinvested your dividends and capital gains and did not redeem any shares, you would have invested only $23,000 but your account would have reached a total value of $56,311 1 by 9/30/99. You would have earned an average annual total return of 6.41%. A practical investment plan helps you pursue a high level of income through tax-free municipal bonds. Through systematic investing, you buy shares on a regular basis and reinvest all tax-free earnings. An investment plan can work for you when you invest only $1,000 annually. You can take it one step at a time. Put time, money, and compounding to work. The graphic presentation here displayed consists of a legend in the upper left quadrant indicating the components of the corresponding mountain chart. The color coded mountain chart is a visual representation of the narrative text above it. The "x" axis reflects computation periods from 10/4/76 to 9/30/99. The "y" axis is measured in increments of $10,000 ranging from $0 to $60,000 and indicates that the ending value of hypothetical yearly investments of $1,000 in the fund's Class A Shares, assuming the reinvestment of capital gains and dividends, would have grown to $56,311 on 9/30/99. 1 This chart assumes that the subsequent annual investments are made on the last day of each anniversary month. No method of investing can guarantee a profit or protect against loss in down markets. Hypothetical Investor Profile- Investing for Tax-Free Income Larry and Barbara Bartlett are a fictional couple who, like all other tax-sensitive shareholders, want to keep more of what they earn. Larry owns a successful architectural firm and Barbara is a marketing executive. Their combined income puts them in the 39.6% federal tax bracket. On September 30, 1989, the Bartletts invested $25,000 in the Class A Shares of Federated Municipal Securities Fund, Inc. As this chart shows, in 10 years, their original $25,000 investment has grown to $42,102. 1 This represents a 5.35% average annual total return. As far as the Bartletts are concerned, this fund has made all the difference. The graphic presentation here displayed consists of a legend in the upper left quadrant indicating the components of the corresponding mountain chart. The color coded mountain chart is a visual representation of the narrative text above it. The "x" axis reflects computation periods from 9/30/89 to 9/30/99. The "y" axis is measured in increments of $10,000 ranging from $0 to $50,000 and indicates that the ending value of hypothetical initial investment of $25,000 in the fund's Class A Shares, assuming the reinvestment of capital gains and dividends, would have grown to $42,102 on 9/30/99. 1 Income may be subject to the federal alternative minimum tax and state and local taxes. This hypothetical scenario is provided for illustrative purposes only and does not represent the results obtained by any particular shareholder. Past performance does not guarantee future results. Portfolio of Investments SEPTEMBER 30, 1999 (UNAUDITED)
PRINCIPAL CREDIT AMOUNT RATING 1 VALUE LONG-TERM MUNICIPALS-98.8% ALABAMA-1.4% $ 2,000,000 Courtland, AL IDB, Solid Waste Disposal Revenue Bonds (Series A), 6.50% (Champion International Corp.)/(Original Issue Yield: 6.654%), 9/1/2025 BBB $ 2,036,340 6,260,000 Jefferson County, AL, Sewer Revenue Warrants (Series 1997D), 5.70% (Original Issue Yield: 5.73%), 2/1/2018 AAA 6,246,040 TOTAL 8,282,380 ALASKA-0.2% 1,100,000 Anchorage, AK, UT GO Bonds, Series A, 5.00% (FGIC INS)/(Original Issue Yield: 5.08%), 4/1/2018 AAA 996,897 CALIFORNIA-4.1% 9,400,000 California PCFA, Refunding Revenue Bonds (Series A), 5.90% (San Diego Gas & Electric)/(Original Issue Yield: 5.934%), 6/1/2014 A+ 9,856,652 5,000,000 California State Public Works Board, Lease Revenue Refunding Bonds, Series A, 5.25% (Trustees of the California State University), 10/1/2015 A+ 4,855,150 2,500,000 Foothill/Eastern Transportation Corridor Agency, CA, Toll Road Refunding Revenue Bonds (Series 1999), 5.25%, 1/15/2013 AAA 2,498,600 4,000,000 Foothill/Eastern Transportation Corridor Agency, CA, Toll Road Refunding Revenue Bonds (Series 1999), 5.375%, 1/15/2015 AAA 3,979,040 3,000,000 Los Angeles, CA Unified School District, UT GO Bonds (Series C), 5.625%, 7/1/2015 AAA 3,053,010 TOTAL 24,242,452 COLORADO-3.2% 5,580,000 Denver (City & County), CO, Excise Tax Revenue Refunding Bonds (Series 1999A), 5.50% (FSA INS), 9/1/2013 AAA 5,628,546 6,650,000 Denver (City & County), CO, Excise Tax Revenue Refunding Bonds (Series 1999A), 5.50% (FSA INS), 9/1/2014 AAA 6,662,236 6,000,000 Jefferson County, CO School District No. R-001, Refunding UT GO Bonds, 6.50%, 12/15/2011 AAA 6,723,900 TOTAL 19,014,682 CONNECTICUT-1.6% 4,200,000 Connecticut State HEFA, (Series 1999 U-1) Weekly VRDNs (Yale University) AAA 4,200,000 5,000,000 Connecticut State, UT GO Bonds (Series 1999A), 5.25%, 6/15/2011 AA 5,058,500 TOTAL 9,258,500 PRINCIPAL CREDIT AMOUNT RATING 1 VALUE LONG-TERM MUNICIPALS- continued DISTRICT OF COLUMBIA-2.5% $ 8,275,000 District of Columbia Hospital Authority, Revenue Refunding Bonds (Series A), 7.125% (Medlantic Healthcare Group)/(Original Issue Yield: 7.30%), 8/15/2019 BBB+ $ 9,016,854 2,000,000 District of Columbia Hospital Authority, Revenue Refunding Bonds (Series B), 7.00% (Medlantic Healthcare Group)/(Original