--------------------------------------------------------------------------------
OHIO
--------------------------------------------------------------------------------
INTERMEDIATE
--------------------------------------------------------------------------------
MUNICIPAL
--------------------------------------------------------------------------------
TRUST
--------------------------------------------------------------------------------
SUPPLEMENT TO PROSPECTUS
DATED FEBRUARY 15, 1994
MAY 31, 1994
FEDERATED SECURITIES CORP.
(LOGO)
---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
4041812A (5/94)
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
OHIO INTERMEDIATE MUNICIPAL TRUST
(A PORTFOLIO OF INTERMEDIATE MUNICIPAL TRUST)
SUPPLEMENT TO PROSPECTUS DATED FEBRUARY 15, 1994
A. Please insert the following "Financial Highlights" table as page 2 of the
prospectus following the "Summary of Fund Expenses" table and before the
section entitled "General Information." In addition, please add the heading
"Financial Highlights" to the Table of Contents after the heading "Summary of
Fund Expenses."
OHIO INTERMEDIATE MUNICIPAL TRUST
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
MAY 31, 1994*
-------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
-----------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------------------------------------------------------
Net investment income 0.15
-----------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.52)
----------------------------------------------------------------------------------- --------
Total from investment operations (0.37)
-----------------------------------------------------------------------------------
LESS DISTRIBUTIONS
-----------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.15)
----------------------------------------------------------------------------------- --------
NET ASSET VALUE, END OF PERIOD $ 9.48
----------------------------------------------------------------------------------- --------
TOTAL RETURN** (3.79%)
-----------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
-----------------------------------------------------------------------------------
Expenses 0.20%(a)
-----------------------------------------------------------------------------------
Net investment income 4.66%(a)
-----------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 3.44%(a)
-----------------------------------------------------------------------------------
SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $3,651
-----------------------------------------------------------------------------------
Portfolio turnover rate 19%
-----------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from November 15, 1993 (date of initial
public offering) to March 31, 1994 (unaudited).
** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
<TABLE>
<C> <S>
(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).
</TABLE>
(See Notes which are an integral part of the Financial Statements)
B. Please insert the following financial statements beginning on page 15 of the
prospectus. In addition, please add the heading "Financial Statements" to the
Table of Contents page immediately before "Addresses."
OHIO INTERMEDIATE MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS
MARCH 31, 1994
(UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
--------- ----------------------------------------------------------- ------- ----------
<C> <C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--98.2%
--------------------------------------------------------------------------
OHIO--98.2%
-----------------------------------------------------------
$200,000 Cincinnati Student Loan Funding Corp., 5.125% Revenue Bonds
(Subject to AMT)/(AMBAC Insured), 12/1/2005 AAA $ 191,926
-----------------------------------------------------------
100,000 Columbus, OH, Water System, 6.375% Refunding Revenue Bonds
(Series 1991)/(Original Issue Yield: 6.65%), 11/1/2010 AA- 102,916
-----------------------------------------------------------
155,000 Cuyahoga County, OH, 4.90%, 10/1/2004 Aa 147,182
-----------------------------------------------------------
400,000 Cuyahoga County, OH, 5.00% Hospital Revenue Bonds (Fairview
General Hospital)/(Original Issue Yield: 5.10%), 8/15/2004 A1 369,200
-----------------------------------------------------------
100,000 Franklin County, OH, 6.40% Hospital Revenue Bonds (Mt.
Carmel--Holy Cross Health System)/(Original Issue Yield:
6.49%), 6/1/2003 AA- 104,426
-----------------------------------------------------------
</TABLE>
<TABLE>
<C> <C> <S> <C> <C>
500,000 Franklin County, OH, 7.60% Hospital Facility Refunding and
Improvement Revenue Bonds (Riverside United Methodist
Hospital)/(Prerefunded), 5/15/2000 (@102) Aa 571,085
-----------------------------------------------------------
125,000 Fremont, OH, Water Treatment Plant Expansion, 4.95% GO
Bonds (Series 1994)/(MBIA Insured), 12/1/2003 AAA 120,341
-----------------------------------------------------------
140,000 Hamilton, OH, 4.60% Gas System Revenue Bonds (Series A)/
(MBIA Insured)/(Original Issue Yield: 4.70%), 10/15/2005 Aaa 126,553
-----------------------------------------------------------
</TABLE>
OHIO INTERMEDIATE MUNICIPAL TRUST
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
--------- ----------------------------------------------------------- ------- ----------
<C> <C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
--------------------------------------------------------------------------
OHIO--CONTINUED
-----------------------------------------------------------
260,000 Lakewood, OH, 6.00% Hospital Improvement Revenue Bonds
(Lakewood Hospital)/(BIGI Insured)/(Original Issue Yield:
6.90%), 2/15/2010 Aaa 255,029
-----------------------------------------------------------
</TABLE>
OHIO INTERMEDIATE MUNICIPAL TRUST
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
--------- ----------------------------------------------------------- ------- ----------
<C> <C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
--------------------------------------------------------------------------
OHIO--CONTINUED
-----------------------------------------------------------
$100,000 Lakota (Butler County), OH, Local School District, 4.65% UT
School Improvement Revenue Bonds (Series 1994), 12/1/2003 A1 $ 91,991
-----------------------------------------------------------
100,000 Loveland, OH, City School District, 6.20% UT GO Bonds,
12/1/2003 A 103,967
-----------------------------------------------------------
125,000 Massillon, OH, City School District, 4.50% UT GO Refunding
Bonds (Series 1994)/(Original Issue Yield: 4.60%)/ (AMBAC
Insured), 12/1/2003 AAA 113,526
-----------------------------------------------------------
100,000 Montgomery County, OH, 4.80% Refunding Revenue Bonds
(Series 1994)/(Sisters of Charity Health Care System,
Inc.)/ (Original Issue Yield: 4.90%), 5/15/2004 AA- 93,362
-----------------------------------------------------------
100,000 Ohio State HEFA, 4.70% Revenue Bonds (John Carroll
University), 11/15/2003 A 92,038
-----------------------------------------------------------
150,000 Ohio State Water Development Authority, 5.75% Refunding
Revenue Bonds (Pure Water)/(Original Issue Yield: 5.80%)/
(MBIA Insured), 6/1/2003 AAA 154,618
-----------------------------------------------------------
200,000 Ohio State, Infrastructure & Improvement, 6.50% GO Water
and Sewer Improvement Bonds, 8/1/2004 AA 217,394
-----------------------------------------------------------
200,000 Ohio University, OH, 4.50% General Receipt Bonds (Original
Issue Yield: 4.60%)/(FGIC Insured), 12/1/2003 AAA 185,286
-----------------------------------------------------------
100,000 Pickerington, OH, 4.70% UT GO School Building Construction
& Improvement Bonds (FGIC Insured), 12/1/2004 AAA 92,232
-----------------------------------------------------------
150,000 South Euclid, OH, 4.75% UT GO School Improvement Revenue
Bonds (Lyndhurst City School District)/(FGIC Insured),
12/1/2005 AAA 137,726
-----------------------------------------------------------
125,000 South-Western City School District, OH, 4.65% UT GO School
Facility Bonds (Original Issue Yield: 4.70%)/(MBIA
Insured), 12/1/2004 AAA 114,984
-----------------------------------------------------------
</TABLE>
OHIO INTERMEDIATE MUNICIPAL TRUST
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
--------- ----------------------------------------------------------- ------- ----------
<C> <C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
--------------------------------------------------------------------------
OHIO--CONTINUED
-----------------------------------------------------------
$100,000 University of Cincinnati, OH, 7.00% General Receipt Bonds
(Original Issue Yield: 7.05%), 6/1/2011 AA- $ 108,149
-----------------------------------------------------------
100,000 University of Toledo, OH, 4.70% General Receipt Bonds
(Series 1994)/(FGIC Insured), 6/1/2004 AAA 92,502
----------------------------------------------------------- ----------
TOTAL LONG-TERM MUNICIPAL SECURITIES
(IDENTIFIED COST, $3,813,136) $3,586,433+
----------------------------------------------------------- ----------
</TABLE>
* Please refer to the appendix of the Statement of Additional Information for an
explanation of the credit ratings.
+ The cost of investments for federal tax purposes amounts to $3,813,136. The
net unrealized depreciation on a federal tax basis amounts to $226,703, at
March 31, 1994.
Note:
The categories of investments are shown as a percentage of net assets
($3,650,917) at March 31, 1994.
The following abbreviations are used in this portfolio.
<TABLE>
<S> <C>
AMBAC --American Municipal Bond Assurance Corporation
AMT --Alternative Minimum Tax
BIGI --Bond Investors Guaranty Inc.
FGIC --Financial Guaranty Insurance Company
GO --General Obligation
HEFA --Health and Education Facilities Authority
MBIA --Municipal Bond Investors Assurance
UT --Unlimited Tax
</TABLE>
(See Notes which are an integral part of the Financial Statements)
OHIO INTERMEDIATE MUNICIPAL TRUST
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1994
(UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
---------------------------------------------------------------------------------
Investments in securities, at value (Note 2A) (identified and tax cost
$3,813,136) $3,586,433
---------------------------------------------------------------------------------
Receivable for Fund shares sold 263,876
---------------------------------------------------------------------------------
Interest receivable 53,520
---------------------------------------------------------------------------------
Receivable from Adviser (Note 4) 8,000
--------------------------------------------------------------------------------- ----------
Total assets 3,911,829
---------------------------------------------------------------------------------
LIABILITIES:
----------------------------------------------------------------------
Payable for investments purchased $125,103
----------------------------------------------------------------------
Payable to bank 109,872
----------------------------------------------------------------------
Dividends payable (Note 2B) 10,999
----------------------------------------------------------------------
Accrued expenses and other liabilities 14,938
---------------------------------------------------------------------- --------
Total liabilities 260,912
--------------------------------------------------------------------------------- ----------
NET ASSETS for 384,976 shares of beneficial interest outstanding $3,650,917
--------------------------------------------------------------------------------- ----------
NET ASSETS CONSIST OF:
---------------------------------------------------------------------------------
Paid-in capital $3,887,167
---------------------------------------------------------------------------------
Unrealized depreciation of investments (226,703)
---------------------------------------------------------------------------------
Accumulated net realized loss on investments (9,547)
--------------------------------------------------------------------------------- ----------
Total Net Assets $3,650,917
--------------------------------------------------------------------------------- ----------
NET ASSET VALUE, Offering Price, and Redemption Price Per Share
($3,650,917 / 384,976 shares of beneficial interest outstanding) $ 9.48
--------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
OHIO INTERMEDIATE MUNICIPAL TRUST
STATEMENT OF OPERATIONS
PERIOD ENDED MARCH 31, 1994*
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
------------------------------------------------------------------------------------
Interest income (Note 2B) $ 39,663
------------------------------------------------------------------------------------
EXPENSES:
------------------------------------------------------------------------------------
Investment advisory fee (Note 4) $ 4,084
-------------------------------------------------------------------------
Custodian fees 21,986
-------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses (Note 4) 335
-------------------------------------------------------------------------
Shareholder services fees (Note 4) 153
-------------------------------------------------------------------------
Legal fees 1,560
-------------------------------------------------------------------------
Printing and postage 1,100
-------------------------------------------------------------------------
Miscellaneous 500
------------------------------------------------------------------------- -------
Total expenses 29,718
------------------------------------------------------------------------- -------
Deduct--
---------------------------------------------------------------
Waiver of investment advisory fee (Note 4) $ 4,084
---------------------------------------------------------------
Reimbursement of other operating expenses (Note 4) 24,000 28,084
--------------------------------------------------------------- ------- -------
Net expenses 1,634
------------------------------------------------------------------------------------ ---------
Net investment income 38,029
------------------------------------------------------------------------------------ ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
------------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis) (9,547)
------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments (226,703)
------------------------------------------------------------------------------------ ---------
Net realized and unrealized loss on investments (236,250)
------------------------------------------------------------------------------------ ---------
Change in net assets resulting from operations $(198,221)
------------------------------------------------------------------------------------ ---------
</TABLE>
* For the period from November 15, 1993 (date of initial public offering) to
March 31, 1994 (unaudited).
(See Notes which are an integral part of the Financial Statements)
OHIO INTERMEDIATE MUNICIPAL TRUST
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
MAY 31, 1994*
-------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
-----------------------------------------------------------------------
OPERATIONS--
-----------------------------------------------------------------------
Net investment income $ 38,029
-----------------------------------------------------------------------
Net realized gain (loss) on investment transactions ($9,547 net loss as
computed for federal tax purposes) (Note 2C) (9,547)
-----------------------------------------------------------------------
Change in unrealized appreciation (depreciation) on investments (226,703)
----------------------------------------------------------------------- ----------------
Change in net assets resulting from operations (198,221)
----------------------------------------------------------------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2B)--
-----------------------------------------------------------------------
Dividends to shareholders from net investment income (38,029)
----------------------------------------------------------------------- ----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
-----------------------------------------------------------------------
Proceeds from sale of shares 5,844,998
-----------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
dividends declared 6,276
-----------------------------------------------------------------------
Cost of shares redeemed (1,964,107)
----------------------------------------------------------------------- ----------------
Change in net assets from Fund share transactions 3,887,167
----------------------------------------------------------------------- ----------------
Change in net assets 3,650,917
-----------------------------------------------------------------------
NET ASSETS:
-----------------------------------------------------------------------
Beginning of period --
----------------------------------------------------------------------- ----------------
End of period $ 3,650,917
----------------------------------------------------------------------- ----------------
</TABLE>
* For the period from November 15, 1993 (date of initial public offering) to
March 31, 1994 (unaudited).
