FEDERATED
INCOME
TRUST
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JULY 31, 1994
[LOGO] FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Investor:
I'm pleased to present the Semi-Annual Report to Shareholders for Federated
Income Trust. The report covers the six-month period ended July 31, 1994, and
includes the Trust's Investment Review, Portfolio of Investments, and Financial
Statements. In addition, Financial Highlights tables have been included for
Institutional Service Shares and Institutional Shares.
The Trust continues to pursue attractive income through a diversified portfolio
of mortgage-backed securities. In addition, the Trust held a minor position in
repurchase agreements. During the period, the Trust maintained its AAAf rating
by Standard & Poor's Ratings Group, the highest available from this independent
rating service.
Over the six-month period covered by this report, the Trust paid total dividends
of $53 million, or $0.34 per share for Institutional Shares, and $0.32 per share
for Institutional Service Shares. The Trust's net asset value ended the period
at $9.95, while total net assets stood at $1.5 billion.
We appreciate your continued confidence in Federated Income Trust. As always, we
welcome your questions and comments.
Sincerely,
Glen R. Johnson
President
September 15, 1994
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
Federated Income Trust (the "Trust"), provides shareholders with a
professionally managed portfolio of U.S. government securities. The Trust is
managed for a short to intermediate average life and is invested primarily in
mortgage-backed securities. Current investment strategy emphasizes a diversified
range of mortgage securities with coupons averaging 7.87%, and with a weighted
average life of 4.2 years. The Trust's total portfolio will have volatility
similar to an intermediate U.S. Treasury.
During the semi-annual reporting period, the Federal Reserve Board tightened
monetary policy on four separate occasions. The U.S. Treasury yield curve from
2-years to 30-years flattened significantly as of July 31, 1994, from 212 basis
points to 140 basis points. During this same period, the mortgage market went
through a metamorphosis as fears of rapid prepayments turned to concern over the
impact of significant extension risk.
Due to this environment, the Trust's portfolio strategy has been focused on a
more defensive strategy that emphasizes liquidity and lower volatility. Balloon
securities with maturities in the five and seven year areas enhanced portfolio
return due to reduced issuance as prepayment activity declined. These securities
in combination with 10 through 20-year mortgage securities offered the Trust a
relatively solid total rate of return and mitigated the extension risk
associated with 30-year collateral.
As of July 31, 1994, total net assets were $1.5 billion and the average 30-day
net yield as calculated under Securities and Exchange Commission ("SEC")
guidelines was 6.85%* for Institutional Shares, and 6.65%* for Institutional
Service Shares, based upon the net asset value of $9.95. The Trust is rated
AAAf, the highest mutual fund credit rating of Standard & Poor's Ratings
Group,** and will continue to strive to provide monthly income while seeking
competitive yields.
* Performance quoted represents past performance. 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.
** Ratings are subject to change.
FEDERATED INCOME TRUST
PORTFOLIO OF INVESTMENTS
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
The obligations listed below are issued, guaranteed, or insured by the U.S.
