PRESIDENT'S MESSAGE
Dear Investor:
I am pleased to present the Semi-Annual Report to Shareholders for
Federated Income Trust. The report covers the six-month reporting
period ended July 31, 1997, and includes the trust's Investment
Review, Portfolio of Investments and Financial Statements.
During the reporting period, the trust continued to pursue attractive
income through a diversified portfolio of mortgage-backed securities.
Dividends paid by the trust during this period totaled $0.33 per share
for Institutional Shares and $0.32 per share for Institutional Service
Shares. Net asset value for both share classes increased by $0.16 to
end the reporting period at $10.31. Total returns for the six-month
reporting period ended July 31, 1997, for Institutional Shares and
Institutional Service Shares were 4.99% and 4.88%, respectively.* The
trust's total net assets stood at $840.0 million on the last day of
the reporting period.
During the reporting period, the trust maintained its AAAf rating by
Standard & Poor's, the highest available from this independent rating
service.**
We appreciate your continued confidence in Federated Income Trust. As
always, we welcome your questions and comments.
Sincerely,
[Graphic]
Glen R. Johnson
President
September 15, 1997
* Performance quoted represents past performance and is not indicative
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.
** An AAAf rating means that the trust's portfolio holdings and
counterparties provide extremely strong protection against losses
from credit defaults. Ratings are subject to change, and do not
remove market risks.
INVESTMENT REVIEW
Federated Income Trust (the "Trust"), provides shareholders with a
professionally managed portfolio of U.S. government securities. The
Trust offers daily liquidity, credit control and other advantages over
comparable U.S. Treasuries while at the same time allowing investors
to avoid the complexities of managing a portfolio of mortgage-backed
securities. Shareholders receive a diversified portfolio managed using
very conservative disciplines.
The U.S. economy during the semi-annual reporting period has been very
favorable for all financial market sectors. The main catalysts to this
rosy scenario have been signs of low inflation, and optimism about
declining budget deficits. However, early economic reports have
suggested that the economy may be picking up as we move through the
third quarter. Recent data on retail sales, manufacturing, and housing
starts may suggest that the economy is off to a vigorous start in the
third quarter. These reports have refocused investors of the
possibility of rising inflation in a strong economy.
Current portfolio strategy targets an effective duration of 3.0 years,
which is neutral to the Lehman Brothers Mortgage-Backed Securities
Index.+ The asset allocation mix reflects an emphasis on an overweight
in conventional mortgage-backed securities. This strategy gave the
Trust, for the semi-annual reporting period ended July 31, 1997, a net
total rate of return of 4.99%* on Institutional Shares and 4.88%* on
Institutional Service Shares versus the Lehman Brothers
Mortgage-Backed Securities Index+ total return of 5.09% and the
Merrill Lynch 5-year Treasury Index+ total return of 4.68%.
As of July 31, 1997, total net assets were $840.0 million and the
average 30-day net yield as calculated under SEC guidelines was 6.58%*
for Institutional Shares and 6.36%* for Institutional Service Shares
based upon the net asset value of $10.31. The Trust is rated AAAf by
Standard & Poor's, for credit quality.** The Trust remains committed
to pursuing competitive yields and daily liquidity.
* Performance quoted represents past performance and is not indicative
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.
** An AAAf rating means that the Trust's portfolio holdings and
counterparties provide extremely strong protection against losses
from credit defaults. Ratings are subject to change, and do not
remove market risks.
+ Lehman Brothers Mortgage-Backed Securities Index is composed of all
fixed rate, securitized mortgage pools by GNMA, FNMA, and the FHLMC,
including GNMA Graduated Payment Mortgages. The Merrill Lynch 5-year
Treasury Index, is an index tracking 5-year U.S. government
securities. These indexes are unmanaged, and investments cannot be
made in an index.