(See Notes which are an integral part of the Financial Statements)
OHIO INTERMEDIATE MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1994
(UNAUDITED)
--------------------------------------------------------------------------------
(1) ORGANIZATION
Intermediate Municipal Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Trust consists of three, non-diversified portfolios. The financial
statements included herein present only those of Ohio Intermediate Municipal
Trust (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which the shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles (GAAP).
A. 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 market factors or market data
it deems relevant in determining valuations for normal institutional size
trading units of debt securities. The independent pricing service does not
rely exclusively on quoted prices. Short-term securities with remaining
maturities of sixty days or less may be stated at amortized cost, which
approximates value.
B. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount are amortized as required by the
Internal Revenue Code ("Code"). Distributions to shareholders are recorded on
the ex-dividend date.
C. 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 tax-exempt income.
Accordingly, no provisions for federal income tax are necessary.
D. 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.
E. OTHER--Investment transactions are accounted for on the trade date.
OHIO INTERMEDIATE MUNICIPAL TRUST
--------------------------------------------------------------------------------
(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).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
MAY 31, 1994*
--------------
<S> <C>
Shares outstanding, beginning of period --
---------------------------------------------------------------------------
Shares sold 579,733
---------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 641
---------------------------------------------------------------------------
Shares redeemed (195,398)
--------------------------------------------------------------------------- ------------
Shares outstanding, end of period 384,976
--------------------------------------------------------------------------- ------------
</TABLE>
* For the period from November 15, 1993 (date of initial public offering) to
March 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
ADVISORY FEE--Federated Management, the Fund's investment adviser ("Adviser"),
receives for its services an annual investment advisory fee equal to .50 of 1%
of the Fund's average daily net assets. The Adviser may voluntarily choose to
waive its fee and reimburse certain operating expenses of the Fund. 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 Fund
administrative personnel and services. Prior to March 1, 1994, these services
were provided at approximate cost. Effective March 1, 1994, the 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 any fiscal year shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares.
SHAREHOLDER SERVICE FEES--Under the terms of a shareholder service agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to .25 of
1% of average net assets for the Fund for the period. This fee is to obtain
certain personal services for shareholders and the maintenance of shareholder
accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Fund. The fee
is based on the size, type, and number of accounts and transactions made by
shareholders.
OHIO INTERMEDIATE MUNICIPAL TRUST
--------------------------------------------------------------------------------
ORGANIZATIONAL EXPENSES--Organizational expenses and start-up administrative
service expenses incurred by the Fund will be borne initially by the Adviser and
are estimated at $30,100 and $31,250, respectively. The Fund has agreed to
reimburse the Adviser for the organizational expenses and start-up
administrative expenses during the five year period following November 15, 1993
(date the Fund first became effective).
17A-7--During the period ended March 31, 1994, pursuant to Rule 17a-7 of the
Investment Company Act of 1940, the Fund engaged in purchase and sale
transactions with other Fund's advised by the Adviser amounting to $3,324,800
and $2,950,000, respectively. These purchases and sales were conducted on an
arms length basis and transacted for cash consideration only, at independent
current market prices and without brokerage commissions, fees, or other
remuneration.
Certain of the Officers and Trustees of the Fund are Officers and Trustees of
the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended March 31, 1994, were as follows:
<TABLE>
<S> <C>
--------------------------------------------------------------------------------
PURCHASES $4,416,217
-------------------------------------------------------------------------------- ----------
SALES $ 586,690
-------------------------------------------------------------------------------- ----------
</TABLE>
FEDERATED SECURITIES CORP.
(LOGO)
--------------------------------------------------------------------------------
Distributor
4041812A (5/94)
OHIO INTERMEDIATE MUNICIPAL TRUST
(A PORTFOLIO OF INTERMEDIATE MUNICIPAL TRUST)
PROSPECTUS
The Shares of Ohio Intermediate Municipal Trust (the "Fund") offered by this
prospectus represent interests in a non-diversified portfolio of securities
which is one of a series of investment portfolios in Intermediate Municipal
Trust (the "Trust"), an open-end management investment company (a mutual fund).
The investment objective of the Fund is to provide current income which is
exempt from federal regular income tax and the personal income taxes imposed by
the State of Ohio. The Fund invests primarily in a portfolio of Ohio municipal
securities, including securities of states, territories and possessions of the
United States which are not issued by or on behalf of the State of Ohio or its
political subdivisions, but which are exempt from federal regular income tax and
Ohio state personal income taxes.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information, dated February
15, 1994, with the Securities and Exchange Commission. The information contained
in the Statement of Additional Information is incorporated by reference into
this prospectus. You may request a copy of the Statement of Additional
Information free of charge by calling 1-800-235-4669. To obtain other
information or to make inquiries about the Fund, contact the Fund at the address
listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated February 15, 1994
TABLE OF CONTENTS
--------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
------------------------------------------------------
GENERAL INFORMATION 2
------------------------------------------------------
INVESTMENT INFORMATION 2
------------------------------------------------------
Investment Objective 2
Investment Policies 2
Acceptable Investments 2
Average Maturity 2
Characteristics 3
Participation Interests 3
Variable Rate Municipal Securities 3
Municipal Leases 4
When-Issued and Delayed
Delivery Transactions 4
Temporary Investments 4
Ohio Municipal Securities 5
Investment Risks 5
Non-Diversification 5
Investment Limitations 6
INTERMEDIATE MUNICIPAL TRUST
INFORMATION 6
------------------------------------------------------
Management of the Trust 6
Board of Trustees 6
Investment Adviser 6
Advisory Fees 6
Adviser's Background 7
Distribution of Fund Shares 7
Administration of the Fund 7
Administrative Services 7
Custodian 7
Transfer Agent and Dividend
Disbursing Agent 7
Legal Counsel 8
Independent Public Accountants 8
Expenses of the Fund 8
NET ASSET VALUE 8
------------------------------------------------------
INVESTING IN THE FUND 8
------------------------------------------------------
Share Purchases 8
By Wire 8
By Mail 8
Subaccounting Services 9
Minimum Investment Required 9
What Shares Cost 9
Exchanging Securities for Fund Shares 9
Certificates and Confirmations 10
Dividends and Distributions 10
Capital Gains 10
REDEEMING SHARES 10
------------------------------------------------------
By Telephone 10
By Mail 10
Signatures 11
Accounts with Low Balances 11
SHAREHOLDER INFORMATION 11
------------------------------------------------------
Voting Rights 11
Massachusetts Partnership Law 12
TAX INFORMATION 12
------------------------------------------------------
Federal Income Tax 12
State of Ohio Income Taxes 13
Other State and Local Taxes 13
PERFORMANCE INFORMATION 14
------------------------------------------------------
ADDRESSES Inside Back Cover
------------------------------------------------------
SUMMARY OF FUND EXPENSES
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)........................................ None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)........................................ None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds as applicable)....................... None
Redemption Fee............................................................... None
Exchange Fee................................................................. None
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee (after waiver)(1)............................................. 0.00%
12b-1 Fee.................................................................... None
Other Expenses (after expense reimbursement)................................. 0.45%
Total Fund Operating Expenses(2)........................................ 0.45%
</TABLE>
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of the management fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum management fee is 0.50%.
(2) The Total Fund Operating Expenses are estimated to be 1.32% absent the
anticipated voluntary waiver of the management fee and the anticipated voluntary
reimbursement of certain other operating expenses.
* Total Operating Expenses are estimated based on average expenses expected to
be incurred during the period ending May 31, 1994. During the course of this
period, expenses may be more or less than the average amount shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "INVESTING IN THE FUND" AND "INTERMEDIATE MUNICIPAL TRUST
INFORMATION." WIRE-TRANSFERRED REDEMPTIONS OF LESS THAN $5,000 MAY BE SUBJECT TO
ADDITIONAL FEES.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
--------------------------------------------------------------------------- ------ -------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming
(1) 5% annual return and (2) redemption at the end of each time period.
As noted in the table above, the Fund charges no contingent deferred
sales charge............................................................. $5 $14
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING MAY 31,
1994.
GENERAL INFORMATION
--------------------------------------------------------------------------------
Intermediate Municipal Trust was established as a Massachusetts business trust
under a Declaration of Trust dated May 31, 1985. The Declaration of Trust
permits the Trust to offer separate series of shares of beneficial interest
representing interests in separate portfolios of securities.
Shares of the Fund are designed for the investment of moneys generally held by
financial institutions in a fiduciary capacity. A minimum initial investment of
$25,000 over a 90-day period is required. The Fund is not likely to be a
suitable investment for non-Ohio taxpayers or retirement plans since it intends
to invest primarily in Ohio municipal securities which are not likely to produce
competitive after-tax yields for such persons and entities compared to other
investments.
Shares are sold and redeemed at net asset value without a sales charge imposed
by the Fund.
INVESTMENT INFORMATION
--------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income exempt from
federal regular income tax and the personal income taxes imposed by the State of
Ohio. Interest income of the Fund that is exempt from federal regular income tax
and Ohio state personal income tax retains its tax-free status when distributed
to the Fund's shareholders. The Fund pursues its investment objective by
investing at least 80% of its net assets in a diversified portfolio of Ohio
municipal securities. The portfolio has a dollar-weighted average maturity of
not less than three or more than ten years. While there is no assurance that the
Fund will achieve its investment objective, it endeavors to do so by following
the investment policies described in this prospectus. The investment objective
and the policy stated above cannot be changed without approval of shareholders.
INVESTMENT POLICIES
The investment policies described below may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Ohio municipal securities in which the Fund invests
are:
- obligations issued by or on behalf of the state of Ohio, its political
subdivisions, or agencies;
- debt obligations of any state, territory, or possession of the United
States, including the District of Columbia, or any political subdivision
of any of these; and
- participation interests, as described below, in any of the above
obligations,
the interest from which is, in the opinion of bond counsel for the issuers or in
the opinion of officers of the Fund and/or the investment adviser to the Fund,
exempt from both federal regular income tax and the personal income taxes
imposed by the State of Ohio.
AVERAGE MATURITY. The dollar-weighted average maturity of the Fund's
portfolio of Ohio municipal securities will not be less than three years or
more than ten years. For purposes of determining the dollar-weighted
average portfolio maturity of the Fund's portfolio, the maturity of
a municipal security will be its ultimate maturity, unless it is probable
that the issuer of the security will take advantage of maturity-shortening
devices such as a call, refunding, or redemption provision, in which case
the maturity date will be the date on which it is probable that the
security will be called, refunded, or redeemed. If the municipal security
includes the right to demand payment, the maturity of the security for
purposes of determining the Fund's dollar-weighted average portfolio
maturity will be the period remaining until the principal amount of the
security can be recovered by exercising the right to demand payment.
CHARACTERISTICS. The municipal securities in which the Fund invests are:
- rated within the three highest ratings for municipal securities by
Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa, or A), Standard &
Poor's Corporation ("Standard & Poor's") (AAA, AA, or A) or by Fitch
Investors Service, Inc. ("Fitch") (AAA, AA, or A);
- guaranteed at the time of purchase by the U.S. government as to the
payment of principal and interest;
- fully collateralized by an escrow of U.S. government securities or other
securities acceptable to the Fund's adviser;
- rated at the time of purchase within Moody's highest short-term municipal
obligation rating (MIG1/VMIG1) or Moody's highest municipal commercial
paper rating (P-1) or Standard & Poor's highest municipal commercial
paper rating (SP-1);
- unrated if, at the time of purchase, other municipal securities of that
issuer are rated A or better by Moody's, Standard & Poor's or Fitch; or
- unrated if determined to be of equivalent quality to one of the foregoing
rating categories by the Fund's investment adviser.
If a security is subsequently downgraded, the adviser will determine
whether it continues to be an acceptable investment; if not, the security
will be sold. A description of the ratings categories is contained in the
Appendix to the Statement of Additional Information.
PARTICIPATION INTERESTS. The Fund may purchase participation interests from
financial institutions such as commercial banks, savings and loan
associations, and insurance companies. These participation interests give
the Fund an undivided interest in Ohio municipal securities. The financial
institutions from which the Fund purchases participation interests
frequently provide or secure irrevocable letters of credit or guarantees to
assure that the participation interests are of high quality. The Board of
Trustees of the Trust will determine that participation interests meet the
prescribed quality standards for the Fund.
VARIABLE RATE MUNICIPAL SECURITIES. Some of the Ohio municipal securities
which the Fund purchases may have variable interest rates. Variable
interest rates are ordinarily stated as a percentage of the prime rate of a
bank or a similar standard, such as the 91-day U.S. Treasury bill rate.
Many variable rate municipal securities are subject to payment of principal
on demand by the Fund in not more than seven days. All variable rate
municipal securities will meet the quality standards for the Fund. The
Fund's investment adviser has been instructed by the Trust's Board of
Trustees to monitor the pricing, quality, and liquidity of the variable
rate municipal securities, including participation interests held by the
Fund on the basis of published financial information and reports of the
rating agencies and other analytical services.
MUNICIPAL LEASES. Also included within the general category of municipal
securities are certain lease obligations or installment purchase contract
obligations and participations therein (hereinafter collectively called
"lease obligations") of municipal authorities or entities. Although lease
obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation is
ordinarily backed by the municipality's covenant to budget for, appropriate
and make the payments due under the lease obligation. Interest on lease
obligations is tax-exempt to the same extent as if the municipality had
issued debt obligations to finance the underlying project or purchase.