government, its agencies or instrumentalities, or secured by such obligations.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- --------------- ----------------------------------------------------------------------------- -----------------
LONG-TERM OBLIGATIONS--95.4%
- ----------------------------------------------------------------------------------------------
*FEDERAL HOME LOAN MORTGAGE CORP.--15.7%
-----------------------------------------------------------------------------
$ 5,877,765 12.50%, 11/1/2009-6/1/2015 $ 6,603,258
-----------------------------------------------------------------------------
14,965,176 12.00%, 5/1/99-7/1/2019 16,662,675
-----------------------------------------------------------------------------
6,258,704 11.50%, 3/1/2011-7/1/2016 6,898,218
-----------------------------------------------------------------------------
8,182,087 11.00%, 5/1/2000-9/1/2020 8,862,009
-----------------------------------------------------------------------------
46,928,706 10.50%, 7/1/2000-1/1/2021 50,588,345
-----------------------------------------------------------------------------
45,341,128 10.00%, 10/1/2020-6/1/2021 48,411,200
-----------------------------------------------------------------------------
37,970,409 9.50%, 10/1/2006-12/1/2022 40,034,349
-----------------------------------------------------------------------------
5,290,974 9.00%, 4/1/2009-2/1/2013 5,529,068
-----------------------------------------------------------------------------
1,814,002 7.00%, 10/1/2007 1,772,607
-----------------------------------------------------------------------------
44,216,476 6.50%, 9/1/2003-6/1/2004 43,304,290
-----------------------------------------------------------------------------
1,294,338 6.00%, 3/1/99 1,263,183
-----------------------------------------------------------------------------
708,806 5.50%, 12/1/98 683,998
----------------------------------------------------------------------------- -----------------
Total 230,613,200
----------------------------------------------------------------------------- -----------------
*FEDERAL HOME LOAN MORTGAGE CORP. REMIC--16.4%
-----------------------------------------------------------------------------
25,000,000 7.00%, Series 1072G, 5/15/2006 24,282,000
-----------------------------------------------------------------------------
10,920,000 7.00%, Series 1080D, 7/15/2020 10,791,799
-----------------------------------------------------------------------------
20,000,000 6.90%, Series 1551G, 7/15/2008 18,636,000
-----------------------------------------------------------------------------
10,000,000 6.60%, Series 1559VH, 12/15/2021 9,150,000
-----------------------------------------------------------------------------
18,453,000 6.50%, Series 1369G, 3/15/2006 16,916,603
-----------------------------------------------------------------------------
20,000,000 6.50%, Series 1450E, 9/15/2004 19,333,000
-----------------------------------------------------------------------------
43,116,000 6.375%, Series 1423DD, 1/15/2006 40,266,464
-----------------------------------------------------------------------------
14,245,000 6.25%, Series 1731D, 1/15/2021 12,547,851
-----------------------------------------------------------------------------
25,000,000 6.25%, Series 1564G, 5/15/2007 23,087,750
-----------------------------------------------------------------------------
10,000,000 6.00%, Series 1476G, 4/15/2006 9,029,400
-----------------------------------------------------------------------------
16,153,000 6.00%, Series 1584G, 9/1/2018 14,652,709
-----------------------------------------------------------------------------
15,000,000 5.90%, Series 1612PE, 11/15/2007 13,554,300
-----------------------------------------------------------------------------
31,678,000 5.50%, Series 1353B, 6/15/2006 27,467,994
----------------------------------------------------------------------------- -----------------
Total 239,715,870
----------------------------------------------------------------------------- -----------------
*FEDERAL HOME LOAN MORTGAGE CORP. PC ARM--6.0%
-----------------------------------------------------------------------------
2,074,489 6.75%, 6/1/2018 2,127,430
-----------------------------------------------------------------------------
26,325,937 5.844%, 3/1/2023 26,819,549
-----------------------------------------------------------------------------
3,160,477 5.732%, 3/1/2023 3,164,048
-----------------------------------------------------------------------------
6,118,997 5.71%, 3/1/2023 6,143,901
-----------------------------------------------------------------------------
4,154,894 5.651%, 3/1/2023 4,227,273
-----------------------------------------------------------------------------
22,197,851 5.233%, 6/1/2023 22,483,760
-----------------------------------------------------------------------------
4,871,944 5.052%, 7/1/2023 4,876,865
-----------------------------------------------------------------------------
4,039,048 4.275%, 9/1/2023 4,039,613
-----------------------------------------------------------------------------
14,724,645 3.798%, 12/1/99 14,496,265
----------------------------------------------------------------------------- -----------------
Total 88,378,704
----------------------------------------------------------------------------- -----------------
*FEDERAL NATIONAL MORTGAGE ASSOCIATION--48.8%
-----------------------------------------------------------------------------