Issue Yield: 7.282%), 8/15/2015 BBB+ 2,183,880 4,000,000 District of Columbia, Revenue Bonds, 5.625% (American University)/(AMBAC INS)/(Original Issue Yield: 5.90%), 10/1/2026 AAA 3,854,960 TOTAL 15,055,694 FLORIDA-4.0% 4,335,000 Florida State Board of Education Administration, UT GO Capital Outlay Bonds, 9.125% (Florida State)/(Original Issue Yield: 9.173%), 6/1/2014 AA+ 5,812,195 665,000 Florida State Board of Education Administration, UT GO Capital Outlay Bonds, 9.125% (Florida State)/(United States Treasury COL)/(Original Issue Yield: 9.173%), 6/1/2014 AAA 887,822 6,635,000 Florida State Department of Transportation, Right of Way Acquisition & Bridge Construction Bonds (Series 1997A), 5.00% (Original Issue Yield: 5.10%), 7/1/2014 AA+ 6,324,747 3,000,000 Florida State, UT GO Bonds, Broward County Expressway Authority, 10.00% (Original Issue Yield: 10.105%), 7/1/2014 AA+ 4,272,300 6,135,000 Orange County, FL, Health Facilities Authority, Hospital Revenue Bonds (Series 1999D), 5.75% (Orlando Regional Healthcare System)/(MBIA INS), 10/1/2013 AAA 6,260,338 TOTAL 23,557,402 GEORGIA-0.4% 2,500,000 Effingham County, GA Development Authority, Solid Waste Disposal Revenue Bonds (Series 1998), 5.625% (Fort James Corp.), 7/1/2018 BBB- 2,385,600 HAWAII-2.2% 10,000,000 Hawaii State Department of Budget & Finance, Special Purpose Revenue Refunding Bonds (Series A), 4.95% (Hawaiian Electric Company, Inc.)/(MBIA INS), 4/1/2012 AAA 9,675,000 4,000,000 Honolulu, HI City & County, UT GO Bonds (Series 1999C), 5.00% (Original Issue Yield: 5.11%), 7/1/2019 AAA 3,593,720 TOTAL 13,268,720 ILLINOIS-4.5% 8,295,000 Cook County, IL, Refunding GO Bonds (Series 1997A), 6.25%, 11/15/2013 AAA 8,963,577 5,000,000 Illinois Development Finance Authority, Housing Revenue Bonds, 6.10% (Catholic Charities Housing Development Corp.), 1/1/2020 NR 4,779,700 PRINCIPAL CREDIT AMOUNT RATING 1 VALUE LONG-TERM MUNICIPALS- continued ILLINOIS-CONTINUED $ 11,160,000 Illinois Health Facilities Authority, Hospital Revenue Bonds (Series A), 9.25% (Edgewater Hospital & Medical Center, IL), 7/1/2024 NR $ 13,339,325 TOTAL 27,082,602 INDIANA-4.9% 6,200,000 Indiana Health Facility Financing Authority, Hospital Revenue Bonds, 6.625% (Floyd Memorial Hospital, IN)/(Original Issue Yield: 6.902%), 2/15/2022 A 6,623,646 2,000,000 Indiana Health Facility Financing Authority, Hospital Revenue Refunding Bonds, 5.25% (Floyd Memorial Hospital, IN)/(Original Issue Yield: 5.50%), 2/15/2022 A 1,759,500 19,000,000 Indianapolis, IN Airport Authority, Special Facilities Revenue Bonds, 7.10% (FDX Corp.)/(Original Issue Yield: 7.178%), 1/15/2017 BBB 20,547,740 TOTAL 28,930,886 LOUISIANA-4.0% 3,000,000 Caddo Parish, LA IDB, Exempt Facility Revenue Bonds (Series 1998), 5.60% (Pennzoil Products)/(Original Issue Yield: 5.70%), 12/1/2028 BBB- 2,771,550 6,000,000 De Soto Parish, LA Environmental Improvement Authority, Revenue Bonds, 7.70% (International Paper Co.), 11/1/2018 BBB+ 6,677,880 3,550,000 St. Charles Parish, LA, Solid Waste Disposal Revenue Bonds (Series A), 7.00% (Louisiana Power & Light Co.)/(Original Issue Yield: 7.04%), 12/1/2022 BBB 3,751,214 10,000,000 St. James Parish, LA, Solid Waste Disposal Revenue Bonds, 7.70% (Freeport McMoRan, Inc.)/(Original Issue Yield: 7.75%), 10/1/2022 NR 10,512,500 TOTAL 23,713,144 MARYLAND-2.9% 12,145,000 Maryland State Community Development Administration, SFM Revenue Bonds (5th Series), 6.75%, 4/1/2026 Aa2 12,491,497 5,000,000 Prince George's County, MD, Consolidated Public Improvement UT GO Bonds, 5.50%, 10/1/2013 AAA 5,081,300 TOTAL 17,572,797 MASSACHUSETTS-3.9% 10,000,000 Commonwealth of Massachusetts, UT GO Bonds (Series 1997C), 5.00% (Original Issue Yield: 5.30%), 8/1/2017 AA- 9,143,400 3,000,000 Massachusetts Port Authority, PFC Revenue Bonds (Series 1999A), 5.125% (Original Issue Yield: 5.25%), 7/1/2016 AAA 2,816,970 3,000,000 Massachusetts Port Authority, PFC Revenue Bonds (Series 1999A), 5.125% (Original Issue Yield: 5.29%), 7/1/2017 AAA 2,791,590 2,200,000 Massachusetts State HFA, Rental Housing Mortgage Revenue Bonds (Series 1995E), 5.90% (AMBAC INS), 7/1/2025 AAA 2,185,370 PRINCIPAL CREDIT AMOUNT RATING 1 VALUE LONG-TERM MUNICIPALS- continued MASSACHUSETTS-CONTINUED $ 3,035,000 Worcester, MA, LT GO Bonds, (Series A), 5.75% (FSA INS), 4/1/2013 AAA $ 3,134,852 3,120,000 Worcester, MA, LT GO Bonds, (Series A), 5.75% (FSA INS), 4/1/2014 AAA 3,196,939 TOTAL 23,269,121 MICHIGAN-0.3% 1,250,000 Flint, MI Hospital Building Authority, Rental Revenue Bonds (Series 1998B), 5.375% (Hurley Medical Center)/(Original Issue Yield: 5.53%), 7/1/2028 Baa1 1,083,850 1,000,000 Flint, MI Hospital Building Authority, Revenue Rental Bonds (Series 1998B), 5.375% (Hurley Medical Center)/(Original Issue Yield: 5.48%), 7/1/2018 Baa1 892,890 TOTAL 1,976,740 MINNESOTA-3.7% 5,000,000 Northern Municipal Power Agency, MN, Electric System Revenue Bonds, 5.40% (Original Issue Yield: 5.52%), 1/1/2015 AAA 4,920,500 3,800,000 St. Paul, MN Housing & Redevelopment Authority, Hospital Revenue Refunding Bonds (Series A), 6.625% (Healtheast, MN)/(Original Issue Yield: 6.687%), 11/1/2017 BBB- 3,770,094 1,000,000 St. Paul, MN Housing & Redevelopment Authority, Revenue Bonds (Series 1997A), 5.70% (Healtheast, MN)/(Original Issue Yield: 5.756%), 11/1/2015 BBB- 902,380 12,000,000 VRDC/IVRC Trust, GO Inverse Variable Rate Certificates, 7.273% (University of Minnesota), 5/18/2012 AA 12,615,000 TOTAL 22,207,974 MISSOURI-1.8% 855,000 Kansas City, MO IDA, Multifamily Housing Revenue Bonds, 6.70% (Woodbridge Apartments Project), 8/1/2015 NR 834,566 8,010,000 Kansas City, MO, UT GO Bonds (Series B), 5.125% (Original Issue Yield: 5.25%), 2/1/2017 AA 7,578,822 1,960,000 Missouri State Housing Development Commission, Single Family Mortgage Revenue Bonds (Series 1997C-1), 6.55% (GNMA Home Mortgage Program COL), 9/1/2028 AAA 2,067,761 TOTAL 10,481,149 NEW JERSEY-2.4% 2,100,000 New Jersey EDA, Kapkowski Road Landfill Revenue Bonds, 6.50% (New Jersey Metromall Urban Renewal, Inc.)