FEDERATED INCOME TRUST
PORTFOLIO OF INVESTMENTS
JULY 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
VALUE
<C> <S>
<C>
LONG-TERM OBLIGATIONS--98.8%
(A)FEDERAL HOME LOAN MORTGAGE CORPORATION --33.2%
$ 72,512,589 (b)6.00%, 3/1/2011-12/1/2022
$ 71,141,140
46,383,814 6.50%, 3/1/2012 -
2/1/2024 45,996,415
54,098,666 7.00%, 10/1/2007 -
4/1/2012 54,864,381
52,376,159 7.50%, 12/1/2022 -
3/1/2027 53,372,211
13,538,316 8.00%, 4/1/2027 -
6/1/2027 13,982,509
24,160,564 9.00%, 4/1/2009 -
1/1/2025 25,707,810
12,425,779 9.50%, 11/1/2009 -
12/1/2022 13,418,815
207,548 10.50%,
7/1/2000 218,320
323,822 11.00%,
5/1/2000 340,573
130,700 11.50%,
12/1/2014 147,119
Total 279,189,293
(A)FEDERAL HOME LOAN MORTGAGE CORPORATION REMIC--2.7%
10,099,571 0.00%, Strip 179-1, 9/1/2026 (Principal
Only) 7,780,305
15,000,000 6.50%, Series 1959-C,
5/15/2027 14,728,200
Total 22,508,505
(A)FEDERAL NATIONAL MORTGAGE ASSOCIATION--34.9%
56,593,549 6.50%, 1/1/2026 -
4/1/2027 55,414,237
121,000,000 7.00%,
7/1/2027 120,773,730
20,487,144 7.50%, 3/1/2010 -
11/1/2010 21,027,934
18,772,240 8.00%,
12/1/2026 19,358,873
31,369,416 8.50%, 7/1/2024 -
12/1/2024 32,781,040
24,676,344 10.00%, 11/1/2009 -
4/1/2025 26,933,342
15,177,985 10.50%, 12/1/2019 -
4/1/2022 16,790,646
Total 293,079,802
</TABLE>
FEDERATED INCOME TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
VALUE
<C> <S>
<C>
LONG-TERM OBLIGATIONS--CONTINUED
(A)FEDERAL NATIONAL MORTGAGE ASSOCIATION REMIC--5.2%
$ 23,444,969 0.00%, Strip 264-1, 7/1/2024 (Principal Only)
$ 17,688,525
8,619,143 0.00%, Series 97-44 A, 5/20/2020 (Principal
Only) 7,901,341
15,549,355 7.00%, Series 97-63 PE, 1/15/2027 (Interest
Only) 4,118,150
24,750,000 8.50%, Series 97-33 K,
4/25/2024 13,860,000
Total 43,568,016
(A)GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--22.8%
49,865,615 6.50%, 1/15/2024 -
7/15/2024 49,238,964
89,720,614 8.00%, 12/15/2023 -
3/15/2027 92,914,605
47,182,919 8.50%,
7/15/2024 49,542,065
Total 191,695,634
TOTAL LONG-TERM OBLIGATIONS (IDENTIFIED COST $814,114,724)
830,041,250
(C)REPURCHASE AGREEMENTS--6.7%
47,000,000 Goldman Sachs, 5.495%, dated 7/15/1997, due
8/18/1997 47,000,000
8,900,000 BT Securities Corp., 5.790%, dated 7/31/1997, due
8/1/1997 8,900,000
TOTAL REPURCHASE AGREEMENTS (AT AMORTIZED
COST) 55,900,000
TOTAL INVESTMENTS (IDENTIFIED COST $870,014,724)(D)
$ 885,941,250
</TABLE>
(a) Because of monthly principal payments, the average lives of the
Federal Home Loan Mortgage Corp., Federal National Mortgage
Association, and Government National Mortgage Association
securities approximates 1-10
Years.
(b) A portion of these securities is subject to dollar roll transactions.
(c) The repurchase agreements are fully collateralized by U.S.
government and/or agency obligations based on market prices at the
date of the portfolio. The investments in the repurchase
agreements are through participation in joint accounts with other
Federated funds.
(d) The cost of investments for federal tax purposes amounts to
$870,014,724. The net unrealized appreciation/depreciation of
investments on a federal tax basis amounts to $15,926,526 which is
comprised of $18,660,834 appreciation and $2,734,308 depreciation
at July 31, 1997.
Note: The categories of investments are shown as a percentage of net assets
($840,015,992) at July 31, 1997.