2,462,229 13.00%, 9/1/2011-10/1/2015 2,764,616
-----------------------------------------------------------------------------
7,876,347 12.50%, 12/1/2010-11/1/2015 8,816,546
-----------------------------------------------------------------------------
7,371,417 12.00%, 2/1/2005-5/1/2016 8,212,201
-----------------------------------------------------------------------------
24,618,251 11.50%, 5/1/2012-10/1/2019 27,264,987
-----------------------------------------------------------------------------
17,536,725 11.00%, 7/1/2011-5/1/2023 19,315,438
-----------------------------------------------------------------------------
32,796,537 10.50%, 12/1/2019-4/1/2022 35,860,717
-----------------------------------------------------------------------------
95,762,256 10.00%, 5/1/2019-5/1/2023 102,936,174
-----------------------------------------------------------------------------
2,783,030 9.50%, 7/1/2018-11/1/2019 2,910,854
-----------------------------------------------------------------------------
61,578,252 9.00%, 5/1/2009-6/1/2024 64,243,227**
-----------------------------------------------------------------------------
70,000,000 8.50%, 7/1/2024 72,252,600
-----------------------------------------------------------------------------
151,700,537 8.00%, 4/1/2023-7/1/2024 151,700,536**
-----------------------------------------------------------------------------
119,445,908 7.50%, 3/1/99-7/1/2001 120,712,354**
-----------------------------------------------------------------------------
50,000,000 7.00%, 7/1/2014 48,125,000**
-----------------------------------------------------------------------------
51,238,511 6.50%, 3/1/2001-6/1/2004 50,104,144
----------------------------------------------------------------------------- -----------------
Total 715,219,394
----------------------------------------------------------------------------- -----------------
*FEDERAL NATIONAL MORTGAGE ASSOCIATION REMIC--6.8%
-----------------------------------------------------------------------------
10,000,000 7.00%, Series G92-15E, 8/15/2018 9,723,000
-----------------------------------------------------------------------------
11,393,000 6.50%, Series 1993-55K, 5/25/2008 10,251,763
-----------------------------------------------------------------------------
17,238,812 6.00%, Series 1993-229J, 12/25/2008 15,930,213
-----------------------------------------------------------------------------
15,000,000 6.00%, Series 1993-96PG, 2/25/2019 13,669,200
-----------------------------------------------------------------------------
12,203,000 5.90%, Series 1993-197PG, 9/25/2007 11,016,136
-----------------------------------------------------------------------------
21,000,000 5.50%, Series 1993-198G, 5/25/2019 18,408,810
-----------------------------------------------------------------------------
21,900,000 4.75%, Series 1993-189PB, 5/25/2007 21,240,153
----------------------------------------------------------------------------- -----------------
Total 100,239,275
----------------------------------------------------------------------------- -----------------
*FEDERAL NATIONAL MORTGAGE ASSOCIATION ARM--1.7%
-----------------------------------------------------------------------------
7,430,856 5.546%, 3/1/2023 7,529,835
-----------------------------------------------------------------------------
4,639,699 4.949%, 9/1/2023 4,664,058
-----------------------------------------------------------------------------
6,444,186 4.094%, 7/1/2023 6,492,968
-----------------------------------------------------------------------------
5,559,920 3.976%, 9/1/2023 5,538,069
----------------------------------------------------------------------------- -----------------
Total 24,224,930
----------------------------------------------------------------------------- -----------------
TOTAL LONG-TERM OBLIGATIONS (IDENTIFIED COST, $1,422,372,752) 1,398,391,373
----------------------------------------------------------------------------- -----------------
(A) REPURCHASE AGREEMENTS--21.4%
- ----------------------------------------------------------------------------------------------
18,320,000 J.P. Morgan Securities, Inc., 4.25%, dated 7/29/94,
due 8/1/94 18,320,000
-----------------------------------------------------------------------------
50,000,000 +B.T. Securities Corp., 4.33%, dated 7/21/94, due 8/16/94 50,000,000
-----------------------------------------------------------------------------
45,000,000 +Goldman Sachs Group LP, 4.40%, dated 7/21/94, due 8/24/94 45,000,000
-----------------------------------------------------------------------------
50,000,000 +J.P. Morgan Securities, Inc., 4.47%, dated 7/18/94,
due 8/22/94 50,000,000
-----------------------------------------------------------------------------
150,000,000 +First Boston Corp., 4.45%, dated 7/14/94, due 8/11/94 150,000,000
----------------------------------------------------------------------------- -----------------
TOTAL REPURCHASE AGREEMENTS (AT AMORTIZED COST) (NOTE 2B) 313,320,000
----------------------------------------------------------------------------- -----------------
TOTAL INVESTMENTS (IDENTIFIED COST, $1,735,692,752) $ 1,711,711,373++
----------------------------------------------------------------------------- -----------------
</TABLE>
* Because of monthly principal payments, the average life of the Federal Home
Loan Mortgage Corp. Participation securities and Federal National Mortgage
Association Pass-Through securities approximates 1-10 years.