/(Original Issue Yield: 6.55%), 4/1/2018 NR 2,111,886 6,210,000 New Jersey Health Care Facilities Financing Authority, Revenue Bonds (Series 1999), 5.625% (Meridian Health System Obligated Group)/(FSA INS), 7/1/2012 AAA 6,345,130 PRINCIPAL CREDIT AMOUNT RATING 1 VALUE LONG-TERM MUNICIPALS- continued NEW JERSEY-CONTINUED $ 6,000,000 New Jersey State, Refunding UT GO Bonds (Series F), 5.25%, 8/1/2014 AA+ $ 5,911,500 TOTAL 14,368,516 NEW YORK-14.8% 11,000,000 Metropolitan Transportation Authority, NY, Commuter Facilities Service Contract Revenue Bonds (Series 8), 5.50% (FSA INS)/(Original Issue Yield: 5.65%), 7/1/2021 AAA 10,680,010 7,800,000 New York City Municipal Water Finance Authority, Water and Sewer System Revenue Bonds (Series 1995A) Daily VRDNs (FGIC INS)/(FGIC Securities Purchase, Inc. LIQ) AAA 7,800,000 3,000,000 New York City, NY Transit Authority Metropolitan Transportation Authority Triborough Bridge and Tunnel Authority, Certificates of Participation (Series 1999A), 5.625% (AMBAC INS), 1/1/2012 AAA 3,072,630 3,000,000 New York City, NY Transit Authority Metropolitan Transportation Authority Triborough Bridge and Tunnel Authority, Certificates of Participation (Series 1999A), 5.625% (AMBAC INS), 1/1/2013 AAA 3,047,220 2,100,000 New York City, NY Transitional Finance Authority, (Series 1998A- 1) Weekly VRDNs (Commerzbank AG, Frankfurt LIQ) AA 2,100,000 4,595,000 New York City, NY Transitional Finance Authority, Future Tax Secured Revenue Bonds (Series C), 5.25%, 5/1/2013 AA 4,518,172 5,000,000 New York City, NY, UT GO Bonds (Series 1998G), 5.00% (Original Issue Yield: 5.25%), 8/1/2018 A- 4,447,700 5,000,000 New York City, NY, UT GO Bonds (Series 1999H), 5.25%, 3/15/2018 A- 4,624,100 2,500,000 New York State Dormitory Authority, Revenue Bonds (Series A), 5.50% (University of Rochester, NY)/(Original Issue Yield: 5.60%), 7/1/2016 A+ 2,437,050 6,800,000 New York State Dormitory Authority, Revenue Bonds (Series B), 5.375% (New York State Department of Mental Hygiene)/(Original Issue Yield: 5.97%), 2/15/2026 A- 6,261,168 4,700,000 New York State Energy Research & Development Authority, (Series 1985A) Daily VRDNs (Niagara Mohawk Power Corp.)/(Toronto-Dominion Bank LOC) AA- 4,700,000 2,500,000 New York State Environmental Facilities Corp., Refunding Notes (Series F), 5.25%, 6/15/2014 AA- 2,428,725 4,000,000 New York State Environmental Facilities Corp., State Clean Water & Drinking Revolving Fund (Series 1998C), 5.25%, 6/15/2013 AA- 3,936,360 5,050,000 New York State Local Government Assistance Corp., Residual Interest Tax-Exempt Securities (Series PA-207), 7.92658% (AMBAC INS), 4/1/2008 NR 5,763,262 6,025,000 New York State Local Government Assistance Corp., Residual Interest Tax-Exempt Securities (Series PA-207A), 7.92658%, 4/1/2007 NR 6,870,850 2,000,000 New York State Mortgage Agency, Mortgage Revenue Bonds (Series 30-B), 6.65% (FHA GTD), 10/1/2025 Aa2 2,070,460 PRINCIPAL CREDIT AMOUNT RATING 1 VALUE LONG-TERM MUNICIPALS- continued NEW YORK-CONTINUED $ 4,000,000 New York State Thruway Authority, Local Highway & Bridge Service Contract Revenue Bonds, 5.625%, 4/1/2013 AAA $ 4,071,200 4,000,000 New York State Thruway Authority, Service Contract Revenue Bonds (Series 1998A-2), 5.375%, 4/1/2016 AAA 3,889,200 5,320,000 Triborough Bridge & Tunnel Authority, NY, General Purpose Revenue Bonds (Series 1999B), 5.75%, 1/1/2015 AA 5,412,249 TOTAL 88,130,356 NORTH CAROLINA-3.8% 9,000,000 Martin County, NC IFA, (Series 1995) Solid Waste Disposal Revenue Bonds, 6.00% (Weyerhaeuser Co.), 11/1/2025 A 8,876,880 6,000,000 North Carolina State, Public Improvement UT GO Bonds (Series 1999A), 5.25% (Original Issue Yield: 5.38%), 3/1/2015 AAA 5,890,980 7,200,000 Person County, NC Industrial Facilities & PCFA Daily VRDNs (Carolina Power & Light Co.)/(SunTrust Bank, Atlanta LOC) Aa3 7,200,000 400,000 Wake County, NC Industrial Facilities & PCFA, (Series 1990B) Daily VRDNs (Carolina Power & Light Co.)/(Bank of New York, New York LOC) AA- 400,000 TOTAL 22,367,860 OHIO-1.7% 1,000,000 Cuyahoga County, OH Health Care Facilities, Revenue Refunding Bonds, 5.50% (Benjamin Rose Institute)/(Original Issue Yield: 5.75%), 12/1/2028 A2 868,700 3,000,000 Franklin County, OH Health Care Facilities, Revenue Refunding Bonds, 5.50% (Ohio Presbyterian Retirement Services)/(Original Issue Yield: 5.64%), 7/1/2017 A2 2,760,420 2,000,000 Ohio State Air Quality Development Authority, (Series 1985A) Daily VRDNs (Cincinnati Gas and Electric Co.)/(UBS AG LOC) AA+ 2,000,000 200,000 Ohio State Air Quality Development Authority, Revenue Bonds (Series B) Daily VRDNs (Cincinnati Gas and Electric Co.)