The following acronym is used throughout this portfolio:
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, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost $ 885,941,250
$870,014,724)
Income receivable 4,362,254
Receivable for investments sold 176,835,227
Receivable for shares sold 545,890
Total assets 1,067,684,621
LIABILITIES:
Payable for investments purchased $ 222,411,008
Payable for shares redeemed 1,140
Income distribution payable 4,625,356
Payable to Bank 509,316
Accrued expenses 121,809
Total liabilities 227,668,629
NET ASSETS for 81,490,166 shares outstanding $ 840,015,992
NET ASSETS CONSIST OF:
Paid in capital $ 943,460,831
Net unrealized appreciation of investments 15,926,526
Accumulated net realized loss on investments (119,693,458)
Undistributed net investment income 322,093
Total Net Assets $ 840,015,992
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
INSTITUTIONAL SHARES:
$795,977,149 / 77,218,000 shares outstanding $10.31
INSTITUTIONAL SERVICE SHARES:
$44,038,843 / 4,272,166 shares outstanding $10.31
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED INCOME TRUST
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JULY 31, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest (net of dollar roll expense of $114,313) $
30,567,072
EXPENSES:
Investment advisory fee $ 1,688,138
Administrative personnel and services fee 318,636
Custodian fees 54,104
Transfer and dividend disbursing agent fees and expenses 113,204
Directors'/Trustees' fees 11,611
Auditing fees 9,923
Legal fees 4,634
Portfolio accounting fees 68,805
Distribution services fee--Institutional Service Shares 53,512
Shareholder services fee--Institutional Shares 1,001,575
Shareholder services fee--Institutional Service Shares 53,512
Share registration costs 12,663
Printing and postage 13,729
Insurance premiums 6,749
Taxes 25,560
Miscellaneous 7,588
Total expenses 3,443,943
Waivers
Waiver of distribution services fee--Institutional Service Shares $ (51,371)
Waiver of shareholder services fee--Institutional Shares (881,386)
Waiver of shareholder services fee--Institutional Service Shares (2,140)
Total waivers (934,897)
Net expenses
2,509,046
Net investment income
28,058,026
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments
2,872,510
Net change in unrealized appreciation of investments
10,009,099
Net realized and unrealized gain on investments
12,881,609
Change in net assets resulting from operations $
40,939,635
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED INCOME TRUST
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR
ENDED
JULY 31, JANUARY
31,
1997 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 28,058,026 $
63,340,272
Net realized gain (loss) on investments ($2,872,510 net gain and
$4,661,466 net loss, respectively, as computed for federal
tax purposes) 2,872,510
(4,670,222)
Net change in unrealized appreciation/depreciation 10,009,099
(19,622,703)
Change in net assets resulting from operations 40,939,635
39,047,347
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income
Institutional Shares (26,794,279)
(60,187,940)
Institutional Service Shares (1,384,641)
(2,622,790)
Change in net assets resulting from distributions
to shareholders (28,178,920)
(62,810,730)
SHARE TRANSACTIONS--
Proceeds from sale of shares 78,730,704
181,714,820
Net asset value of shares issued to shareholders in payment of
distributions declared 6,153,173
16,144,090
Cost of shares redeemed (139,428,147)
(316,176,917)
Change in net assets resulting from share transactions (54,544,270)
(118,318,007)
Change in net assets (41,783,555)
(142,081,390)
NET ASSETS:
Beginning of period 881,799,547
1,023,880,937
End of period (including undistributed net investment income
of $322,093 and $442,987, respectively) $ 840,015,992 $
881,799,547
</TABLE>
(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>
SIX MONTHS
ENDED
(UNAUDITED)
JULY 31, YEAR ENDED JANUARY 31,
1997 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.15 $10.39 $ 9.70 $10.50 $10.73 $10.66
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.33 0.68 0.67 0.70 0.77 0.80
Net realized and unrealized
gain
(loss) on investments 0.16 (0.24) 0.69 (0.80) (0.23) 0.07
Total from investment 0.49 0.44 1.36 (0.10) 0.54 0.87
operations
LESS DISTRIBUTIONS
Distributions from net
investment income (0.33) (0.68) (0.67) (0.70) (0.77) (0.80)
Distributions in excess of net
investment income -- -- -- -- -- --
Total distributions (0.33) (0.68) (0.67) (0.70) (0.77) (0.80)
NET ASSET VALUE, END OF PERIOD $10.31 $10.15 $10.39 $ 9.70 $10.50 $10.73
TOTAL RETURN(A) 4.99% 4.44% 14.44% (0.86%) 5.22% 8.51%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.58%* 0.58% 0.58% 0.56% 0.51% 0.51%
Net investment income 6.66%* 6.70% 6.67% 6.99% 7.28% 7.53%
Expense 0.22%* 0.22% 0.22% -- -- --
waiver/reimbursement(b)
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $795,977 $838,542 $983,093 $1,119,976 $1,727,247 $1,548,858
Portfolio turnover 150% 212% 184% 217% 178% 52%
</TABLE>
* Computed on an annualized basis.
(a) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense
and net investment income ratios shown above.
(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>
SIX MONTHS
ENDED
(UNAUDITED)
JULY 31, YEAR ENDED JANUARY 31,
1997 1997 1996 1995 1994 1993(A)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $10.15 $10.39 $ 9.70 $10.50 $10.73 $10.64
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.32 0.65 0.65 0.68 0.75 0.51
Net realized and unrealized
gain (loss) on investments 0.16 (0.24) 0.69 (0.80) (0.23) 0.09
Total from investment
operations 0.48 0.41 1.34 (0.12) 0.52 0.60
LESS DISTRIBUTIONS
Distributions from net
investment income (0.32) (0.65) (0.65) (0.68) (0.75) (0.51)
NET ASSET VALUE, END OF PERIOD $10.31 $10.15 $10.39 $ 9.70 $10.50 $10.73
TOTAL RETURN(B) 4.88% 4.21% 14.19% (1.08%) 4.96% 4.80%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.80%* 0.80% 0.80% 0.78% 0.76% 0.76%*
Net investment income 6.44%* 6.49% 6.45% 6.75% 7.03% 7.16%*
Expense waiver/
reimbursement(c) 0.25%* 0.25% 0.25% 0.22% -- --
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $44,039 $43,257 $40,788 $40,428 $67,176 $53,981
Portfolio turnover 150% 212% 184% 217% 178% 52%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from May 31, 1992 (effective
date of Institutional Service Shares) to January 31, 1993.