However, certain lease obligations contain "non-appropriation" clauses
which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated
for such purpose on a yearly basis. In addition to the "non-appropriation"
risk, these securities represent a relatively new type of financing that
has not yet developed the depth of marketability associated with more
conventional bonds and some lease obligations may be illiquid. Although
"non-appropriation" lease obligations are generally secured by the leased
property, disposition of the property in the event of foreclosure might
prove difficult. In addition, the tax treatment of such obligations in the
event of "non-appropriation" is unclear. The Fund does not invest more than
10% of its total assets in lease obligations that contain
"non-appropriation" clauses.
If the Fund purchases unrated municipal leases, the Trustees will be
responsible for determining, on an ongoing basis, the credit quality of
such leases and the likelihood that such lease will not be cancelled.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase Ohio
municipal securities on a when-issued or delayed delivery basis. In when-issued
and delayed delivery transactions, the Fund relies on the seller to complete the
transaction. The seller's failure to complete the transaction may cause the Fund
to miss a price or yield considered to be advantageous.
TEMPORARY INVESTMENTS. The Fund normally invests in Ohio municipal securities,
as described above. However, from time to time, when the investment adviser
determines that market conditions call for a temporary defensive posture, the
Fund may invest in short-term non-Ohio municipal tax-exempt obligations or
taxable temporary investments. These temporary investments include: notes issued
by or on behalf of municipal or corporate issuers; obligations issued or
guaranteed by the U.S. government, its agencies, or instrumentalities; other
debt securities; commercial paper; certificates of deposit of banks; and
repurchase agreements (arrangements in which the organization selling the Fund a
bond or temporary investment agrees at the time of sale to repurchase it at a
mutually agreed upon time and price).
There are no rating requirements applicable to temporary investments with the
exception of temporary municipal securities which are subject to the same rating
requirements as all other municipal securities in which the Fund invests.
However, the investment adviser will limit temporary investments to those it
considers to be of comparable quality to the acceptable investments in the Fund.
Although the Fund is permitted to make taxable, temporary investments, there is
no current intention of generating income subject to federal regular income tax
or Ohio state personal income taxes.
OHIO MUNICIPAL SECURITIES
Ohio municipal securities are generally issued to finance public works, such as
airports, bridges, highways, housing, hospitals, mass transportation projects,
schools, streets, and water and sewer works. They are also issued to repay
outstanding obligations, to raise funds for general operating expenses, and to
make loans to other public institutions and facilities.
Ohio municipal securities include industrial development bonds issued by or on
behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. However, interest on and principal of revenue bonds, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Ohio municipal securities depend on a variety of factors, including:
the general conditions of the municipal bond market; the size of the particular
offering; the maturity of the obligations; and the rating of the issue. Further,
any adverse economic conditions or developments affecting the state of Ohio or
its municipalities could impact the Fund's portfolio. The State of Ohio and
certain underlying municipalities face potential economic problems over the
longer term. The state economy has grown more slowly than that of the nation as
a whole, resulting in a gradual erosion of its relative economic affluence. The
causes of this relative decline are varied and complex, involving in many cases
national and international demographic and economic trends beyond the influence
of the state. The ability of the Fund to achieve its investment objective also
depends on the continuing ability of the issuers of Ohio municipal securities
and participation interests, or the guarantors of either, to meet their
obligations for the payment of interest and principal when due. Investing in
Ohio municipal securities which meet the Fund's quality standards may not be
possible if the State of Ohio or its municipalities do not maintain their
current credit ratings. In addition, certain Ohio constitutional amendments,
legislative measures, executive orders, administrative regulations, and voter
initiatives could result in adverse consequences affecting Ohio municipal
securities.
NON-DIVERSIFICATION
The Fund is a non-diversified investment portfolio. As such, there is no limit
on the percentage of assets which can be invested in any single issuer. An
investment in the Fund, therefore, will entail greater risk than would exist in
a diversified portfolio of securities because the higher percentage of
investments among fewer issuers may result in greater fluctuation in the total
market value of the Fund's portfolio. Any economic, political, or regulatory
developments affecting the value of the securities in the Fund's portfolio will
have a greater impact on the total value of the portfolio than would be case if
the portfolio were diversified among more issuers.
The Fund intends to comply with Subchapter M of the Internal Revenue Code. This
undertaking requires that at the end of each quarter of the taxable year, with
regard to at least 50% of the Fund's total assets, no more than 5% of its total
assets are invested in the securities of a single issuer; beyond that no more
than 25% of its total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a percentage of
its cash value with an agreement to buy it back on a set date) or pledge
securities except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets and pledge up to 10% of the value of
those assets to secure such borrowings. The Fund does not intend to make any
borrowings during the coming fiscal year.
The above investment limitation cannot be changed without shareholder approval.
The following limitation, however, can be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in this limitation becomes effective.
The Fund will not invest more than 15% of its net assets in securities which are
illiquid, including repurchase agreements providing for settlement in more than
seven days after notice, and restricted securities determined by the Trustees
not to be liquid.
INTERMEDIATE MUNICIPAL TRUST INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Board of
Trustees is responsible for managing the business affairs of the Trust and for
exercising all of the powers of the Trust except those reserved for the
shareholders. An Executive Committee of the Board of Trustees handles the
Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser (the "Adviser"), subject to direction
by the Trustees. The Adviser continually conducts investment research and
supervision for the Fund and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the Fund.
ADVISORY FEES. The Fund's Adviser receives an annual investment advisory fee
equal to .50 of 1% of the Fund's average daily net assets. Under the
investment advisory contract, the Adviser may reimburse the Fund the amount,
limited to the amount of the advisory fee, by which the Fund's aggregate
annual operating expenses, including its investment advisory fee but
excluding interest, taxes, brokerage commissions, insurance premiums,
expenses of registering and qualifying the Fund and its shares under federal
and state laws, expenses of withholding taxes, and extraordinary expenses,
exceed a certain percentage of its average daily net assets. This does not
include reimbursement to the Fund of any expenses incurred by shareholders
who use the transfer agent's subaccounting facilities. The Adviser can
terminate this voluntary reimbursement of expenses at any time at its sole
discretion. The Adviser has also undertaken to reimburse the Fund for
operating expenses in excess of limitations established by certain states.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the Trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Jonathan C. Conley has been the Fund's co-portfolio manager since the
Fund's inception. Mr. Conley joined Federated Investors in 1979 and has
been a Vice President of the Trust's investment adviser since 1982. Mr.
Conley is a Chartered Financial Analyst and received his M.B.A. in Finance
from the University of Virginia.
J. Scott Albrecht has been the Fund's co-portfolio manager since the Fund's
inception. Mr. Albrecht joined Federated Investors in 1989 and has been an
Assistant Vice President of the Trust's investment adviser since 1992. From
1989 until 1991, Mr. Albrecht acted as an investment analyst. Mr. Albrecht
was a municipal credit analyst at Mellon Bank, N.A. from 1985 until 1989.
Mr. Albrecht is a Chartered Financial Analyst and received his M.S. in
Management from Carnegie Mellon University.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors is
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the principal distributor for shares of the Fund.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, Inc., a subsidiary
of Federated Investors, provides the Fund with the administrative personnel and
services necessary to operate the Fund. Such services include shareholder
servicing and certain legal and accounting services. Federated Administrative
Services, Inc. provides these at approximate cost.
CUSTODIAN. State Street Bank and Trust Company ("State Street Bank"), Boston,
Massachusetts, is custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company (the
"Transfer Agent" of "FSC"), Pittsburgh, Pennsylvania is transfer agent for the
shares of the Fund, and dividend disbursing agent for the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, Washington, D.C.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Fund
are Arthur Andersen & Co., Pittsburgh, Pennsylvania.
EXPENSES OF THE FUND
Holders of shares pay their allocable portion of Fund and Trust expenses.
The Trust expenses for which shareholders pay their allocable portion include,
but are not limited to: the cost of organizing the Trust and continuing its
existence; registering the Trust with federal and state securities authorities;
Trustees' fees; auditors' fees; the cost of meetings of Trustees; legal fees of
the Trust; association membership dues; and such non-recurring and extraordinary
items as may arise.
The Fund expenses for which shareholders pay their allocable portion include,
but are not limited to: registering the Fund and shares of the Fund; investment
advisory services; taxes and commissions; custodian fees; insurance premiums;
auditors' fees; and such non-recurring and extraordinary items as may arise.
NET ASSET VALUE
--------------------------------------------------------------------------------
The Fund's net asset value per share fluctuates. It is determined by dividing
the sum of all securities and other assets, less liabilities, by the total
number of shares outstanding.
INVESTING IN THE FUND
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SHARE PURCHASES
Shares of the Fund are sold on days on which the New York Stock Exchange is open
for business. Shares may be purchased either by wire or mail. The Fund reserves
the right to reject any purchase request.
To purchase shares of the Fund, open an account by calling Federated Securities
Corp. Information needed to establish the account will be taken over the
telephone.
BY WIRE. To purchase shares of the Fund by Federal Reserve wire, call the Fund
before 4:00 P.M. (Eastern time) to place an order. The order is considered
received immediately. Payment by federal funds must be received before 3:00 P.M.
(Eastern time) on the next business day following the order. Federal funds
should be wired as follows: State Street Bank and Trust Company, Boston,
Massachusetts; Attention: EDGEWIRE; For Credit to: Ohio Intermediate Municipal
Trust; Fund Number (this number can be found on the Account Statement or by
contacting the Fund); Group Number or Order Number; Nominee or Institution Name:
ABA Number 011000028. Shares cannot be purchased on days on which the New York
Stock Exchange is closed and on federal holidays restricting wire transfers.
BY MAIL. To purchase shares of the Fund by mail, send a check made payable to
Ohio Intermediate Municipal Trust to State Street Bank and Trust Company, P.O.
Box 8602, Boston, Massachusetts
02266-8602. Orders by mail are considered received when payment by check is
converted by State Street Bank into federal funds. This is normally the next
business day after State Street Bank receives the check.
SUBACCOUNTING SERVICES
Financial institutions are encouraged to open single master accounts. However,
certain financial institutions may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Financial institutions holding shares in a fiduciary, agency,
custodial, or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services provided which may be related to the ownership of
shares of the Fund. This prospectus should, therefore, be read together with any
agreement between the customer and the institution with regard to the services
provided, the fees charged for those services, and any restrictions and
limitations imposed.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $25,000, plus any non-affiliated
bank or broker's fee, if applicable. However, an account may be opened with a
smaller amount as long as the $25,000 minimum is reached within 90 days. An
institutional investor's minimum investment will be calculated by combining all
accounts it maintains with the Fund.
Individual accounts established through a bank or broker may be subject to a
different minimum investment requirement.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund. Investors who purchase
shares through a non-affiliated bank or broker may be charged an additional
service fee by that bank or broker.
The net asset value is determined at 4:00 P.M. (Eastern time), Monday through
Friday, except on: (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no Shares are tendered for
redemption and no orders to purchase shares are received; or (iii) on the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange certain municipal securities or a combination of
securities and cash for Fund shares. The securities and cash must have a market
value of at least $25,000. The Fund reserves the right to determine the
acceptability of the securities to be exchanged. Securities accepted by the Fund
are valued in the same manner as the Fund values its assets. Shareholders
wishing to exchange securities should first contact Federated Securities Corp.
Shares purchased by exchange of municipal securities cannot be redeemed by
telephone for five business days to allow time for the transfer to settle.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, FSC maintains a share account for each
shareholder. Share certificates are not issued unless requested in writing.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during that
month.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared daily and paid monthly to all shareholders invested in
the Fund on the record date. Dividends and distributions are automatically
reinvested in additional shares of the Fund on payment dates at the ex-dividend
date net asset value, unless shareholders request cash payments on the new
account form or by writing to FSC. All shareholders on the record date are
entitled to the dividend.
CAPITAL GAINS
Distributions of net realized long-term capital gains realized by the Fund, if
any, will be made at least once every twelve months.
REDEEMING SHARES
--------------------------------------------------------------------------------
The Fund redeems shares at their net asset value next determined after State
Street Bank receives the redemption request. Redemptions will be made on days on
which the Fund computes its net asset value. Redemption requests must be
received in proper form and can be made by telephone request or by written
request.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as by mail, should be considered.
BY TELEPHONE. Shareholders may redeem their shares by telephoning the Fund
before 4:00 P.M. (Eastern time). All proceeds will normally be wire transferred
the following business day, but in no event more than seven days, to the
shareholder's account at a domestic commercial bank that is a member of the
Federal Reserve System. If at any time, the Fund shall determine it necessary to
terminate or modify this method of redemption, shareholders would be promptly
notified. Telephone redemption instructions may be recorded. If reasonable
procedures are not followed by the Fund, it may be liable for losses due to
unauthorized or fraudulent telephone instructions.
An authorization form permitting the Fund to accept telephone redemption
requests must first be completed. It is recommended that investors request this
privilege at the time of their initial application. If not completed at the time
of initial application, authorization forms and information on this service can
be obtained through Federated Securities Corp.
BY MAIL. Shareholders may redeem shares by sending a written request to the
Fund. The written request should include the shareholder's name, the Fund name,
the account number, and the share or
dollar amount requested. If share certificates have been issued, they must be
properly endorsed and should be sent by registered or certified mail with the
written request.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges;
- a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
- any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed to the shareholder within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request provided State Street Bank has received payment for
Shares from the shareholder.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum value of $25,000 due to
shareholder redemptions. This requirement does not apply, however, if the
balance falls below $25,000 because of changes in the Fund's net asset value.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
--------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights except that in matters
affecting only a particular fund or class, only shares of that fund or class are
entitled to vote.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust's or the Fund's operation and for the election of Trustees
under certain circumstances. Trustees may be removed by the Trustees or by
shareholders at a special meeting. A special meeting of the shareholders for
this purpose shall be called
by the Trustees upon the written request of shareholders owning at least 10% of
the outstanding shares of all series in the Trust entitled to vote.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust on behalf
of the Fund. To protect shareholders of the Fund, the Trust has filed legal
documents with Massachusetts that expressly disclaim the liability of
shareholders of the Fund for such acts or obligations of the Trust. These
documents require notice of this disclaimer to be given in each agreement,
obligation, or instrument that the Trust or its Trustees enter into or sign on
behalf of the Fund.