/(J.P. Morgan Delaware, Wilmington LOC) AAA 200,000 4,000,000 Ohio State Building Authority, State Facilities Bonds, (Series 1999), 5.50%, 10/1/2013 AA- 4,031,200 TOTAL 9,860,320 OKLAHOMA-1.3% 7,500,000 Tulsa, OK Municipal Airport, Revenue Bonds, 7.60% (American Airlines)/(Original Issue Yield: 7.931%), 12/1/2030 BBB- 7,892,775 OREGON-1.3% 5,000,000 Clackamas County, OR School District, UT GO Bonds, 5.25% (North Clackamas School District #12)/(FGIC INS), 6/1/2011 AAA 5,046,800 PRINCIPAL CREDIT AMOUNT RATING 1 VALUE LONG-TERM MUNICIPALS- continued OREGON-CONTINUED $ 2,980,000 Salem-Keizer, OR School District #24J, UT GO Bonds, 5.25% (Oregon School Boards Assoc. GTD), 6/1/2012 AA $ 2,978,421 TOTAL 8,025,221 PENNSYLVANIA-2.3% 2,310,000 Allegheny County, PA HDA, Refunding Revenue Bonds (Series 1998A), 5.125% (South Hills Health System)/(Original Issue Yield: 5.34%), 5/1/2023 A2 2,008,083 2,000,000 Allegheny County, PA HDA, Refunding Revenue Bonds (Series 1998A), 5.125% (South Hills Health System)/(Original Issue Yield: 5.40%), 5/1/2029 A2 1,711,260 1,695,000 Allegheny County, PA IDA, Cargo Facilities Lease Revenue Bonds (Series 1999), 6.625% (AFCO Cargo PIT LLC Project)/(Original Issue Yield: 6.75%), 9/1/2024 NR 1,672,507 1,300,000 Latrobe, PA IDA, College Revenue Bonds, 6.75% (St. Vincent College, PA)/(Original Issue Yield: 7.00%), 5/1/2024 AAA 1,441,583 5,000,000 Pennsylvania Intergovernmental Coop Authority, Special Tax Refunding Revenue Bonds, 5.25% (Philadelphia Funding Program), 6/15/2013 AAA 4,901,500 2,000,000 Sayre, PA, Health Care Facilities Authority, Revenue Bonds (Series A), 7.10% (Guthrie Healthcare System, PA)/(Original Issue Yield: 7.175%), 3/1/2017 AAA 2,104,400 TOTAL 13,839,333 PUERTO RICO-0.7% 2,000,000 Puerto Rico Highway and Transportation Authority, Residual Interest Tax- Exempt Securites (Series PA 331A), 7.22247% (AMBAC INS), 7/1/2013 NR 2,094,760 2,000,000 Puerto Rico Highway and Transportation Authority, Residual Interest Tax- Exempt Securities (Series PA 331B), 7.22247% (AMBAC INS), 7/1/2014 NR 2,066,480 TOTAL 4,161,240 SOUTH CAROLINA-1.0% 6,000,000 South Carolina Transportation Infrastructure Bank, Revenue Bonds, 5.50% (AMBAC INS), 10/1/2011 Aaa 6,146,820 TENNESSEE-3.4% 13,000,000 Springfield, TN Health & Educational Facilities Board, Hospital Revenue Bonds, 8.50% (NorthCrest Medical Center)/(Original Issue Yield: 8.875%), 4/1/2024 Aaa 15,854,670 2,280,000 Tennessee Housing Development Agency, Home Ownership Program Revenue Bonds (Series 1999-2A), 5.35%, 7/1/2012 AA 2,216,798 2,405,000 Tennessee Housing Development Agency, Home Ownership Program Revenue Bonds (Series 1999-2A), 5.40%, 7/1/2013 AA 2,332,610 TOTAL 20,404,078 PRINCIPAL CREDIT AMOUNT RATING 1 VALUE LONG-TERM MUNICIPALS- continued TEXAS-11.9% $ 4,000,000 Brazos River Authority, TX, PCR Revenue Bonds (Series A), 7.875% (Texas Utilities Electric Co.), 3/1/2021 BBB+ $ 4,222,680 12,750,000 Dallas-Fort Worth, TX International Airport Facilities, Revenue Bonds, 7.25% (American Airlines, Inc.)/(Original Issue Yield: 7.428%), 11/1/2030 BBB- 13,523,033 3,000,000 Georgetown, TX HFDC, Revenue Bonds, 5.375% (Wesleyan Homes, Inc.)/(American Capital Access INS)/(Original Issue Yield: 5.55%), 8/15/2028 A 2,674,560 2,000,000 Gulf Coast, TX Waste Disposal Authority, Revenue Bonds (Series A), 6.875% (Champion International Corp.)/(Original Issue Yield: 7.15%), 12/1/2028 BBB 2,117,180 4,490,000 Gulf Coast, TX Waste Disposal Authority, Revenue Bonds, 5.60% (Valero Energy Corp.), 4/1/2032 BBB- 4,037,677 900,000 Harris County, TX HFDC, (Series 1994) Daily VRDNs (Methodist Hospital, Harris County, TX) AA 900,000 2,200,000 Harris County, TX HFDC, Hospital Revenue Bonds (Series 1997A), 6.00% (Memorial Hospital System), 6/1/2011 AAA 2,339,458 4,000,000 Harris County, TX HFDC, Hospital Revenue Bonds (Series 1997A), 6.00% (Memorial Hospital System), 6/1/2012 AAA 4,234,800 2,000,000 Lufkin, TX HFDC, Health System Revenue Bonds (Series 1998), 5.70% (Memorial Health System of East Texas)/(Original Issue Yield: 5.75%), 2/15/2028 BBB 1,800,880 6,000,000 Matagorda County, TX Navigation District Number One, Residual Interest Tax-Exempt Securities (Series PA-427), 6.14767% (Houston Industries, Inc.)/(MBIA INS), 11/1/2029 NR 4,535,580 3,700,000 Red River Authority, TX, PCR Bonds, 6.875% (Hoechst Celanese Corp.)/(Original Issue Yield: 6.939%), 4/1/2017 A+ 3,913,675 1,700,000 Richardson, TX Hospital Authority, Hospital Revenue Refunding and Improvement Bonds, 5.625% (Baylor/Richardson Medical Center, TX)/(Original Issue Yield: 5.70%), 12/1/2028 BBB+ 1,500,386 2,420,000 Richardson, TX Hospital Authority, Refunding Revenue Bonds, 6.50% (Baylor/Richardson Medical Center, TX)/(Original Issue Yield: 6.72%), 12/1/2012 BBB+ 2,628,362 3,850,000 Richardson, TX Hospital Authority, Refunding Revenue Bonds, 6.50% (Baylor/Richardson Medical Center, TX)/(Original Issue Yield: 6.72%), 12/1/2012 BBB+ 3,904,093 385,000 Richardson, TX Hospital Authority, Refunding Revenue Bonds, 6.75% (Baylor/Richardson Medical Center, TX)/(Original Issue Yield: 6.82%), 12/1/2023 BBB+ 421,756 615,000 Richardson, TX Hospital Authority, Refunding Revenue Bonds, 6.75% (Baylor/Richardson Medical Center, TX)/(Original Issue Yield: 6.82%), 12/1/2023 BBB+ 632,687 PRINCIPAL CREDIT AMOUNT RATING 1 VALUE