(b) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense
and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INCOME TRUST
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997 (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 management investment company. The Trust offers
two classes of shares: Institutional Shares and Institutional Service
Shares. The investment objective of the Trust is current income.
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.
INVESTMENT VALUATIONS-- U.S. government securities are generally
valued at the mean of the latest bid and asked price as furnished by
an independent pricing service. Short-term securities are valued at
the prices provided by an independent pricing service. However,
short-term securities with remaining maturities of sixty days or
less at the time of purchase may be valued at amortized cost, which
approximates fair market value.
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 under
repurchase agreement transactions. Additionally, procedures have
been established by the Trust to monitor, on a daily basis, the
market value of each repurchase agreement's collateral to ensure
that the value of collateral at least equals the repurchase price to
be paid under the repurchase agreement transaction.
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 the guidelines and/or standards reviewed or 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.
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.
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
income. Accordingly, no provisions for federal tax are necessary.
At January 31, 1997, the Trust, for federal tax purposes, had a
capital loss carryforward of $122,621,966, 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 as follows:
EXPIRATION YEAR EXPIRATION AMOUNT
1998 $ 16,389,825
1999 $ 1,962,942
2003 $ 99,607,733
2005 $ 4,661,466
Additionally, net capital losses of $8,756 attributable to security
transactions incurred after October 31, 1996 are treated as arising
on the first day of the Trust's next taxable year.
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.
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 sells 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, which may enhance
the Trust's current yield and total return.
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.
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 capital stock were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JULY 31, 1997 JANUARY 31, 1997
INSTITUTIONAL SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 7,226,971 $ 73,245,707 16,566,782 $ 167,676,822
Shares issued to shareholders in
payment of distributions declared 543,582 5,488,589 1,436,529 14,505,137
Shares redeemed (13,174,918) (133,373,935) (30,045,652) (303,965,855)
Net change resulting from
Institutional Shares transactions (5,404,365) $ (54,639,639) (12,042,341) $ (121,783,896)
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JULY 31, 1997 JANUARY 31, 1997
INSTITUTIONAL SERVICE SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 540,634 $ 5,484,997 1,383,128 $ 14,037,998
Shares issued to shareholders in
payment of distributions declared 65,871 664,584 162,236 1,638,953
Shares redeemed (596,993) (6,054,212) (1,210,371) (12,211,062)
Net change resulting from
Institutional Service Shares
transactions 9,512 $ 95,369 334,993 $ 3,465,889
Net change resulting from share
transactions (5,394,853) $ (54,544,270) (11,707,348) $ (118,318,007)
</TABLE>
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 0.40% of the Trust's average
daily net assets.
ADMINISTRATIVE FEE-- Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Trust 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 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 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 0.25% of the average
daily net assets of the Institutional Service Shares, annually, to
compensate FSC. The distributor may voluntarily choose to waive any
portion of its fee. The distributor 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 ("FSS"), the Trust
will pay FSS up to 0.25% of average daily net assets of the Trust
for the period. The fee paid to Federated Shareholder Services is
used to finance certain services for shareholders and to maintain
shareholder accounts. FSS may voluntarily choose to waive any
portion of its fee. FSS can modify or terminate this voluntary
waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES-- Federated
Services Company ("FServ"), through its subsidiary, Federated
Shareholder Services Company ("FSSC") serves as transfer and
dividend disbursing agent for the Trust. 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 Trust's accounting
records for which it receives a fee. The fee is based on the level
of the Trust's average daily net assets for the period, plus
out-of-pocket expenses.
GENERAL-- 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 period ended July 31, 1997, were as follows:
PURCHASES $1,230,486,328
SALES $1,280,060,189
TRUSTEES
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
James E. Dowd
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr.
Glen R. Johnson
Peter E. Madden
Gregor F. Meyer
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Glen R. Johnson
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Richard B. Fisher
Vice President
Anthony R. Bosch
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 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
SEMI-ANNUAL REPORT TO SHAREHOLDERS
JULY 31, 1997
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Cusip 314199100
Cusip 314199209
8082203 (9/97)
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