** Includes securities with a market value of $295,557,700 subject to Dollar
Roll transactions.
(a) The repurchase agreements are fully collateralized by U.S. government
obligations. The investments in the repurchase agreements are through
participation in a joint account with other Federated funds.
+ Although final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase
agreement within seven days.
+\ The cost of investments for federal tax purposes amounts to $1,735,692,752.
The net unrealized depreciation of investments on a federal tax basis amounts
to $23,981,379, which is comprised of $8,398,541 appreciation and $32,379,920
depreciation at July 31, 1994.
Note: The categories of investments are shown as a percentage of net assets
($1,465,589,942) at July 31, 1994.
The following abbreviations are used in this portfolio:
ARM--Adjustable Rate Mortgage
PC--Participation Certificates
REMIC--Real Estate Mortgage Investment Conduit
(See Notes which are an integral part of the Financial Statements)
FEDERATED INCOME TRUST
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ----------------------------------------------------------------------------------------------
Investments in repurchase agreements (Note 2B) $ 313,320,000
- ---------------------------------------------------------------------------
Investments in other securities (Note 2A) 1,398,391,373
- --------------------------------------------------------------------------- -----------------
Total investments, at value
(identified and tax cost, $1,735,692,752) $ 1,711,711,373
- ----------------------------------------------------------------------------------------------
Receivable for investments sold 157,062,430
- ----------------------------------------------------------------------------------------------
Interest receivable 14,331,662
- ----------------------------------------------------------------------------------------------
Receivable for Trust shares sold 229,883
- ---------------------------------------------------------------------------------------------- -----------------
Total assets 1,883,335,348
- ----------------------------------------------------------------------------------------------
LIABILITIES:
- ----------------------------------------------------------------------------------------------
Payable for dollar roll transactions (Note 2F) 292,789,234
- ---------------------------------------------------------------------------
Payable for investments purchased 110,150,938
- ---------------------------------------------------------------------------
Payable for Trust shares redeemed 7,713,250
- ---------------------------------------------------------------------------
Dividends payable 6,935,385
- ---------------------------------------------------------------------------
Payable to bank 22,773
- ---------------------------------------------------------------------------
Accrued expenses 133,826
- --------------------------------------------------------------------------- -----------------
Total liabilities 417,745,406
- ---------------------------------------------------------------------------------------------- -----------------
NET ASSETS for 147,295,861 shares of beneficial interest outstanding $ 1,465,589,942
- ---------------------------------------------------------------------------------------------- -----------------
NET ASSETS CONSIST OF:
- ----------------------------------------------------------------------------------------------
Paid-in capital 1,637,439,483
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (23,981,379)
- ----------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (147,868,162)
- ---------------------------------------------------------------------------------------------- -----------------
Total Net Assets $ 1,465,589,942
- ---------------------------------------------------------------------------------------------- -----------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
Institutional Shares (net assets of $1,413,598,729 / 142,069,999 shares of
beneficial interest outstanding) $9.95
- ---------------------------------------------------------------------------------------------- -----------------
Institutional Service Shares (net assets of $51,991,213 / 5,225,862 shares of
beneficial interest outstanding) $9.95
- ---------------------------------------------------------------------------------------------- -----------------
(See Notes which are an integral part of the Financial Statements)
</TABLE>
FEDERATED INCOME TRUST
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------------------------------------
Interest income (Note 2C) (net of interest expense of $4,401,851) $ 57,848,812
- -------------------------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------------------------
Investment advisory fee (Note 4) $ 3,190,781
- ----------------------------------------------------------------------------------
Trustees' fees 8,504
- ----------------------------------------------------------------------------------
Administrative personnel and services (Note 4) 589,513
- ----------------------------------------------------------------------------------
Custodian and portfolio accounting fees 94,056
- ----------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses (Note 4) 62,295