LONG-TERM MUNICIPALS- continued TEXAS-CONTINUED $ 535,000 San Antonio, TX Electric & Gas, PRF Revenue Bonds, 5.00% (Original Issue Yield: 6.00%), 2/1/2002 AA $ 548,231 11,915,000 San Antonio, TX Electric & Gas, Revenue Bonds, 5.00% (Original Issue Yield: 6.10%), 2/1/2017 AA 10,886,616 5,000,000 Tarrant County, TX HFDC, System Revenue Bonds (Series 1997A), 5.75% (Texas Health Resources System)/(MBIA INS), 2/15/2015 AAA 5,089,200 1,085,000 Texas State, UT GO Veterans Housing Assistance, 7.00%, 12/1/2025 AA 1,139,618 TOTAL 71,050,472 UTAH-2.8% 13,500,000 Salt Lake City, UT Hospital Authority, Hospital Revenue Refunding Bonds (Series A), 8.125% (IHC Hospitals Inc., UT)/(United States Treasury COL)/(Original Issue Yield: 8.17%), 5/15/2015 AAA 16,568,684 WASHINGTON-2.7% 5,905,000 Seattle, WA, Library Facilities UT GO Bonds (Series 1999A), 5.375%, 12/1/2012 AA+ 5,932,104 5,000,000 Washington State Public Power Supply System, (Nuclear Project No. 2) Refunding Revenue Bonds (Series 1998A), 5.00% (Original Issue Yield: 5.18%), 7/1/2012 AA- 4,752,800 5,595,000 Washington State, Convention and Trade Center Certificates of Participation, 5.125% (Original Issue Yield: 5.30%), 7/1/2013 AAA 5,344,567 TOTAL 16,029,471 WEST VIRGINIA-1.0% 6,000,000 West Virginia State, GO State Road Bonds, Series 1999, 5.75%, 6/1/2014 AA- 6,145,619 WISCONSIN-0.6% 4,000,000 Wisconsin Health and Educational Facilities Authority, Revenue Bonds (Series 1998A), 5.375% (The Richland Hospital, Inc.)/(American Capital Access INS)/(Original Issue Yield: 5.46%), 6/1/2028 A 3,562,240 WYOMING-1.5% 8,460,000 Sweetwater County, WY Water Pollution Authority, (Series A), 7.00% (FMC Corp.), 6/1/2024 BBB- 8,859,396 TOTAL INVESTMENTS (IDENTIFIED COST $579,945,451) 2 $ 588,709,141
Securities that are subject to alternative minimum tax represent 23.0% of the portfolio as calculated based upon total portfolio market value. 1 Please refer to the Appendix of the Statement of Additional Information for an explanation of the credit ratings. Current credit ratings are unaudited. 2 The cost of investments for federal tax purposes amounts to $579,945,451. The net unrealized appreciation of investments on a federal tax basis amounts to $8,763,690 which is comprised of $20,114,421 appreciation and $11,350,731 depreciation at September 30, 1999. Note: The categories of investments are shown as a percentage of net assets ($595,802,315) at September 30, 1999. The following acronyms are used throughout this portfolio: AMBAC -American Municipal Bond Assurance Corporation COL -Collateralized EDA - -Economic Development Authority FGIC -Financial Guaranty Insurance Company FHA - -Federal Housing Administration FSA -Financial Security Assurance GNMA - -Government National Mortgage Association GO -General Obligation GTD -Guaranteed HDA -Hospital Development Authority HEFA -Health and Education Facilities Authority HFA -Housing Finance Authority HFDC -Health Facility Development Corporation IDA -Industrial Development Authority IDB -Industrial Development Bond IFA -Industrial Finance Authority INS -Insured LIQ -Liquidity Agreement LOC - -Letter of Credit LT -Limited Tax MBIA -Municipal Bond Investors Assurance PCR - -Pollution Control Revenue PCFA -Pollution Control Finance Authority PFC -Public Finance Commission 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 Statement of Assets and Liabilities SEPTEMBER 30, 1999 (UNAUDITED)
ASSETS: Total investments in securities, at value (identified and tax cost $579,945,451) $ 588,709,141 Income receivable 10,444,548 Receivable for investments sold 10,203,768 Receivable for shares sold 212,228 TOTAL ASSETS 609,569,685 LIABILITIES: Payable for investments purchased $ 10,778,362 Payable for shares redeemed 233,675 Income distribution payable 2,423,785 Payable to Bank 189,136 Accrued expenses 142,412 TOTAL LIABILITIES 13,767,370 Net Assets for 59,322,352 shares outstanding $ 595,802,315 NET ASSETS CONSIST OF: Paid in capital $ 623,947,843 Net unrealized appreciation of investments 8,763,690 Accumulated net realized loss on investments (33,723,974) Distributions in excess of net investment income (3,185,244) TOTAL NET ASSETS $ 595,802,315 NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE CLASS A SHARES: Net Asset Value Per Share ($501,041,151 / 49,887,235 shares outstanding) $10.04 Offering Price Per Share (100/95.50 of $10.04) 1 $10.51 Redemption Proceeds Per Share $10.04 CLASS B SHARES: Net Asset Value Per Share ($80,623,688 / 8,027,506 shares outstanding) $10.04 Offering Price Per Share $10.04 Redemption Proceeds Per Share (94.50/100 of $10.04) 1 $9.49 CLASS C SHARES: Net Asset Value Per Share ($14,137,476 / 1,407,611 shares outstanding) $10.04 Offering Price Per Share $10.04 Redemption Proceeds Per Share (99.00/100 of $10.04) 1 $9.94
1 See "What Do Shares Cost?" in the Prospectus. See Notes which are an integral part of the Financial Statements Statement of Operations SIX MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