In the unlikely event a shareholder of the Fund is held personally liable for
the Trust's obligations on behalf of the Fund, the Trust is required to use the
property of the Fund to protect or compensate the shareholder. On request, the
Trust will defend any claim made and pay any judgment against a shareholder of
the Fund for any act or obligation of the Trust on behalf of the Fund.
Therefore, financial loss resulting from liability as a shareholder of the Fund
will occur only if the Trust cannot meet its obligations to indemnify
shareholders and pay judgments against them from the assets of the Fund.
TAX INFORMATION
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FEDERAL INCOME TAX
The Fund does not expect to pay federal income tax because it expects to meet
requirements of the Internal Revenue Code, as amended, applicable to regulated
investment companies and to receive the special tax treatment afforded to such
companies. The Fund will be treated as a single, separate entity for federal
income tax purposes so that income (including capital gains) and losses realized
by the Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
Shareholders are not required to pay federal regular income tax on any dividends
received from the Fund that represent net interest on tax-exempt municipal
bonds. However, under the Tax Reform Act of 1986, dividends representing net
interest income earned on some municipal bonds may be included in calculating
the federal individual alternative minimum tax or the federal alternative
minimum tax for corporations.
The alternative minimum tax, up to 28% of alternative minimum taxable income for
individuals and 20% for corporations, applies when it exceeds the regular tax
for the taxable year. Alternative minimum taxable income is equal to the regular
taxable income of the taxpayer increased by certain "tax preference" items not
included in regular taxable income and reduced by only a portion of the
deductions allowed in the calculation of the regular tax.
The Tax Reform Act of 1986 treats interest on certain "private activity" bonds
issued after August 7, 1986, as a tax preference item for both individuals and
corporations. Unlike traditional governmental purpose municipal bonds, which
finance roads, schools, libraries, prisons, and other public facilities, private
activity bonds provide benefits to private parties. The Fund may purchase all
types of municipal bonds, including private activity bonds. Thus, should it
purchase any such bonds, a portion of the Fund's dividends may be treated as a
tax preference item.
In addition, in the case of a corporate shareholder, dividends of the Fund which
represent interest on municipal bonds will become subject to the 20% corporate
alternative minimum tax because the dividends are included in a corporation's
"adjusted current earnings." The corporate alternative minimum tax treats 75% of
the excess of a taxpayer's pre-tax "adjusted current earnings" over the
taxpayer's alternative minimum taxable income as a tax preference item.
"Adjusted current earnings" is based upon the concept of a corporation's
"earnings and profits." Since "earnings and profits" generally includes the full
amount of any Fund dividend, and alternative minimum taxable income does not
include the portion of the Fund's dividend attributable to municipal bonds which
are not private activity bonds, the difference will be included in the
calculation of the corporation's alternative minimum tax.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares. Information on the tax status of dividends and distributions
is provided annually.
STATE OF OHIO INCOME TAXES
Dividends of the Fund representing interest from obligations held by the Fund
which are issued by the state of Ohio or its subdivisions, which interest is
exempt from federal regular income tax when received by a shareholder, will also
be exempt from the Ohio individual income tax. Dividends of the Fund
representing interest from obligations held by the Fund which are issued by the
state of Ohio or its subdivisions would also be exempt from any Ohio municipal
income tax even if the municipality is permitted under current Ohio law to levy
a tax on intangible income.
OTHER STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from state income taxes in states
other than Ohio or from personal property taxes. State laws differ on this
issue, and shareholders are urged to consult their own tax advisers regarding
the status of their accounts under state and local tax laws.
PERFORMANCE INFORMATION
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From time to time the Fund advertises its total return, yield and tax-equivalent
yield.
Total return represents the change, over a specific period of time, in the value
of an investment in the Fund after reinvesting all income and capital gains
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the
shares of the Fund over a thirty-day period by the offering price per share of
the shares of the Fund on the last day of the period. This number is then
annualized using semi-annual compounding. The tax-equivalent yield of the shares
of the Fund is calculated similarly to the yield, but is adjusted to reflect the
taxable yield that the shares of the Fund would have had to earn to equal its
actual yield, assuming a specific tax rate. The yield and the tax-equivalent
yield do not necessarily reflect income actually earned by the shares of the
Fund and, therefore, may not correlate to the dividends or other distributions
paid to shareholders.
[THIS PAGE INTENTIONALLY LEFT BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
ADDRESSES
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<TABLE>
<S> <C> <C>
Ohio Intermediate Municipal Trust Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
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Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8602
Trust Company Boston, Massachusetts 02266-8602
------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen & Co. 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
------------------------------------------------------------------------------------------------
</TABLE>
OHIO INTERMEDIATE
MUNICIPAL TRUST
PROSPECTUS
A Non-Diversified Portfolio of
Intermediate Municipal Trust
an Open-End, Management
Investment Company
February 15, 1994
FEDERATED SECURITIES CORP.
(LOGO)
---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
3081602A (2/94)
OHIO INTERMEDIATE MUNICIPAL TRUST
(A Portfolio of Intermediate Municipal Trust)
--------------------------------------------------------------------------------
SUPPLEMENT TO STATEMENT OF ADDITIONAL INFORMATION DATED FEBRUARY 15, 1994
A. Please insert the following section after the section entitled "Reverse
Repurchase Agreements" which begins on page 2:
"Portfolio Turnover"
The Fund may trade or dispose of portfolio securities as considered
necessary to meet its investment objective. For the period from November
15, 1993 (date of initial public offering) to March 31, 1994, the
portfolio turnover rate for the Fund was 19%."
B. Please insert the following information as a second paragraph under the
section entitled "Fund Ownership" on page 7:
"As of May 9, 1994, the following shareholders of record owned 5% or
more of the outstanding shares of the Fund: Federated Disbursing Corp.,
Pittsburgh, Pennsylvania, owned approximately 81,886 (22.06%) Shares;
Holdon, The Ohio Bank, Findlay, Ohio, owned approximately 70,040
(18.86%) Shares and approximately 27,186 (7.32%) Shares in separate
accounts; SNBSO & Co., Security National Bank and Trust Company,
Springfield, Ohio, owned approximately 69,587 (18.74%) Shares; Grand Old
Co., The First National Bank, Zanesville, Ohio, owned approximately
42,283 (11.39%) Shares; and Mattco, Mahoning National Bank, Youngstown,
Ohio, owned approximately 24,176 (6.18%) Shares.
C. Please insert the following sub-section after the sub-section entitled
"Adviser to the Fund" under the main section entitled "Investment
Advisory Services" on page 7:
"Advisory Fees
For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectus.
During the period from November 15, 1993 (date of initial public
offering) to March 31, 1994, the Fund's Adviser earned advisory fees of
$4,084, all of which was voluntarily waived. In addition, the Adviser
reimbursed other operating expenses of $24,000."
D. Please insert the following section after the section entitled "Tax
Status" on page 9:
"Total Return"
The Fund's cumulative total return from November 15, 1993 (date of
initial public offering) to March 31, 1994 was (3.79%). Cumulative total
return reflects the Fund's total performance over a specific period of
time. The Fund's total return is representative of only four months of
investment activity since the Fund's effective date.
The average annual total return for the Fund is the average compounded
rate of return for a given period that would equate a $1,000 initial
investment to the ending redeemable value of that investment. The ending
redeemable value is computed by multiplying the number of shares owned
at the end of the period by the maximum offering price per share at the
end of the period. The number of shares owned at the end of the period
is based on the number of shares purchased at the beginning of the
period with $1,000, adjusted over the period by any additional shares,
assuming the monthly reinvestment of all dividends and distributions.
E. Please insert the following information as the first paragraph under the
section entitled "Yield" on page 10:
"The Fund's yield for the thirty-day and seven-day period ended March
31, 1994, was 4.96% and 4.89% respectively."
F. Please insert the following information as the first paragraph under the
section entitled "Tax-Equivalent Yield" on page 10:
"The Fund's tax-equivalent yield for the thirty-day and seven-day period
ended March 31, 1994, was 6.89% and 6.79%, respectively."
May 31, 1994
FEDERATED SECURITIES CORP.
(LOGO)
--------------------------------------------------------------------------------
Distributor
004331-A (5/94)
OHIO INTERMEDIATE MUNICIPAL TRUST
(A PORTFOLIO OF INTERMEDIATE MUNICIPAL TRUST)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus of
Ohio Intermediate Municipal Trust (the "Fund") dated February 15, 1994. This
Statement is not a prospectus itself. To receive a copy of the prospectus write
or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated February 15, 1994
FEDERATED SECURITIES CORP.
(LOGO)
---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
--------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
---------------------------------------------------------------
Acceptable Investments 1
When-Issued and Delayed
Delivery Transactions 2
Temporary Investments 2
Investment Limitations 3
Investment Risks 4
MANAGEMENT OF INTERMEDIATE MUNICIPAL TRUST 5
---------------------------------------------------------------
Officers and Trustees 5
Fund Ownership 7
The Funds 7
Trustee Liability 7
INVESTMENT ADVISORY SERVICES 7
---------------------------------------------------------------
Adviser to the Fund 7
ADMINISTRATIVE SERVICES 8
---------------------------------------------------------------
BROKERAGE TRANSACTIONS 8
---------------------------------------------------------------
PURCHASING SHARES 8
---------------------------------------------------------------
Conversion to Federal Funds 8
DETERMINING NET ASSET VALUE 8
---------------------------------------------------------------
Valuing Municipal Bonds 8
Use of Amortized Cost 9
REDEEMING SHARES 9
---------------------------------------------------------------
Redemption in Kind 9
TAX STATUS 9
---------------------------------------------------------------
The Fund's Tax Status 9
Shareholder's Tax Status 9
YIELD 10
---------------------------------------------------------------
TAX-EQUIVALENT YIELD 10
---------------------------------------------------------------
Tax-Equivalency Table 10
PERFORMANCE COMPARISONS 11
---------------------------------------------------------------
APPENDIX 12
---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
--------------------------------------------------------------------------------
The Fund is a portfolio in Intermediate Municipal Trust (the "Trust"). The Trust
was established as a Massachusetts business trust under a Declaration of Trust
dated May 31, 1985.
INVESTMENT OBJECTIVE AND POLICIES
--------------------------------------------------------------------------------
The Fund's investment objective is to provide current income which is exempt
from federal regular income tax and personal income taxes imposed by the State
of Ohio. The investment objective cannot be changed without approval of
shareholders.
ACCEPTABLE INVESTMENTS
The Fund invests primarily in a portfolio of municipal securities which are
exempt from federal regular income tax and Ohio state personal income taxes .
These securities include those issued by or on behalf of the State of Ohio and
Ohio municipalities, and those issued by states, territories, and possessions of
the United States which are exempt from both federal regular income tax and Ohio
state personal income taxes.
CHARACTERISTICS
The Ohio municipal securities in which the Fund invests have the
characteristics set forth in the prospectus.
An Ohio municipal security will be determined by the Fund's adviser to
meet the quality standards established by the Fund's Board of Trustees if
it is of comparable quality to municipal securities within the Fund's
rating requirements. The Trustees consider the creditworthiness of the
issuer of a municipal security, the issuer of a participation interest if
the Fund has the right to demand payment from the issuer of the interest,
or the guarantor of payment by either of those issuers. The Fund is not
required to sell a municipal security if the security's rating is reduced
below the required minimum subsequent to its purchase by the Fund. The
investment adviser considers this event, however, in its determination of
whether the Fund should continue to hold the security in its portfolio.
If Moody's Investors Service, Inc., Standard & Poor's Corporation or
Fitch Investor Services, Inc. ratings change because of changes in those
organizations or in their rating systems, the Fund will try to use
comparable ratings as standards in accordance with the investment
policies described in the Fund's prospectus.
TYPES OF ACCEPTABLE INVESTMENTS
Examples of Ohio municipal securities are:
- municipal notes and municipal commercial paper;
- serial bonds sold with differing maturity dates;
- tax anticipation notes sold to finance working capital needs of
municipalities;
- bond anticipation notes sold prior to the issuance of long-term bonds;
- pre-refunded municipal bonds; and
- general obligation bonds secured by a municipality pledge of taxation.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Fund the right
to demand payment of the principal amounts of the participation interests
plus accrued interest on short notice (usually within seven days).
VARIABLE RATE MUNICIPAL SECURITIES
Variable interest rates generally reduce changes in the market value of
municipal securities from their original purchase prices. Accordingly, as
interest rates decrease or increase, the potential for capital
appreciation or depreciation is less for variable rate municipal
securities than for fixed income obligations. Many municipal securities
with variable interest rates purchased by the Fund are subject to
repayment of principal (usually within seven days) on the Fund's demand.
The terms of these variable rate demand instruments require payment of
principal and accrued interest from the issuer of the municipal
obligations, the issuer of the participation interests, or a guarantor of
either issuer.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of participation
interests which represent undivided proportional interests in lease
payments by a governmental or non-profit entity. The lease payments and
other rights under the lease provide for and secure the payments on the
certificates. Lease obligations may be limited by municipal charter or
the nature of the appropriation for the lease. In particular, lease
obligations may be subject to periodic appropriation. If the entity does
not appropriate funds for future lease payments,
--------------------------------------------------------------------------------
the entity cannot be compelled to make such payments. Furthermore, a
lease may provide that the certificate trustee cannot accelerate lease
obligations upon default. The trustee would only be able to enforce lease
payments as they became due. In the event of a default or failure of
appropriation, it is unlikely that the trustee would be able to obtain an
acceptable substitute source of payment.