- ----------------------------------------------------------------------------------
Registration costs 52,283
- ----------------------------------------------------------------------------------
Auditing fees 17,878
- ----------------------------------------------------------------------------------
Legal fees 8,950
- ----------------------------------------------------------------------------------
Printing and postage 33,673
- ----------------------------------------------------------------------------------
Taxes 47,294
- ----------------------------------------------------------------------------------
Distribution services fee (Note 4) 67,621
- ----------------------------------------------------------------------------------
Insurance premiums 1,500
- ----------------------------------------------------------------------------------
Shareholder Services Fee--Institutional Shares (Note 4) 259,678
- ----------------------------------------------------------------------------------
Shareholder Services Fee--Institutional Service Shares (Note 4) 53,119
- ----------------------------------------------------------------------------------
Miscellaneous 13,062
- ---------------------------------------------------------------------------------- -------------
Total expenses 4,500,207
- ----------------------------------------------------------------------------------
Deduct: Waiver of distribution services fee (Note 4) 53,119
- ---------------------------------------------------------------------------------- -------------
Net expenses 4,447,088
- ------------------------------------------------------------------------------------------------- ---------------
Net investment income 53,401,724
- ------------------------------------------------------------------------------------------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis) (71,193,774)
- -------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments (20,407,533)
- ------------------------------------------------------------------------------------------------- ---------------
Net realized and unrealized gain (loss) on investments (91,601,307)
- ------------------------------------------------------------------------------------------------- ---------------
Change in net assets resulting from operations ($ 38,199,583)
- ------------------------------------------------------------------------------------------------- ---------------
(See Notes which are an integral part of the Financial Statements)
</TABLE>
FEDERATED INCOME TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
<S> <C> <C>
------------------------------------
<CAPTION>
1995* 1994
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------------------
Net investment income $ 53,401,724 $ 124,801,114
- ---------------------------------------------------------------------------
Net realized gain (loss) on investment transactions ($71,193,774 net loss
and $23,832,544 net gain, respectively, as computed for federal income tax
purposes) (71,193,774) 6,604,924
- ---------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) on investments (20,407,533) (44,130,386)
- --------------------------------------------------------------------------- ----------------- -----------------
Change in net assets resulting from operations (38,199,583) 87,275,652
- --------------------------------------------------------------------------- ----------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- ---------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- ---------------------------------------------------------------------------
Institutional Shares (51,722,753) (120,844,426)
- ---------------------------------------------------------------------------
Institutional Service Shares (1,756,229) (3,879,431)
- --------------------------------------------------------------------------- ----------------- -----------------
Change in net assets from distributions to shareholders (53,478,982) (124,723,857)
- --------------------------------------------------------------------------- ----------------- -----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- ---------------------------------------------------------------------------
Proceeds from sales of shares 198,111,481 858,701,229
- ---------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of dividends declared 11,032,276 25,460,750
- ---------------------------------------------------------------------------
Cost of shares redeemed (446,299,048) (655,129,012)
- --------------------------------------------------------------------------- ----------------- -----------------
Change in net assets from Trust share transactions (237,155,291) 229,032,967
- --------------------------------------------------------------------------- ----------------- -----------------
Change in net assets (328,833,856) 191,584,762
- ---------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------
Beginning of period 1,794,423,798 1,602,839,036
- --------------------------------------------------------------------------- ----------------- -----------------
End of period (includes undistributed net investment income
of $0 and $77,257, respectively) $ 1,465,589,942 $ 1,794,423,798
- --------------------------------------------------------------------------- ----------------- -----------------
</TABLE>
* Six months ended July 31, 1994 (unaudited).