INVESTMENT INCOME: Interest $ 18,198,745 EXPENSES: Investment advisory fee $ 1,767,448 Administrative personnel and services fee 239,165 Custodian fees 23,386 Transfer and dividend disbursing agent fees and expenses 292,017 Directors'/Trustees' fees 8,993 Auditing fees 10,590 Legal fees 3,453 Portfolio accounting fees 65,904 Distribution services fee- Class B Shares 317,869 Distribution services fee- Class C Shares 58,998 Shareholder services fee- Class A Shares 667,366 Shareholder services fee- Class B Shares 105,956 Shareholder services fee- Class C Shares 19,666 Share registration costs 17,834 Printing and postage 52,619 Insurance premiums 1,763 Taxes 24,657 Miscellaneous 9,517 TOTAL EXPENSES 3,687,201 WAIVERS: Waiver of shareholder services fee-Class A Shares $ (373,725) Waiver of shareholder services fee-Class C Shares (787) TOTAL WAIVERS (374,512) Net expenses 3,312,689 Net investment income 14,886,056 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized loss on investments (20,888,810) Net change in unrealized appreciation of investments (29,541,927) Net realized and unrealized loss on investments (50,430,737) Change in net assets resulting from operations $ (35,544,681)
See Notes which are an integral part of the Financial Statements Statement of Changes in Net Assets
SIX MONTHS ENDED YEAR (unaudited) ENDED SEPTEMBER 30, MARCH 31, 1999 1999 INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 14,886,056 $ 32,466,474 Net realized gain (loss) on investments ($(20,888,810) and $2,566,287, respectively, as computed for federal tax purposes) (20,888,810) (10,509,648) Net change in unrealized appreciation/depreciation (29,541,927) 7,900,594 CHANGE IN NET ASSETS RESULTING FROM OPERATIONS (35,544,681) 29,857,420 DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income Class A Shares (12,904,032) (27,771,720) Class B Shares (1,671,183) (3,383,778) Class C Shares (310,841) (670,339) CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS (14,886,056) (31,825,837) SHARE TRANSACTIONS: Proceeds from sale of shares 54,942,830 134,901,460 Net asset value of shares issued to shareholders in payment of distributions declared 7,767,995 19,740,788 Cost of shares redeemed (84,987,211) (180,394,469) CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (22,276,386) (25,752,221) Change in net assets (72,707,123) (27,720,638) NET ASSETS: Beginning of period 668,509,438 696,230,076 End of period $ 595,802,315 $ 668,509,438
See Notes which are an integral part of the Financial Statements Financial Highlights-Class A Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS ENDED (unaudited) SEPTEMBER 30, YEAR ENDED MARCH 31, 1999 1999 1998 1997 1996 1995 NET ASSET VALUE, BEGINNING OF PERIOD $10.87 $10.91 $10.31 $10.82 $10.92 $11.20 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.26 0.53 0.46 0.55 0.66 0.67 Net realized and unrealized gain (loss) on investments (0.83) (0.05) 0.64 (0.36) (0.09) (0.05) TOTAL FROM INVESTMENT OPERATIONS (0.57) 0.48 1.10 0.19 0.57 0.62 LESS DISTRIBUTIONS: Distributions from net investment income (0.26) (0.52) (0.46) (0.55) (0.66) (0.67) Distributions in excess of net investment income 1 - - (0.01) (0.05) - - TOTAL DISTRIBUTIONS FROM NET INVESTMENT INCOME (0.26) (0.52) (0.47) (0.60) (0.66) (0.67) Distributions from net realized gain on investment - - (0.03) (0.10) (0.01) (0.23) TOTAL DISTRIBUTIONS (0.26) (0.52) (0.50) (0.70) (0.67) (0.90) NET ASSET VALUE, END OF PERIOD $10.04 $10.87 $10.91 $10.31 $10.82 $10.92 TOTAL RETURN 2 (5.35%) 4.46% 11.28% 1.84% 5.32% 5.90% RATIOS TO AVERAGE NET ASSETS: Expenses 3 1.04% 4 1.01% 1.00% 1.07% 1.11% 0.92% Net investment income 3 4.69% 4 4.72% 4.56% 5.23% 5.84% 6.17% Expenses (after waivers) 0.90% 4 0.87% 0.86% 0.93% 0.98% 0.92% Net investment income (after waivers) 4.83% 4 4.86% 4.70% 5.37% 5.97% 6.17% SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $501,041 $562,883 $591,310 $595,515 $663,538 $708,712 Portfolio turnover 37% 31% 64% 33% 29% 41%
1 Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These distributions do not represent a return of capital for federal tax purposes. 2 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 3 During the period, certain fees were voluntarily waived. If such waivers had not occurred, the ratios would have been as indicated. 4 Computed on an annualized basis. See Notes which are an integral part of the Financial Statements Financial Highlights-Class B Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS ENDED (unaudited) SEPTEMBER 30, YEAR ENDED MARCH 31, 1999 1999 1998 1997 1996 1995 1 NET ASSET VALUE, BEGINNING OF PERIOD $10.87 $10.91 $10.31 $10.82 $10.92 $11.06 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.21 0.43 0.38 0.47 0.56 0.40 Net realized and unrealized gain (loss) on investments (0.83) (0.05) 0.64 (0.37) (0.09) (0.03) TOTAL FROM INVESTMENT OPERATIONS (0.62) 0.38 1.02 0.10 0.47 0.37 LESS DISTRIBUTIONS: Distributions from net investment income (0.21) (0.42) (0.38) (0.47) (0.56) (0.40) Distributions in excess of net investment income 2 - - (0.01) (0.04) - - TOTAL DISTRIBUTIONS FROM NET INVESTMENT INCOME (0.21) (0.42) (0.39) (0.51) (0.56) (0.40) Distributions from net realized gain on investment - - (0.03) (0.10) (0.01) (0.11) TOTAL DISTRIBUTIONS (0.21) (0.42) (0.42) (0.61) (0.57) (0.51) NET ASSET VALUE, END OF PERIOD $10.04 $10.87 $10.91 $10.31 $10.82 $10.92 TOTAL RETURN 3 (5.77%) 3.53% 10.30% 0.94% 4.40% 3.49% RATIOS TO AVERAGE NET ASSETS: Expenses 4 1.79% 5 1.76% 1.75% 1.82% 1.86% 1.84% 5 Net investment income 4 3.94% 5 3.97% 3.81% 4.50% 5.23% 5.94% 5 Expenses (after waivers) 1.79% 5 1.76% 1.75% 1.82% 1.86% 1.84% 5 Net investment income (after waivers) 3.94% 5 3.97% 3.81% 4.50% 5.23% 5.94% 5 SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $80,624 $88,756 $87,304 $77,536 $58,296 $18,201 Portfolio turnover 37% 31% 64% 33% 29% 41%