In determining the liquidity of municipal lease securities, the Fund's
investment adviser, under the authority delegated by the Board of
Trustees ("Trustees"), will base its determination on the following
factors;
- whether the lease can be terminated by the lessee;
- the potential recovery, if any, from a sale of the leased property upon
termination of the lease;
- the lessee's general credit strength (e.g., its debt, administrative,
economic and financial characteristics and prospects);
- the likelihood that the lessee will discontinue appropriating funding
for the leased property because the property is no longer deemed
essential to its operations (e.g., the potential for an "event of non-
appropriation"); and
- any credit enhancement or legal recourse provided upon an event of
non-appropriation or other termination of the lease.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The Fund engages in
when-issued and delayed delivery transactions only for the purpose of acquiring
portfolio securities consistent with the Fund's investment objective and
policies, not for investment leverage. These transactions are made to secure
what is considered to be an advantageous price and yield for the Fund.
Settlement dates may be a month or more after entering into these transactions,
and the market values of the securities purchased may vary from the purchase
prices.
No fees or expenses, other than normal transaction costs, are incurred. However,
liquid assets of the Fund sufficient to make payment for the securities to be
purchased are segregated on the Fund's records at the trade date. These assets
are marked to market daily and maintained until the transaction is settled.
The Fund does not intend to engage in these transactions to an extent that would
cause the segregation of more than 20% of the value of its total assets.
TEMPORARY INVESTMENTS
The Fund may also invest in temporary investments during times of unusual market
conditions for defensive purposes.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements in which banks, broker/dealers,
and other recognized financial institutions sell U.S. government
securities or certificates of deposit to the Fund and agree at the time
of sale to repurchase them at a mutually agreed upon time and price
within one year from the date of acquisition. The Fund or its custodian
will take possession of the securities subject to repurchase agreements.
To the extent that the original seller does not repurchase the securities
from the Fund, the Fund could receive less than the repurchase price on
any sale of such securities. In the event that such a defaulting seller
filed for bankruptcy or became insolvent, disposition of such securities
by the Fund might be delayed pending court action. The Fund believes that
under the regular procedures normally in effect for custody of the Fund's
portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of the Fund and allow
retention or disposition of such securities. The Fund may only enter into
repurchase agreements with banks and other recognized financial
institutions such as broker/dealers which are found by the Fund's adviser
to be creditworthy pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. This
transaction is similar to borrowing cash. In a reverse repurchase
agreement the Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in
return for a percentage of the instrument's market value in cash, and
agrees that on a stipulated date in the future the Fund will repurchase
the portfolio instrument by remitting the original consideration plus
interest at an agreed upon rate. The use of reverse repurchase agreements
may enable the Fund to avoid selling portfolio instruments at a time when
a sale may be deemed to be disadvantageous, but the ability to enter into
reverse repurchase agreements does not ensure that the Fund will be able
to avoid selling portfolio instruments at a disadvantageous time.
--------------------------------------------------------------------------------
When effecting reverse repurchase agreements, liquid assets of the Fund,
in a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated on the Fund's records at the trade date. These
assets are marked to market daily and are maintained until the
transaction is settled.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as may be necessary for
clearance of purchases and sales of securities.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money and engage in reverse repurchase agreements in amounts up to
one-third of the value of its total assets, including the amounts
borrowed.
The Fund will not borrow money or engage in reverse repurchase agreements
for investment leverage, but rather as a temporary, extraordinary, or
emergency measure or to facilitate management of the portfolio by
enabling the Fund to meet redemption requests when the liquidation of
portfolio securities is deemed to be inconvenient or disadvantageous. The
Fund will not purchase any securities while borrowings in excess of 5% of
its total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate its assets except to
secure permitted borrowings. In those cases, it may mortgage, pledge, or
hypothecate assets having a market value not exceeding 10% of the value
of its total assets at the time of the pledge.
UNDERWRITING
The Fund will not underwrite any issue of securities except as it may be
deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objective, policies, and limitations.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate or invest in real estate
limited partnerships, although it may invest in municipal bonds secured
by real estate or interests in real estate.
INVESTING IN COMMODITIES
The Fund will not buy or sell commodities, commodity contracts, or
commodities futures contracts.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except that it may acquire
publicly or non-publicly issued municipal bonds or temporary investments
or enter into repurchase agreements in accordance with its investment
objective, policies, and limitations or its Declaration of Trust.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such purchase,
25% or more of the value of its total assets would be invested in any one
industry or in industrial development bonds or other securities, the
interest upon which is paid from revenues of similar types of projects.
However, the Fund may invest as temporary investments more than 25% of
the value of its assets in cash or cash items, securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities, or
instruments secured by these money market instruments, i.e., repurchase
agreements.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies
except as part of a merger, consolidation, or other acquisition.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE FUND
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Fund or its investment adviser, owning
individually more than 1/2 of 1% of the issuer's securities, together own
more than 5% of the issuer's securities.
--------------------------------------------------------------------------------
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in securities
which are illiquid, including repurchase agreements providing for
settlement in more than seven days after notice, and certain restricted
securities not determined by the Trustees to be liquid.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
industrial development bonds where the principal and interest are the
responsibility of companies (or guarantors, where applicable) with less
than three years of continuous operations, including the operation of any
predecessor.
INVESTING IN MINERALS
The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, although it may invest in
securities of issuers which invest in or sponsor such programs.
In addition, to comply with investment restrictions of a certain state, the Fund
will not invest in real estate limited partnerships.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
For purposes of its policies and limitations, the Fund considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic bank
or savings and loan having capital, surplus, and undivided profits in excess of
$100,000,000 at the time of investment to be "cash items."
INVESTMENT RISKS
The economy of the State of Ohio is reliant in part on durable goods
manufacturing, largely concentrated in motor vehicles and equipment, steel,
rubber products and household appliances. During the past decade, competition in
various industries in the State of Ohio has changed from being domestic to
international in nature. In addition, these industries may be characterized as
having excess capacity in particular product segments. The steel industry, in
particular, and the automobile industry, to a lesser extent, share these
characteristics. Because the State of Ohio and certain underlying municipalities
have large exposure to these industries and their respective aftermarkets,
trends in these industries may, over the long term, impact the demographic and
financial position of the State of Ohio and its municipalities. To the degree
that domestic manufacturers in industries to which Ohio municipalities have
exposure fail to make competitive adjustments, employment statistics and
disposable income of residents in Ohio may deteriorate, possibly leading to
population declines and erosion of municipality tax bases.
Both the economic trends above and the political climate in various
municipalities may have contributed to the decisions of various businesses and
individuals to relocate outside the State. A municipality's political climate in
particular may affect its own credit standing. For both the State of Ohio and
underlying Ohio municipalities, adjustment of credit ratings by the rating
agencies may affect the ability to issue securities and thereby affect the
supply of obligations meeting the quality standards for investment by the Fund.
The recent recession in the United States has had an adverse effect on both the
economy in Ohio and the financial condition of the State of Ohio and its
underlying municipalities. The Ohio Office of Budget and Management ("OBM")
projected a Fiscal Year 1993 imbalance in General Revenue Fund ("GRF") resources
and expenditures which require prompt action. Expenditures were estimated to
exceed receipts by approximately $520 million. As a first step, the Governor
ordered selected reductions in Fiscal Year 1993 GRF appropriation spending
totalling $315.6 million. Those selected GRF reductions excluded, among others,
appropriations for debt service (including lease rental payments) and for
primary and secondary education. In fiscal 1992, the Ohio legislature agreed on
a Fiscal Year 1993 balanced budget plan to correct the $250 million shortfall by
enacting $50 million of spending cuts and $200 million in revenues from tax
revisions. These revenue anchors are expected to provide $900 million in new
revenue for the 1994-95 biennium. Much of the new revenues will go to offset the
projected increases in Medicaid Costs of 11.7% in 1994 and 10.2% in 1995.
Additionally, budget balancing actions over the recent years have completely
exhausted the Budget Stabilization Fund.
The State has established procedures for municipal fiscal emergencies under
which joint state/local commissions are established to monitor the fiscal
affairs of a financially troubled municipality. When these procedures are
invoked, the municipality must develop a financial plan to eliminate deficits
and cure any defaults. Since their adoption in 1979, these procedures have been
applied to approximately twenty-one cities and villages, including the City of
Cleveland; in sixteen of these communities, the fiscal situation has been
resolved and the procedures terminated.
The foregoing discussion only highlights some of the significant financial
trends and problems affecting the State of Ohio and underlying municipalities.
MANAGEMENT OF INTERMEDIATE MUNICIPAL TRUST
--------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with Federated Management,
Federated Investors, Federated Securities Corp., Federated Services Company,
Federated Administrative Services, Inc., and the Funds (as defined below).
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------------
John F. Donahue*+ Chairman and Chairman and Trustee, Federated Investors; Chairman and Trustee, Federated
Federated Investors Trustee Advisers, Federated Management, and Federated Research; Director, Aetna Life
Tower and Casualty Company; Chief Executive Officer and Director, Trustee, or
Pittsburgh, PA Managing General Partner of the Funds; formerly, Director, The Standard Fire
Insurance Company. Mr. Donahue is the father of J. Christopher Donahue, Vice
President of the Trust.
--------------------------------------------------------------------------------------------------------------------------------
John T. Conroy, Jr. Trustee President, Investment Properties Corporation; Senior Vice-President, John R.
Wood/IPC Commercial Wood and Associates, Inc., Realtors; President, Northgate Village
Department Development Corporation; General Partner or Trustee in private real estate
John R. Wood and ventures in Southwest Florida; Director, Trustee, or Managing General
Associates, Inc., Partner of the Funds; formerly, President, Naples Property Management, Inc.
Realtors
3255 Tamiami Trail North
Naples, FL
--------------------------------------------------------------------------------------------------------------------------------
William J. Copeland Trustee Director and Member of the Executive Committee, Michael Baker, Inc.;
One PNC Plaza-23rd Floor Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
Pittsburgh, PA Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan
Homes, Inc.
--------------------------------------------------------------------------------------------------------------------------------
James E. Dowd Trustee Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
571 Hayward Mill Road Trustee, or Managing General Partner of the Funds; formerly, Director, Blue
Concord, MA Cross of Massachusetts, Inc.
--------------------------------------------------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
3471 Fifth Avenue Hospitals; Clinical Professor of Medicine and Trustee, University of
Suite 1111 Pittsburgh; Director, Trustee, or Managing General Partner of the Funds.
Pittsburgh, PA
--------------------------------------------------------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+ Trustee Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat'N Park
5916 Penn Mall Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director, Trustee,
Pittsburgh, PA or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
--------------------------------------------------------------------------------------------------------------------------------
Glen R. Johnson* President and Trustee, Federated Investors; President and/or Trustee of some of the funds;
Federated Investors Trustee staff member, Federated Securities Corp. and Federated Administrative
Tower Services Inc.
Pittsburgh, PA
--------------------------------------------------------------------------------------------------------------------------------
Peter E. Madden Trustee Consultant; State Representative, Commonwealth of Massachusetts; Director,
225 Franklin Street Trustee, or Managing General Partner of the Funds; formerly, President,
Boston, MA State Street Bank and Trust Company and State Street Boston Corporation and
Trustee, Lahey Clinic Foundation, Inc.
--------------------------------------------------------------------------------------------------------------------------------
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare, Inc.;
5916 Penn Mall Director, Eat 'N Park Restaurants, Inc.; Director, Trustee, or Managing
Pittsburgh, PA General Partner of the Funds; formerly, Vice Chairman, Horizon Financial,
F.A.
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------------
Wesley W. Posvar Trustee Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
1202 Cathedral of Endowment for International Peace, RAND Corporation, Online Computer Library
Learning Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak Management
University of Pittsburgh Center; Director, Trustee, or Managing General Partner of the Funds;
Pittsburgh, PA President Emeritus, University of Pittsburgh; formerly, Chairman, National
Advisory Council for Environmental Policy and Technology.
--------------------------------------------------------------------------------------------------------------------------------
Marjorie P. Smuts Trustee Public relations/marketing consultant; Director, Trustee, or Managing
4905 Bayard Street General Partner of the Funds.
Pittsburgh, PA
--------------------------------------------------------------------------------------------------------------------------------
J. Christopher Donahue* Vice President President and Trustee, Federated Investors; Trustee, Federated Advisers,
Federated Investors Federated Management, and Federated Research; President and Director,
Tower Federated Administrative Services, Inc.; Trustee, Federated Services
Pittsburgh, PA Company; President or Vice President of the Funds; Director, Trustee, or
Managing General Partner of some of the Funds. Mr. Donahue is the son of
John F. Donahue, Chairman and Trustee of the Trust.
--------------------------------------------------------------------------------------------------------------------------------
Richard B. Fisher Vice President Executive Vice President and Trustee, Federated Investors; Chairman and
Federated Investors Director, Federated Securities Corp.; President or Vice President of the
Tower Funds; Director or Trustee of some of the Funds.
Pittsburgh, PA
--------------------------------------------------------------------------------------------------------------------------------
Edward C. Gonzales Vice President Vice President, Treasurer, and Trustee, Federated Investors; Vice President
Federated Investors and Treasurer and Treasurer, Federated Advisers, Federated Management, and Federated
Tower Research; Executive Vice President, Treasurer, and Director, Federated
Pittsburgh, PA Securities Corp.; Trustee, Federated Services Company; Chairman, Treasurer,
and Director, Federated Administrative Services, Inc.; Trustee or Director
of some of the Funds; Vice President and Treasurer of the Funds.