(See Notes which are an integral part of the Financial Statements)
FEDERATED INCOME TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995* 1994 1993 1992 1991 1990 1989 1988 1987 1986
NET ASSET VALUE,
BEGINNING OF
PERIOD $ 10.50 $ 10.73 $ 10.66 $ 10.42 $ 10.18 $ 10.05 $ 10.43 $ 10.74 $ 10.87 $ 10.50
- ------------------
INCOME FROM
INVESTMENT
OPERATIONS
- ------------------
Net investment
income 0.34 0.77 0.80 0.89 0.93 0.94 0.95 0.99 1.03 1.19
- ------------------
Net realized and
unrealized gain
(loss) on
investments (0.55) (0.23) 0.07 0.24 0.24 0.13 (0.38) (0.31) (0.05) 0.37
- ------------------ --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from
investment
operations (0.21) 0.54 0.87 1.13 1.17 1.07 0.57 0.68 0.98 1.56
- ------------------
LESS DISTRIBUTIONS
- ------------------
Dividends to
shareholders from
net investment
income (0.34) (0.77) (0.80) (0.89) (0.93) (0.94) (0.95) (0.99) (1.04) (1.19)
- ------------------
Distributions to
shareholders from
net realized gain
on investment
transactions -- -- -- -- -- -- -- -- (0.07) --
- ------------------ --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL
DISTRIBUTIONS (0.34) (0.77) (0.80) (0.89) (0.93) (0.94) (0.95) (0.99) (1.11) (1.19)
- ------------------ --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE,
END OF PERIOD $ 9.95 $ 10.50 $ 10.73 $ 10.66 $ 10.42 $ 10.18 $ 10.05 $ 10.43 $ 10.74 $ 10.87
- ------------------ --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN** (2.03%) 5.22% 8.51% 11.27% 12.01% 11.04% 5.75% 6.79% 9.52% 15.66%
- ------------------
RATIOS TO AVERAGE
NET ASSETS
- ------------------
Expenses 0.55 (a) 0.51% 0.51% 0.50% 0.50% 0.53% 0.52% 0.50% 0.54%
0.57%
- ------------------
Net investment
income 6.70 (a) 7.28% 7.53% 8.41% 9.06% 9.23% 9.33% 9.49% 9.47%
11.13%
- ------------------
SUPPLEMENTAL DATA
- ------------------
Net assets, end
of period (000
omitted) $1,413,599 $1,727,247 $1,548,858 $1,231,978 $892,255 $1,023,886 $1,196,585 $1,376,895 $1,169,155
$270,612
- ------------------
Portfolio
turnover rate 103% 178% 52% 51% 36% 45% 77% 92% 146% 235%
- ------------------
</TABLE>
* Six months ended July 31, 1994 (unaudited).
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INCOME TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
<S> <C> <C> <C>
1995* 1994 1993**
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.50 $ 10.73 $ 10.64
- -------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------
Net investment income 0.32 0.75 0.51
- -------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.55) (0.23) 0.09
- ------------------------------------------------------------------------- --------- --------- ---------
Total from investment operations (0.23) 0.52 0.60
- -------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.32) (0.75) (0.51)
- ------------------------------------------------------------------------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 9.95 $ 10.50 $ 10.73
- ------------------------------------------------------------------------- --------- --------- ---------
TOTAL RETURN*** (2.14%) 4.96% 4.80%
- -------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------
Expenses 0.77 (a) 0.76% 0.76%(a)
- -------------------------------------------------------------------------
Net investment income 6.49 (a) 7.03% 7.16%(a)
- -------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.20 (a) -- --
- -------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------
Net assets, end of period (000 omitted) $51,991 $67,176 $53,981
- -------------------------------------------------------------------------
Portfolio turnover rate 103% 178% 52%
- -------------------------------------------------------------------------
</TABLE>
* Six months ended July 31, 1994 (unaudited).