1 Reflects operations for the period from July 26, 1994 (date of initial public offering) to March 31, 1995. 2 Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These distributions do not represent a return of capital for federal tax purposes. 3 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 4 During the period, certain fees were voluntarily waived. If such waivers had not occurred, the ratios would have been as indicated. 5 Computed on an annualized basis. See Notes which are an integral part of the Financial Statements Financial Highlights-Class C Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS ENDED (unaudited) SEPTEMBER 30, YEAR ENDED MARCH 31, 1999 1999 1998 1997 1996 1995 NET ASSET VALUE, BEGINNING OF PERIOD $10.87 $10.91 $10.31 $10.82 $10.92 $11.20 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.21 0.43 0.37 0.46 0.56 0.58 Net realized and unrealized gain (loss) on investments (0.83) (0.05) 0.65 (0.36) (0.09) (0.05) TOTAL FROM INVESTMENT OPERATIONS (0.62) 0.38 1.02 0.10 0.47 0.53 LESS DISTRIBUTIONS: Distributions from net investment income (0.21) (0.42) (0.37) (0.46) (0.56) (0.58) Distributions in excess of net investment income 1 - - (0.02) (0.05) - - TOTAL DISTRIBUTIONS FROM NET INVESTMENT INCOME (0.21) (0.42) (0.39) (0.51) (0.56) (0.58) Distributions from net realized gain on investment - - (0.03) (0.10) (0.01) (0.23) TOTAL DISTRIBUTIONS (0.21) (0.42) (0.42) (0.61) (0.57) (0.81) NET ASSET VALUE, END OF PERIOD $10.04 $10.87 $10.91 $10.31 $10.82 $10.92 TOTAL RETURN 2 (5.76%) 3.54% 10.31% 0.95% 4.42% 4.96% RATIOS TO AVERAGE NET ASSETS: Expenses 3 1.79% 4 1.76% 1.75% 1.82% 1.86% 1.81% Net investment income 3 3.94% 4 3.97% 3.82% 4.50% 5.12% 5.28% Expenses (after waivers) 1.78% 4 1.75% 1.74% 1.81% 1.82% 1.81% Net investment income (after waivers) 3.95% 4 3.98% 3.83% 4.51% 5.16% 5.28% SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $14,137 $16,870 $17,616 $20,544 $25,914 $22,389 Portfolio turnover 37% 31% 64% 33% 29% 41%
1 Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These distributions do not represent a return of capital for federal tax purposes. 2 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 3 During the period, certain fees were voluntarily waived. If such waivers had not occurred, the ratios would have been as indicated. 4 Computed on an annualized basis. See Notes which are an integral part of the Financial Statements Notes to Financial Statements SEPTEMBER 30, 1999 (UNAUDITED) ORGANIZATION Federated Municipal Securities Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a diversified, open-end management investment company. The Fund offers three classes of shares: Class A Shares, Class B Shares and Class C Shares. The investment objective of the Fund is to provide for its shareholders a high level of current income which is exempt from federal regular income tax. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles. INVESTMENT VALUATIONS Municipal bonds are valued by an independent pricing service, taking into consideration yield, liquidity, risk, credit quality, coupon, maturity, type of issue, and any other factors or market data the pricing service deems relevant. Short-term securities are valued at the prices provided by an independent pricing service. However, short-term securities with remaining maturities of 60 days or less at the time of purchase may be valued at amortized cost, which approximates fair market value. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are recorded on the ex- dividend date. Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting distribution. These distributions do not represent a return of capital for federal income tax purposes. FEDERAL TAXES It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provisions for federal tax are necessary. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. OTHER Investment transactions are accounted for on the trade date. CAPITAL STOCK At September 30,1999, par valve share ($0.01 per share) authorized were as follows:
PERCENTAGE OF PAR VALUE SHARE CLASS NAME CAPITAL STOCK AUTHORIZED Class A Shares 375,000,000 Class B Shares 250,000,000 Class C Shares 375,000,000 TOTAL 1,000,000,000
Transactions in capital stock were as follows:
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, 1999 MARCH 31, 1999 CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT Shares sold 4,499,487 $ 47,051,417 10,327,327 $ 113,274,145 Shares issued to shareholders in payment of distributions declared 663,976 6,955,369 1,619,511 17,770,129 Shares redeemed (7,048,980) (73,402,218) (14,392,026) (157,856,794) NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS (1,885,517) $ (19,395,432) (2,445,188) $ (26,812,520) SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, 1999 MARCH 31, 1999 CLASS B SHARES: SHARES AMOUNT SHARES AMOUNT Shares sold 592,379 $ 6,233,643 1,554,992 $ 17,066,503 Shares issued to shareholders in payment of distributions declared 60,620 635,017 140,590 1,542,609 Shares redeemed (789,032) (8,267,120) (1,537,205) (16,860,862) NET CHANGE RESULTING FROM CLASS B SHARE TRANSACTIONS (136,033) $ (1,398,460) 158,377 $ 1,748,250 SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, 1999 MARCH 31, 1999 CLASS C SHARES: SHARES AMOUNT SHARES AMOUNT Shares sold 160,476 $ 1,657,770 414,516 $ 4,560,812 Shares issued to shareholders in payment of distributions declared 16,946 177,609 39,027 428,050 Shares redeemed (321,447) (3,317,873) (517,122) (5,676,813) NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS (144,025) $ (1,482,494) (63,579) $ (687,951) NET CHANGE RESULTING FROM SHARE TRANSACTIONS (2,165,575) $ (22,276,386) (2,350,390) $ (25,752,221)