--------------------------------------------------------------------------------------------------------------------------------
John W. McGonigle Vice President Vice President, Secretary, General Counsel, and Trustee, Federated
Federated Investors and Secretary Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Tower Federated Management, and Federated Research; Trustee, Federated Services
Pittsburgh, PA Company; Executive Vice President, Secretary, and Director, Federated
Administrative Services, Inc.; Director and Executive Vice President,
Federated Securities Corp.; Vice President and Secretary of the Funds.
--------------------------------------------------------------------------------------------------------------------------------
John A. Staley, IV Vice President Vice President and Trustee, Federated Investors; Executive Vice President,
Federated Investors Federated Securities Corp.; President and Trustee, Federated Advisers,
Tower Federated Management, and Federated Research; Vice President of the Funds;
Pittsburgh, PA Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
President, The Standard Fire Insurance Company and President of its
Federated Research Division.
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* This Trustee is deemed to be an "interested person" of the Trust as defined in
the Investment Company Act of 1940, as amended.
+ Members of the Trust's Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of Trustees
between meetings of the Board.
--------------------------------------------------------------------------------
FUND OWNERSHIP
Officers and Trustees own less than 1% of the outstanding shares of the Fund.
THE FUNDS
"The Funds" and "Funds" mean the following investment companies: A.T. Ohio
Tax-Free Money Fund; American Leaders Fund, Inc.; Annuity Management Series;
Automated Cash Management Trust; Automated Government Money Trust; BankSouth
Select Funds; The Boulevard Funds; California Municipal Cash Trust; Cash Trust
Series, Inc.; Cash Trust Series II; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; FT Series, Inc.; Federated ARMs Fund; Federated
Exchange Fund, Ltd.; Federated GNMA Trust; Federated Government Trust; Federated
Growth Trust; Federated High Yield Trust; Federated Income Securities Trust;
Federated Income Trust; Federated Index Trust; Federated Intermediate Government
Trust; Federated Master Trust; Federated Municipal Trust; Federated
Short-Intermediate Government Trust; Federated Short-Term U.S. Government Trust;
Federated Stock Trust; Federated Tax-Free Trust; Federated U.S. Government Bond
Fund; First Priority Funds; Fixed Income Securities, Inc.; Fortress Adjustable
Rate U.S. Government Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress
Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.; Government Income
Securities, Inc.; High Yield Cash Trust; Insight Institutional Series, Inc.;
Insurance Management Series; Intermediate Municipal Trust; Investment Series
Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty
High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty
Term Trust, Inc.-1999; Liberty U.S. Government Money Market Trust; Liberty
Utility Fund, Inc.; Liquid Cash Trust; Mark Twain Funds; Money Market
Management, Inc.; Money Market Obligations Trust; Money Market Trust; Municipal
Securities Income Trust; Star Funds; New York Municipal Cash Trust; 111 Corcoran
Funds; The Planters Funds; Portage Funds; RIMCO Monument Funds; The Shawmut
Funds; Short-Term Municipal Trust; Signet Select Funds; The Starburst Funds; The
Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted Duration
Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for Financial
Institutions; Trust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; and Trust for U.S. Treasury Obligations.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgement or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
--------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is Federated Management (the "Adviser"). It is a
subsidiary of Federated Investors. All of the Class A (voting) shares of
Federated Investors are owned by a trust, the Trustees of which are John F.
Donahue, his wife, and his son, J. Christopher Donahue. John F. Donahue is
Chairman and Trustee, Federated Management; Chairman and Trustee, Federated
Investors; and Chairman and Trustee of the Trust. John A. Staley, IV, is
President of Federated Management; Vice President and Trustee, Federated
Investors; Executive Vice President, Federated Securities Corp.; and Vice
President of the Trust. J. Christopher Donahue is Trustee, Federated Management;
President and Trustee, Federated Investors; President and Director, Federated
Administrative Services, Inc.; and Vice President of the Trust. John W.
McGonigle is Trustee, Federated Management; Trustee, Vice President, Secretary,
and General Counsel, Federated Investors; Executive Vice President, Secretary,
and Director, Federated Administrative Services, Inc.; Executive Vice President
and Director, Federated Securities Corp.; and Vice President and Secretary of
the Trust.
The Adviser shall not be liable to the Trust, the Fund or any shareholder of the
Fund for any losses that may be sustained in the purchase, holding, or sale of
any security, or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Fund.
STATE EXPENSE LIMITATIONS
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2.5% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1.5% per year
of the remaining average net assets, the Adviser will reimburse the Trust
for its expenses over the limitation.
--------------------------------------------------------------------------------
If the Fund's monthly projected operating expenses exceed this expense
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee. This arrangement is not part of the advisory contract and
may be amended or rescinded in the future.
ADMINISTRATIVE SERVICES
--------------------------------------------------------------------------------
Federated Administrative Services, Inc., a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund at approximate cost.
John A. Staley, IV, an officer of the Trust, and Dr. Henry J. Gailliot, an
officer of Federated Management, the Adviser to the Fund, each hold
approximately 15% and 20%, respectively, of the outstanding common stock and
serve as directors of Commercial Data Services, Inc., a company which provides
computer processing services to Federated Administrative Services, Inc. For the
fiscal years ended May 31, 1993, 1992 and 1991, Federated Administrative
Services, Inc. paid approximately $176,425, $203,964, and $168,470,
respectively, for services provided by Commercial Data Services, Inc.
BROKERAGE TRANSACTIONS
--------------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees. The Adviser may select brokers and dealers who offer
brokerage and research services. These services may be furnished directly to the
Fund or to the Adviser and may include:
- advice as to the advisability of investing in securities;
- security analysis and reports;
- economic studies;
- industry studies;
- receipt of quotations for portfolio evaluations; and
- similar services.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage and
research services provided.
Research services provided by brokers may be used by the Adviser or by
affiliates of Federated Investors in advising Federated Funds and other
accounts. To the extent that receipt of these services may supplant services for
which the Adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses.
PURCHASING SHARES
--------------------------------------------------------------------------------
Except under certain circumstances described in the prospectus, shares are sold
at their net asset value on days the New York Stock Exchange is open for
business. The procedure for purchasing shares is explained in the prospectus
under "Investing in the Fund."
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. State Street Bank acts as the shareholder's agent in
depositing checks and converting them to federal funds.
DETERMINING NET ASSET VALUE
--------------------------------------------------------------------------------
Net asset value generally changes each day. The days on which net asset value is
calculated by the Fund are described in the prospectus. Net asset value will not
be calculated on the following holidays: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
VALUING MUNICIPAL BONDS
The Trustees use an independent pricing service to value municipal bonds. The
independent pricing service takes into consideration yield, stability, risk,
quality, coupon rate, maturity, type of issue, trading characteristics, special
circumstances of a security or trading market, and any other factors or market
data it considers relevant in
--------------------------------------------------------------------------------
determining valuations for normal institutional size trading units of debt
securities, and does not rely exclusively on quoted prices.
USE OF AMORTIZED COST
The Trustees have decided that the fair value of debt securities authorized to
be purchased by the Fund with remaining maturities of 60 days or less shall be
their amortized cost value, unless the particular circumstances of the security
indicate otherwise. Under this method, portfolio instruments and assets are
valued at the acquisition cost as adjusted for amortization of premium or
accumulation of discount rather than at current market value. The Executive
Committee continually assesses this method of valuation and recommends changes
where necessary to assure that the Fund's portfolio instruments are valued at
their fair value as determined in good faith by the Trustees.
REDEEMING SHARES
--------------------------------------------------------------------------------
The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Shares." Although State Street Bank does not charge
for telephone redemptions, it reserves the right to charge a fee for the cost of
wire-transferred redemptions of less than $5,000.
REDEMPTION IN KIND
The Trust is obligated to redeem shares solely in cash up to $250,000 or 1% of
the net asset value of the Fund, whichever is less, for any one shareholder
within a 90-day period.
Any redemption beyond this amount will also be in cash unless the Trustees
determine that further cash payments will have a material adverse effect on
remaining shareholders. In such a case, the Trust will pay all or a portion of
the remainder of the redemption in portfolio instruments, valued in the same way
that net asset value is determined. The portfolio instruments will be selected
in a manner that the Trustees deem fair and equitable. Such securities will be
readily marketable, to the extent available.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.
TAX STATUS
--------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code, as amended,
applicable to regulated investment companies and to receive the special tax
treatment afforded to such companies. To qualify for this treatment, the Fund
must, among other requirements:
- derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
- derive less than 30% of its gross income from the sale of securities held less
than three months;
- invest in securities within certain statutory limits; and
- distribute to its shareholders at least 90% of its net income earned during
the year.
SHAREHOLDERS' TAX STATUS
CAPITAL GAINS
Capital gains or losses may be realized by the Fund on the sale of
portfolio securities and as a result of discounts from par value on
securities held to maturity. Sales would generally be made because of:
- the availability of higher relative yields;
- differentials in market values;
- new investment opportunities;
- changes in creditworthiness of an issuer; or
- an attempt to preserve gains or limit losses.
Distributions of long-term capital gains are taxed as such, whether they
are taken in cash or reinvested, and regardless of the length of time the
shareholder has owned shares. Any loss by a shareholder on Fund shares
held for less than six months and sold after a capital gains distribution
will be treated as a long-term capital loss to the extent of the capital
gains distribution.
YIELD
--------------------------------------------------------------------------------
The yield of the Fund is determined by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the maximum offering price per share on the last day
of the period. This value is then annualized using semi-annual compounding. This
means that the amount of income generated during the thirty-day period is
assumed to be generated each month over a twelve-month period and is reinvested
every six months. The yield does not necessarily reflect income actually earned
by the Fund because of certain adjustments required by the Securities and
Exchange Commission and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the Fund,
performance will be reduced for those shareholders paying those fees.
TAX-EQUIVALENT YIELD
--------------------------------------------------------------------------------
The tax-equivalent yield for the Fund is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that the Fund would have had to earn to
equal its actual yield, assuming a 39.60% Federal tax rate and assuming that
income is 100% tax-exempt.
TAX-EQUIVALENCY TABLE
The Fund may also use a tax-equivalency table in advertising and sales
literature. The interest earned by the municipal obligations in the Fund's
portfolio generally remains free from federal regular income tax and is free
from the income taxes imposed by the State of Ohio (some portion of the Fund's
income may be subject to the federal alternative minimum tax and state and local
taxes.) As the table below indicates, a "tax-free" investment is an attractive
choice for investors, particularly in times of narrow spreads between "tax-free"
and taxable yields.
<TABLE>
<S> <C> <C> <C> <C> <C>
TAXABLE YIELD EQUIVALENT FOR 1994
STATE OF OHIO
-----------------------------------------------------------------------------------------------------------
TAX BRACKET:
-----------------------------------------------------------------------------------------------------------
FEDERAL 15.00% 28.00% 31.00% 36.00% 39.60%
-----------------------------------------------------------------------------------------------------------
COMBINED
FEDERAL AND
STATE 20.201% 34.900% 37.900% 43.500% 47.100%
-----------------------------------------------------------------------------------------------------------
JOINT RETURN: $1-22,100 $22,101-53,500 $53,501-115,000 $115,001-250,000 OVER 250,000
SINGLE RETURN: $1-22,100 $22,101-53,500 $53,501-115,000 $115,001-250,000 OVER 250,000
-----------------------------------------------------------------------------------------------------------
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
-----------------------------------------------------------------------------------------------------------
1.50% 1.88% 2.30% 2.42% 2.65% 2.84%
2.00% 2.51% 3.07% 3.22% 3.54% 3.78%
2.50% 3.13% 3.84% 4.03% 4.42% 4.73%
3.00% 3.76% 4.61% 4.83% 5.31% 5.67%
3.50% 4.39% 5.38% 5.64% 6.19% 6.62%
4.00% 5.01% 6.14% 6.44% 7.08% 7.56%
4.50% 5.64% 6.91% 7.25% 7.96% 8.51%
5.00% 6.27% 7.68% 8.05% 8.85% 9.45%
5.50% 6.89% 8.45% 8.86% 9.73% 10.40%
6.00% 7.52% 9.22% 9.66% 10.62% 11.34%
</TABLE>
Note: The maximum marginal tax rate for each bracket was used in calculating the
taxable yield equivalent. Furthermore, additional state and local taxes paid on
comparable taxable investments were not used to increase federal deductions.
The charts above are for illustrative purposes only. They are not an indicator
of past or future performance of the Fund.
PERFORMANCE COMPARISONS
--------------------------------------------------------------------------------
The performance of the Fund depends upon such variables as:
- portfolio quality;
- average portfolio maturity;
- type of instruments in which the portfolio is invested;
- changes in interest rates and market value of portfolio securities;
- changes in the Fund's expenses; and
- various other factors.
The Fund's performance fluctuates on a daily basis largely because net earnings
and net asset value per share fluctuate daily. Both net earnings and net asset
value per share are factors in the computation of yield and total return as
described above.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
- LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in net asset value over a specific period of time.
From time to time, the Fund will quote its Lipper ranking in the "other states
intermediate municipal debt funds" category in advertising and sales
literature.
- MORNINGSTAR, INC., an independent rating service is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
- SHEARSON LEHMAN FIVE-YEAR STATE GENERAL OBLIGATION BONDS is an index comprised
of all state general obligation debt issues with maturities between four and
six years. These bonds are rated A or better and represent a variety of coupon
ranges. Index figures are total returns calculated for one, three and twelve
month periods as well as year-to-date. Total returns are also calculated as of
the index inception December 31, 1979.