** Reflects operations for the period from May 31, 1992 (effective date of
Institutional Service Shares) to January 31, 1993.
*** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
FEDERATED INCOME TRUST
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Income Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as a diversified, open-end, no-load,
management investment company. The Trust provides two classes of shares,
Institutional Shares and Institutional Service Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--U.S. government obligations are generally valued at
the mean between the over-the-counter bid and asked prices as furnished by
an independent pricing service. Short-term securities with remaining
maturities of sixty days or less may be stated at amortized cost, which
approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Trust to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Trust to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure that the value
of collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
The Trust will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Trust's adviser to be creditworthy pursuant to guidelines
established by the Board of Trustees (the "Trustees"). Risks may arise from
the potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Trust could receive less than the
repurchase price on the sale of collateral securities.
C. 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.
D. FEDERAL TAXES--It is the Trust'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 taxable income.
Accordingly, no provisions for federal tax are necessary. At January 31,
1994, the Trust, for federal income tax purposes, had a capital loss
carryforward of $59,511,521, which will
reduce the Trust's taxable income arising from future net realized gain on
investments, if any, to the extent permitted by the Code, and thus will
reduce the amount of the distributions to shareholders which would
otherwise be necessary to relieve the Trust of any liability for federal
tax. Pursuant to the Code, such capital loss carryforward will expire in
1996 ($14,398,108), 1997 ($26,760,646), 1998 ($16,389,825) and 1999
($1,962,942). Included in these amounts are $583,490 of losses which were
incurred by Federated Variable Rate Mortgage Securities Trust prior to its
merger into the Trust. The Trust's ability to use these losses may be
limited, however, through the application of the Code's change of ownership
rules.
Additionally, net capital losses of $17,162,868 attributable to security
transactions incurred after October 31, 1993, are treated as arising on
February 1, 1994, the first day of the Fund's next taxable year.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Trust may engage in
when-issued or delayed delivery transactions. The Trust 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.
F. DOLLAR ROLL TRANSACTIONS--The Trust enters into dollar roll transactions,
with respect to mortgage securities issued by GNMA, FNMA and FHLMC, in
which the Trust loans mortgage securities to financial institutions and
simultaneously agrees to accept substantially similar (same type, coupon
and maturity) securities at a later date at an agreed upon price. Dollar
roll transactions are short-term financing arrangements which will not
exceed twelve months. The Trust will use the proceeds generated from the
transactions to invest in short-term investments that may enhance the
Trust's current yield and total return.
G. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in Trust shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
----------------------------------------------------------------
1995* 1994
------------------------------- -------------------------------
INSTITUTIONAL SHARES SHARES DOLLARS SHARES DOLLARS
- --------------------------------------------- ------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
Shares sold 18,090,722 $ 183,763,241 73,655,885 $ 783,979,962
- ---------------------------------------------
Shares issued to shareholders in
payment of dividends declared 997,619 10,032,218 2,174,745 23,092,260
- ---------------------------------------------
Shares redeemed (41,460,156) (418,920,603) (55,772,065) (592,762,823)
- --------------------------------------------- ------------- ---------------- ------------- ----------------
Net change resulting from
Institutional share transactions (22,371,815) ($ 225,125,144) 20,058,565 $ 214,309,399
- --------------------------------------------- ------------- ---------------- ------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-----------------------------------------------------------------
1995* 1994
-------------------------------- -------------------------------
INSTITUTIONAL SERVICE SHARES SHARES DOLLARS SHARES DOLLARS
- ------------------------------------------- -------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
Shares sold 1,419,000 $ 14,348,240 7,007,589 $ 74,721,267
- -------------------------------------------
Shares issued to shareholders in payment of
dividends declared 100,076 1,000,058 222,804 2,368,490
- -------------------------------------------
Shares redeemed (2,688,372) (27,378,445) (5,868,125) (62,366,189)
- ------------------------------------------- -------------- ---------------- ------------- ----------------
Net change resulting from Institutional
Service share transactions (1,169,296) ($ 12,030,147) 1,362,268 $ 14,723,568
- ------------------------------------------- -------------- ---------------- ------------- ----------------
Net change resulting from Trust shares
transactions (23,541,111) ($ 237,155,291) 21,420,833 $ 229,032,967
- ------------------------------------------- -------------- ---------------- ------------- ----------------
</TABLE>
*Six months ended July 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Trust's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .40 of 1% of the Trust's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee and reimburse certain operating
expenses of the Trust. The Adviser can modify or terminate this voluntary waiver
and reimbursement at any time at its sole discretion.