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY FEE Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment advisory fee equal to (a) a maximum of 0.30% of the average daily net assets of the Fund, and (b) 4.50% of the gross income of the Fund, excluding capital gains or losses. ADMINISTRATIVE FEE Federated Services Company ("FServ"), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FServ is based on the level of average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc. for the period. The administrative fee received during the period of the Administrative Services Agreement shall be at least $125,000 per portfolio and $30,000 per each additional class of shares. DISTRIBUTION SERVICES FEE The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. ("FSC"), the principal distributor, from the net assets of the Fund to finance activities intended to result in the sale of the Fund's Class B Shares and Class C Shares. The Plan provides that the Fund may incur distribution expenses according to the following schedule annually, to compensate FSC.
PERCENTAGE OF AVERAGE SHARE CLASS NAME DAILY NET ASSETS Class B Shares 0.75% Class C Shares 0.75%
FSC may voluntarily choose to waive any portion of its fee. FSC can modify or terminate this voluntary waiver at any time at its sole discretion. SHAREHOLDER SERVICES FEE Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily net assets of each class of shares for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion. TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES FServ, through its subsidiary FSSC, serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the size, type, and number of accounts and transactions made by shareholders. PORTFOLIO ACCOUNTING FEES FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. INTERFUND TRANSACTIONS During the period ended September 30, 1999, 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 were made at current market value pursuant to Rule 17a-7 under the Act amounting to $202,669,490 and $225,800,000, respectively. GENERAL Certain of the Officers and Trustees of the Fund are Officers and Directors or Trustees of the above companies. INVESTMENT TRANSACTIONS Purchases and sales of investments, excluding short-term securities, for the period ended September 30, 1999, were as follows:
Purchases $ 226,399,541 Sales $ 280,299,164
CONCENTRATION OF CREDIT RISK At September 30, 1999, 19.6% of the securities in the portfolio of investments are backed by letters of credit or bond insurance of various financial institutions and financial guaranty assurance agencies. The percentage of investments insured by or supported (backed) by a letter of credit from any one institution or agency did not exceed 6.0% of total investments. YEAR 2000 Similar to other financial organizations, the Fund could be adversely affected if the computer systems used by the Fund's service providers do not properly process and calculate date-related information and data from and after January 1, 2000. The Fund's Adviser and administrator are taking measures that they believe are reasonably designed to address the Year 2000 issue with respect to computer systems that they use and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's other service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact to the Fund. Directors JOHN F. DONAHUE THOMAS G. BIGLEY JOHN T. CONROY, JR. NICHOLAS P. CONSTANTAKIS JOHN F. CUNNINGHAM J. CHRISTOPHER DONAHUE LAWRENCE D. ELLIS, M.D. PETER E. MADDEN CHARLES F. MANSFIELD, JR. JOHN E. MURRAY, JR., J.D., S.J.D. MARJORIE P. SMUTS JOHN S. WALSH Officers JOHN F. DONAHUE Chairman J. CHRISTOPHER DONAHUE President WILLIAM D. DAWSON III Chief Investment Officer EDWARD C. GONZALES Executive Vice President JOHN W. MCGONIGLE Executive Vice President and Secretary RICHARD B. FISHER Vice President MARY JO OCHSON Vice President RICHARD J. THOMAS Treasurer LESLIE K. ROSS Assistant Secretary Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal. This report is authorized for distribution to prospective investors only when preceded or accompanied by the fund's prospectus which contains facts concerning its objective and policies, management fees, expenses, and other information. [Graphic] Federated World-Class Investment Manager SEMI-ANNUAL REPORT AS OF SEPTEMBER 30, 1999 Federated Municipal Securities Fund, Inc. Established 1976 23RD SEMI-ANNUAL REPORT [Graphic] Federated Federated Municipal Securities Fund, Inc. Federated Investors Funds 5800 Corporate Drive Pittsburgh, PA 15237-7000 1-800-341-7400 WWW.FEDERATEDINVESTORS.COM Federated Securities Corp., Distributor Cusip 313913105 Cusip 313913204 Cusip 313913303 8110104 (11/99) [Graphic] -----END PRIVACY-ENHANCED MESSAGE-----