- SHEARSON LEHMAN TEN-YEAR STATE GENERAL OBLIGATION BONDS is an index comprised
of the same issues noted above except that the maturities range between nine
and eleven years. Index figures are total returns calculated for the same
periods as listed above.
Advertisements and other sales literature for the Fund may quote total returns
which are calculated on non-standardized base periods. The total returns
represent the historic change in the value of an investment in the Fund based on
monthly reinvestment of dividends over a specified period of time.
APPENDIX
--------------------------------------------------------------------------------
STANDARD AND POOR'S CORPORATION MUNICIPAL BOND RATINGS
AAA--Debt rated "AAA" has the highest rating assigned by Standard & Poor's
Corporation. Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
NR--Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
Plus (+) or minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
MOODY'S INVESTORS SERVICE, INC. MUNICIPAL BOND RATINGS
AAA--Bonds which are rated AAA are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA--Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group they comprise what are generally known as high grade
bonds. They are rated lower than the best because margins of protection may not
be as large as in AAA securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in AAA securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
NR--Not rated by Moody's.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from AA through B in its corporate or municipal bond rating
system. The modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
FITCH INVESTORS SERVICE, INC.
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA". Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+".
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered strong, but
may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
NR--NR indicates that Fitch does not rate the specific issue.
Plus (+) or Minus (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "AAA" category.
STANDARD AND POOR'S CORPORATION MUNICIPAL NOTE RATINGS
SP-1--Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
sign (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
MOODY'S INVESTORS SERVICE, INC. SHORT-TERM LOAN RATINGS
MIG1/VMIG1--This designation denotes best quality. There is a present strong
protection by established cash flows, superior liquidity support or demonstrated
broad based access to the market for refinancing.
MIG2/VMIG2--This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
--------------------------------------------------------------------------------
STANDARD AND POOR'S CORPORATION COMMERCIAL PAPER RATINGS
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high for issues
designated A-1.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS
PRIME-1--Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. PRIME-1
repayment capacity will normally be evidenced by the following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance on debt and ample
asset protection.
- Broad margins in earning coverage of fixed financial charges and high internal
cash generation.
- Well-established access to a range of financial markets and assured sources of
alternative liquidity.
PRIME-2--Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
3081602B (2/94)
--------------------------------------------------------------------------------
PENNSYLVANIA
--------------------------------------------------------------------------------
INTERMEDIATE
--------------------------------------------------------------------------------
MUNICIPAL
--------------------------------------------------------------------------------
TRUST
--------------------------------------------------------------------------------
SUPPLEMENT TO PROSPECTUS
DATED FEBRUARY 15, 1994
MAY 31, 1994
FEDERATED SECURITIES CORP.
(LOGO)
---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
4041813A (5/94)
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
PENNSYLVANIA INTERMEDIATE MUNICIPAL TRUST
(A PORTFOLIO OF INTERMEDIATE MUNICIPAL TRUST)
SUPPLEMENT TO PROSPECTUS DATED FEBRUARY 15, 1994
A. Please insert the following "Financial Highlights" table as page 2 of the
prospectus following the "Summary of Fund Expenses" table and before the
section entitled "General Information." In addition, please add the heading
"Financial Highlights" to the Table of Contents after the heading "Summary of
Fund Expenses."
PENNSYLVANIA INTERMEDIATE MUNICIPAL TRUST
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
MAY 31, 1994*
-------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
---------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
---------------------------------------------------------------------------------
Net investment income 0.16
---------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.19)
--------------------------------------------------------------------------------- ---------
Total from investment operations (0.03)
---------------------------------------------------------------------------------
LESS DISTRIBUTIONS
---------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.16)
--------------------------------------------------------------------------------- ---------
NET ASSET VALUE, END OF PERIOD $9.81
--------------------------------------------------------------------------------- ---------
TOTAL RETURN** (0.16%)
---------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------------------------------
Expenses 0.20%(a)
---------------------------------------------------------------------------------
Net investment income 5.00%(a)
---------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 6.42%(a)
---------------------------------------------------------------------------------
SUPPLEMENTAL DATA
---------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $1,578
---------------------------------------------------------------------------------
Portfolio turnover rate 45%
---------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from November 15, 1993 (date of initial
public offering) to
March 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.
(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)
B. Please insert the following financial statements beginning on page 15 of the
prospectus. In addition, please add the heading "Financial Statements" to the
Table of Contents page immediately before "Addresses."
PENNSYLVANIA INTERMEDIATE MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS
MARCH 31, 1994
(UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
--------- ----------------------------------------------------------- ------- ----------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--12.7%
--------------------------------------------------------------------------
$100,000 Government Development Bank of Puerto Rico, Weekly VRDNs,
(Credit Suisse and Sumitomo Bank Ltd. LOCs) VMIG1 $ 100,000
-----------------------------------------------------------
100,000 Government Development Bank of Puerto Rico, Weekly VRDNs,
(Credit Suisse and Sumitomo Bank Ltd. LOCs) VMIG1 100,000
----------------------------------------------------------- ----------
TOTAL SHORT-TERM MUNICIPAL SECURITIES
(IDENTIFIED COST $200,000) 200,000
----------------------------------------------------------- ----------
LONG-TERM MUNICIPAL SECURITIES--87.6%
--------------------------------------------------------------------------
100,000 Allegheny County, PA, 6.00% UT GO Bonds (Series C-39)/
(AMBAC Insured)/(Original Issue Yield: 6.098%), 5/1/2012 Aaa 99,884
-----------------------------------------------------------
100,000 Chester County, PA Health and Education Facilities
Authority, 4.80% Revenue Bonds (Main Line Health System)/
(Series A-1994)/(Original Issue Yield: 4.90%), 5/15/2003 AA- 93,674
-----------------------------------------------------------
100,000 Dauphin County, PA, 5.20% UT GO Bonds (Series B)/
(MBIA Insured), (Original Issue Yield: 5.30%), 3/15/2004 Aaa 98,246
-----------------------------------------------------------
100,000 Delaware County, PA Authority Hospital, 4.50% Revenue
Bonds (Crozer-Chester Medical Center)/(MBIA Insured)/
(Original Issue Yield: 4.60%), 12/15/2001 Aaa 93,839
-----------------------------------------------------------
100,000 Easton, PA Area Joint Sewer Authority, 6.00% Refunding
Revenue Bonds (Asset Guaranty Insured), 4/1/2006 AA 101,187
-----------------------------------------------------------
</TABLE>
PENNSYLVANIA INTERMEDIATE MUNICIPAL TRUST
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
--------- ----------------------------------------------------------- ------- ----------
<C> <C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
--------------------------------------------------------------------------
100,000 Lancaster, PA Industrial Development Authority, 6.50%
Refunding Revenue Bonds (Union Camp Corporation Project),
3/1/2004 A 105,448
-----------------------------------------------------------
</TABLE>
PENNSYLVANIA INTERMEDIATE MUNICIPAL TRUST
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
--------- ----------------------------------------------------------- ------- ----------
<C> <C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
--------------------------------------------------------------------------
$100,000 Norristown Area School District, Montgomery County, PA,
4.45% GO Bonds (Series 1994), 9/1/2003 Aa $ 90,508
-----------------------------------------------------------
100,000 Pennsylvania HFA, 5.30%. SFM Revenue Bonds (Series 38),
4/1/2003 Aa 97,729
-----------------------------------------------------------
100,000 Pennsylvania Infrastructure Investment Authority, 5.45%
Revenue Bonds (Pennvest Loan Pool), 9/1/2003 AA 98,485
-----------------------------------------------------------
100,000 Pennsylvania State, 6.50% UT GO Bonds (Series A)/
(Original Issue Yield: 6.60%), 11/15/2010 A1 104,116
-----------------------------------------------------------
100,000 Philadelphia, PA IDA, 4.90% Refunding Revenue Bonds (PGH/
CHDC Parking Facility)/(Original Issue Yield: 5.04%),
7/1/2002 AA 96,461
-----------------------------------------------------------
100,000 Philadelphia, PA Hospital and Higher Education Facilities
Authority, 5.25% Revenue Bonds (Will's Eye Hospital)/
(Series 1994)/(Original Issue Yield: 5.40%), 7/1/2003 A 96,442
-----------------------------------------------------------
110,000 University of Pittsburgh, PA Higher Education, 5.75%
Refunding Revenue Bonds (Series B)/(MBIA Insured), 6/1/2002 Aaa 113,827
-----------------------------------------------------------
100,000 Upper Darby, PA School District, 4.60% UT GO Bonds (Series
1994)/(AMBAC Insured), 2/15/2004 Aaa 91,846
----------------------------------------------------------- ----------
TOTAL LONG-TERM MUNICIPAL SECURITIES
(IDENTIFIED COST, $1,446,712) 1,381,692
----------------------------------------------------------- ----------
TOTAL INVESTMENTS (IDENTIFIED COST $1,646,712) $1,581,692+
----------------------------------------------------------- ----------
</TABLE>
* Please refer to the appendix of the Statement of Additional Information for an
explanation of the credit ratings.
+ The cost of investments for federal tax purposes amounts to $1,646,712. The
net unrealized depreciation on a federal tax basis amounts to $65,020, which
is comprised of $227 appreciation and $65,247 depreciation at March 31, 1994.
Note: The categories of investments are shown as a percentage of net assets
($1,578,112) at March 31, 1994.
PENNSYLVANIA INTERMEDIATE MUNICIPAL TRUST
--------------------------------------------------------------------------------
The following abbreviations are used in this portfolio.
<TABLE>
<S> <C>
AMBAC --American Municipal Bond Assurance Corporation
GO --General Obligation
HFA --Housing Finance Authority/Agency
IDA --Industrial Development Authority.
LOCs --Letters of Credit
MBIA --Municipal Bond Investors Assurance
SFM --Single Family Mortgage
UT --Unlimited Tax
VRDNs --Variable Rate Demand Notes
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PENNSYLVANIA INTERMEDIATE MUNICIPAL TRUST
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1994
(UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
---------------------------------------------------------------------------------
Investments in securities, at value (Note 2A) (identified and tax cost
$1,646,712) $1,581,692
---------------------------------------------------------------------------------
Receivable for investments sold 398,912
---------------------------------------------------------------------------------
Receivable for Fund shares sold 20,000
---------------------------------------------------------------------------------
Interest receivable 16,951
---------------------------------------------------------------------------------
Receivable from Adviser (Note 4) 8,600
--------------------------------------------------------------------------------- ----------
Total assets 2,026,155
---------------------------------------------------------------------------------
LIABILITIES:
----------------------------------------------------------------------
Payable for investments purchased $415,330
----------------------------------------------------------------------
Dividends payable (Note 2B) 6,081
----------------------------------------------------------------------
Accrued expenses and other liabilities 26,632
---------------------------------------------------------------------- --------
Total liabilities 448,043
--------------------------------------------------------------------------------- ----------
NET ASSETS for 160,849 shares of beneficial interest outstanding $1,578,112
--------------------------------------------------------------------------------- ----------
NET ASSETS CONSIST OF:
---------------------------------------------------------------------------------
Paid-in capital $1,681,208
---------------------------------------------------------------------------------
Unrealized depreciation of investments (65,020)
---------------------------------------------------------------------------------
Accumulated net realized loss on investments (38,076)
--------------------------------------------------------------------------------- ----------
Total Net Assets $1,578,112
--------------------------------------------------------------------------------- ----------
NET ASSET VALUE, Offering Price, and Redemption Price Per Share
($1,578,112 / 160,849 shares of beneficial interest outstanding) $ 9.81
--------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PENNSYLVANIA INTERMEDIATE MUNICIPAL TRUST
STATEMENT OF OPERATIONS
PERIOD ENDED MARCH 31, 1994*
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
------------------------------------------------------------------------------------
Interest income (Note 2B) $ 22,641
------------------------------------------------------------------------------------
EXPENSES:
------------------------------------------------------------------------------------
Investment advisory fee (Note 4) $ 2,178
-------------------------------------------------------------------------
Custodian fees 21,792
-------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses (Note 4) 1,335
-------------------------------------------------------------------------
Shareholder services fees (Note 4) 71
-------------------------------------------------------------------------
Legal fees 1,573
-------------------------------------------------------------------------
Printing and postage 1,200
-------------------------------------------------------------------------
Miscellaneous 700
------------------------------------------------------------------------- -------
Total expenses 28,849
-------------------------------------------------------------------------
Deduct--
---------------------------------------------------------------
Waiver of investment advisory fee (Note 4) $ 2,178
---------------------------------------------------------------
Reimbursement of other operating expenses (Note 4) 25,800 27,978
--------------------------------------------------------------- ------- -------
Net expenses 871
------------------------------------------------------------------------------------ ---------
Net investment income 21,770
------------------------------------------------------------------------------------ ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
------------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis) (38,076)
------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments (65,020)
------------------------------------------------------------------------------------ ---------
Net realized and unrealized loss on investments (103,096)
------------------------------------------------------------------------------------ ---------
Change in net assets resulting from operations $ (81,326)
------------------------------------------------------------------------------------ ---------
</TABLE>
* For the period from November 15, 1993 (date of initial public offering) to
March 31, 1994 (unaudited).