ADMINISTRATION FEE--Federated Administrative Services ("FAS") provides the Trust
administrative personnel and services. Prior to March 1, 1994, these services
were provided at approximate cost. Effective March 1, 1994, the FAS fee is based
on the level of average aggregate daily net assets of all funds advised by
subsidiaries of Federated Investors for the period. The administrative fee
received during the period of the Administrative Services Agreement shall be at
least $125,000 per portfolio and $30,000 per each additional class of shares.
DISTRIBUTION AND SHAREHOLDER SERVICES FEE--The Trust has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the
Plan, the Trust will compensate Federated Securities Corp. ("FSC"), the
principal distributor, from the net assets of the Trust to finance activities
intended to result in the sale of the Trust's Institutional Service Shares. The
Plan provides that the Trust may incur distribution expenses up to .25 of 1% of
the average daily net assets of the Institutional Service Shares, annually, to
compensate FSC. The distributor may voluntarily choose to waive a portion of its
fee. The distributor can modify or terminate this volunary waiver at any time at
its sole discretion.
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Trust will pay FSS up to .25 of 1% of average net assets
of the Trust for the period. This fee is to obtain certain personal services for
shareholders and to maintain the shareholder accounts.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT--Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Trust. The
FServ fee is based on the size, type, and number of accounts and transactions
made by shareholders.
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the six
months ended July 31, 1994, were as follows:
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------
PURCHASES $ 1,609,956,760
- ----------------------------------------------------------------------------------------------- -----------------
SALES $ 1,757,999,892
- ----------------------------------------------------------------------------------------------- -----------------
</TABLE>
(6) ACQUISITION OF FEDERATED VARIABLE RATE MORTGAGE SECURITIES TRUST
On April 26, 1990, the Trust acquired all the net assets of Federated Variable
Rate Mortgage Securities Trust ("Acquired Trust") pursuant to a plan of
reorganization approved by the Acquired Trust's shareholders on February 14,
1990. The acquisition was accomplished by a tax-free exchange of 742,473 shares
of the Trust (valued at $7,439,576) for assets of the Acquired Trust outstanding
on April 26, 1990. The Acquired Trust's net assets at that date ($7,439,576)
including $14,365 of unrealized appreciation and $583,996 net realized loss on
investment transactions, were combined with those of the Trust. The aggregate
net assets of the Trust immediately before and after the acquisition were
$960,530,883 and $967,970,459, respectively.
TRUSTEES OFFICERS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
John F. Donahue John F. Donahue
John T. Conroy, Jr. Chairman
William J. Copeland Glen R. Johnson
James E. Dowd President
Lawrence D. Ellis, M.D. J. Christopher Donahue
Edward L. Flaherty, Jr. Vice President
Glen R. Johnson Richard B. Fisher
Peter E. Madden Vice President
Gregor F. Meyer Edward C. Gonzales
Wesley W. Posvar Vice President and Treasurer
Marjorie P. Smuts John W. McGonigle
Vice President and Secretary
David M. Taylor
Assistant Treasurer
J. Crilley Kelly
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the FDIC, the Federal
Reserve Board, or any other government agency. Investment in mutual funds
involves risk, including possible loss of principal.
This report is authorized for distribution to prospective investors only
when preceded or accompanied by the Trust's prospectus which
contains facts concerning its objective and policies, management fees, expenses
and other information.
FEDERATED INCOME TRUST
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
An Open-End, Diversified
Management Investment Company
March 31, 1994
8082203 (9/94)