(See Notes which are an integral part of the Financial Statements)
PENNSYLVANIA INTERMEDIATE MUNICIPAL TRUST
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
MAY 31, 1994*
-------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
-----------------------------------------------------------------------
OPERATIONS--
-----------------------------------------------------------------------
Net investment income $ 21,770
-----------------------------------------------------------------------
Net realized gain (loss) on investment transactions ($38,076 net loss
as computed for federal tax purposes) (Note 2C) (38,076)
-----------------------------------------------------------------------
Change in unrealized appreciation (depreciation) on investments (65,020)
----------------------------------------------------------------------- ----------------
Change in net assets resulting from operations (81,326)
----------------------------------------------------------------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2B)--
-----------------------------------------------------------------------
Dividends to shareholders from net investment income (21,770)
----------------------------------------------------------------------- ----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
-----------------------------------------------------------------------
Proceeds from sale of shares 3,041,960
-----------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
dividends declared 1,296
-----------------------------------------------------------------------
Cost of shares redeemed (1,362,048)
----------------------------------------------------------------------- ----------------
Change in net assets resulting from Fund share transactions 1,681,208
----------------------------------------------------------------------- ----------------
Change in net assets 1,578,112
-----------------------------------------------------------------------
NET ASSETS:
-----------------------------------------------------------------------
Beginning of period --
----------------------------------------------------------------------- ----------------
End of period $ 1,578,112
----------------------------------------------------------------------- ----------------
</TABLE>
* For the period from November 15, 1993 (date of initial public offering) to
March 31, 1994 (unaudited).
(See Notes which are an integral part of the Financial Statements)
PENNSYLVANIA INTERMEDIATE MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1994
(UNAUDITED)
--------------------------------------------------------------------------------
(1) ORGANIZATION
Intermediate Municipal Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment company.
The Trust consists of three, non-diversified portfolios. The financial
statements included herein present only those of Pennsylvania Intermediate
Municipal Trust (the "Fund"). The financial statements of the other portfolios
are presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles (GAAP).
A. 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 it
deems relevant in determining valuations for normal institutional size
trading units of debt securities. The independent pricing service does not
rely exclusively on quoted prices. Short-term securities with remaining
maturities of sixty days or less shall be stated at amortized cost, which
approximates value.
B. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount are amortized as required by the
Internal Revenue Code ("Code"). Distributions to shareholders are recorded on
the ex-dividend date.
C. 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 tax-exempt income.
Accordingly, no provisions for federal tax are necessary.
D. 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.
E. OTHER--Investment transactions are accounted for on the trade date.
PENNSYLVANIA INTERMEDIATE MUNICIPAL TRUST
--------------------------------------------------------------------------------
(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).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
MAY 31, 1994*
--------------------------------------------------------------------------- --------------
<S> <C>
Shares outstanding, beginning of period --
---------------------------------------------------------------------------
Shares sold 291,866
---------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 127
---------------------------------------------------------------------------
Shares redeemed (131,144)
--------------------------------------------------------------------------- ------------
Shares outstanding, end of period 160,849
--------------------------------------------------------------------------- ------------
</TABLE>
* For the period from November 15, 1993 (date of initial public offering) to
March 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
ADVISORY FEE--Federated Management, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.50% of the Fund's average daily net assets. The Adviser may voluntarily choose
to waive its fee and reimburse certain operating expenses of the Fund. 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 Fund
administrative personnel and services. Prior to March 1, 1994, these services
were provided at approximate cost. Effective March 1, 1994, the 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 any fiscal year shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares.
SHAREHOLDER SERVICE FEES--Under the terms of a shareholder service agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to .25 of
1% of average net assets for the Fund for the period. This fee is to obtain
certain personal services for shareholders and the maintenance of shareholder
accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer agent and dividend disbursing agent for the Fund.
The fee is based on the size, type and number of accounts and transactions made
by shareholders.
ORGANIZATIONAL EXPENSES--Organizational expenses and start-up administrative
service expenses incurred by the Fund will be borne initially by the Adviser and
are estimated at $30,100 and $31,250, respectively. The Fund has agreed to
reimburse the Adviser for the organizational expenses and start-up
administrative service expenses during the five year period following November
15, 1993 (date the Fund first became effective).
PENNSYLVANIA INTERMEDIATE MUNICIPAL TRUST
--------------------------------------------------------------------------------
17A-7--For the period ended March 31, 1994, pursuant to Rule 17a-7 of the
Investment Company Act of 1940, the Fund engaged in purchase and sale
transactions with other funds advised by the Adviser, amounting to $2,236,457
and $1,100,000, respectively. These purchases and sales were conducted on an
arms-length basis insofar as they were transacted for cash consideration only,
at independent current market prices and without brokerage commission, fee, or
other remuneration.
Certain Officers and Trustees of the Fund are Officers and Trustees of the above
companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended March 31, 1994, were as follows:
<TABLE>
<S> <C>
--------------------------------------------------------------------------------
PURCHASES $3,469,794
-------------------------------------------------------------------------------- ----------
SALES $1,783,773
-------------------------------------------------------------------------------- ----------
</TABLE>
FEDERATED SECURITIES CORP.
(LOGO)
--------------------------------------------------------------------------------
Distributor
4041813A (5/94)
PENNSYLVANIA INTERMEDIATE MUNICIPAL TRUST
(A PORTFOLIO OF INTERMEDIATE MUNICIPAL TRUST)
PROSPECTUS
The Shares of Pennsylvania Intermediate Municipal Trust (the "Fund") offered by
this prospectus represent interests in a non-diversified portfolio of securities
which is one of a series of investment portfolios in Intermediate Municipal
Trust (the "Trust"), an open-end management investment company (a mutual fund).
The investment objective of the Fund is to provide current income which is
exempt from federal regular income tax and the personal income taxes imposed by
the Commonwealth of Pennsylvania. The Fund invests primarily in a portfolio of
Pennsylvania municipal securities including securities of states, territories
and possessions of the United States which are not issued by or on behalf of the
Commonwealth of Pennsylvania or its political subdivisions, but which are exempt
from federal regular income tax and Pennsylvania state personal income taxes.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENTAL AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information, dated February
15, 1994, with the Securities and Exchange Commission. The information contained
in the Statement of Additional Information is incorporated by reference into
this prospectus. You may request a copy of the Statement of Additional
Information free of charge by calling 1-800-235-4669. To obtain other
information or to make inquiries about the Fund, contact the Fund at the address
listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated February 15, 1994
TABLE OF CONTENTS
--------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
------------------------------------------------------
GENERAL INFORMATION 2
------------------------------------------------------
INVESTMENT INFORMATION 2
------------------------------------------------------
Investment Objective 2
Investment Policies 2
Acceptable Investments 2
Average Maturity 2
Characteristics 3
Participation Interests 3
Variable Rate Municipal Securities 3
Municipal Leases 4
When-Issued and Delayed
Delivery Transactions 4
Temporary Investments 4
Pennsylvania Municipal Securities 5
Investment Risks 5
Non-Diversification 5
Investment Limitations 6
INTERMEDIATE MUNICIPAL TRUST
INFORMATION 6
------------------------------------------------------
Management of the Trust 6
Board of Trustees 6
Investment Adviser 6
Advisory Fees 7
Adviser's Background 7
Distribution of Fund Shares 7
Administration of the Fund 8
Administrative Services 8
Custodian 8
Transfer Agent and Dividend
Disbursing Agent 8
Legal Counsel 8
Independent Public Accountants 8
Expenses of the Fund 8
NET ASSET VALUE 8
------------------------------------------------------
INVESTING IN THE FUND 9
------------------------------------------------------
Share Purchases 9
By Wire 9
By Mail 9
Subaccounting Services 9
Minimum Investment Required 9
What Shares Cost 10
Exchanging Securities for Fund Shares 10
Certificates and Confirmations 10
Dividends and Distributions 10
Capital Gains 10
REDEEMING SHARES 10
------------------------------------------------------
By Telephone 11
By Mail 11
Signatures 11
Accounts with Low Balances 12
SHAREHOLDER INFORMATION 12
------------------------------------------------------
Voting Rights 12
Massachusetts Partnership Law 12
TAX INFORMATION 12
------------------------------------------------------
Federal Income Tax 12
Pennsylvania Taxes 13
Other State and Local Taxes 14
PERFORMANCE INFORMATION 14
------------------------------------------------------
ADDRESSES Inside Back Cover
------------------------------------------------------
SUMMARY OF FUND EXPENSES
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)..................................................................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)........................................ None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds as applicable)....................... None
Redemption Fee............................................................... None
Exchange Fee................................................................. None
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee (after waiver)(1)............................................. 0.00%
12b-1 Fee.................................................................... None
Other Expenses (after expense reimbursement)................................. 0.45%
Total Fund Operating Expenses(2)........................................ 0.45%
</TABLE>
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of the management fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum management fee is 0.50%.
(2) The Total Fund Operating Expenses are estimated to be 1.21% absent the
anticipated voluntary waiver of the management fee and the anticipated voluntary
reimbursement of certain other operating expenses.
* Total Operating Expenses are estimated based on average expenses expected to
be incurred during the period ending May 31, 1994. During the course of this
period, expenses may be more or less than the average amount shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "INVESTING IN THE FUND" AND "INTERMEDIATE MUNICIPAL TRUST
INFORMATION." WIRE-TRANSFERRED REDEMPTIONS OF LESS THAN $5,000 MAY BE SUBJECT TO
ADDITIONAL FEES.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
--------------------------------------------------------------------------- ------ -------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming
(1) 5% annual return and (2) redemption at the end of each time period.
As noted in the table above, the Fund charges no contingent deferred
sales charge............................................................. $5 $14
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING MAY 31,
1994.
GENERAL INFORMATION
--------------------------------------------------------------------------------
Intermediate Municipal Trust (the "Trust") was established as a Massachusetts
business trust under a Declaration of Trust dated May 31, 1985. The Declaration
of Trust permits the Trust to offer separate series of shares of beneficial
interest representing interests in separate portfolios of securities.
Shares of the Fund are designed for the investment of moneys generally held by
financial institutions in a fiduciary capacity. A minimum initial investment of
$25,000 over a 90-day period is required. The Fund is not likely to be a
suitable investment for non-Pennsylvania taxpayers or retirement plans since
Pennsylvania municipal securities are not likely to produce competitive
after-tax yields for such persons and entities when compared to other
investments.
Shares are sold and redeemed at net asset value without a sales charge imposed
by the Fund.
INVESTMENT INFORMATION
--------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income exempt from
federal regular income tax and the personal income taxes imposed by the
Commonwealth of Pennsylvania. Interest income of the Fund that is exempt from
federal regular income tax and Pennsylvania state personal income tax retains
its tax-free status when distributed to the Fund's shareholders. The Fund
pursues its investment objective by investing at least 80% of its net assets in
a diversified portfolio of Pennsylvania municipal securities. The portfolio has
a dollar-weighted average maturity of not less than three or more than ten
years. While there is no assurance that the Fund will achieve its investment
objective, it endeavors to do so by following the investment policies described
in this prospectus. The investment objective and the policy stated above cannot
be changed without approval of shareholders.
INVESTMENT POLICIES
The investment policies described below may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Pennsylvania municipal securities in which the Fund
invests are:
- obligations issued by or on behalf of the Commonwealth of Pennsylvania,
its political subdivisions, or agencies;
- debt obligations of any state, territory, or possession of the United
States, or any political subdivision of any of these; and
- participation interests, as described below, in any of the above
obligations,
the interest from which is, in the opinion of bond counsel for the issuers or in
the opinion of officers of the Fund and/or the investment adviser to the Fund,
exempt from both federal regular income tax and the personal income taxes
imposed by the Commonwealth of Pennsylvania.
AVERAGE MATURITY. The dollar-weighted average maturity of the Fund's
portfolio of Pennsylvania municipal securities will not be less than three
years or more than ten years. For purposes
of determining the dollar-weighted average maturity of the Fund's
portfolio, the maturity of a municipal security will be its ultimate
maturity, unless it is probable that the issuer of the security will take
advantage of maturity-shortening devices such as a call, refunding, or
redemption provision, in which case the maturity date will be the date on
which it is probable that the security will be called, refunded, or
redeemed. If the municipal security includes the right to demand payment,
the maturity of the security for purposes of determining the Fund's
dollar-weighted average portfolio maturity will be the period remaining
until the principal amount of the security can be recovered by exercising
the right to demand payment.
CHARACTERISTICS. The municipal securities in which the Fund invests are:
- rated within the three highest ratings for municipal securities by
Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa, or A), Standard &
Poor's Corporation ("Standard & Poor's") (AAA, AA, or A) or by Fitch
Investors Service, Inc. ("Fitch") (AAA, AA or A);
- guaranteed at the time of purchase by the U.S. government as to the
payment of principal and interest;
- fully collateralized by an escrow of U.S. government securities or other
securities acceptable to the Fund's adviser;
- rated at the time of purchase within Moody's highest short-term municipal
obligation rating (MIG1/VMIG1) or Moody's highest municipal commercial
paper rating (P-1) or Standard & Poor's highest municipal commercial
paper rating (SP-1);
- unrated if, at the time of purchase, other municipal securities of that
issuer are rated A or better by Moody's, Standard & Poor's or Fitch; or
- unrated if determined to be of equivalent quality to one of the foregoing
rating categories by the Fund's investment adviser.
If a security is subsequently downgraded, the adviser will determine
whether it continues to be an acceptable investment; if not, the security
will be sold. A description of the ratings categories is contained in the
Appendix to the Statement of Additional Information.
PARTICIPATION INTERESTS. The Fund may purchase participation interests
from financial institutions such as commercial banks, savings and loan
associations, and insurance companies. These participation interests give
the Fund an undivided interest in Pennsylvania municipal securities. The
financial institutions from which the Fund purchases participation
interests frequently provide or secure irrevocable letters of credit or
guarantees to assure that the participation interests are of high quality.
The Trustees will determine that participation interests meet the
prescribed quality standards for the Fund.
VARIABLE RATE MUNICIPAL SECURITIES. Some of the Pennsylvania municipal
securities which the Fund purchases may have variable interest rates.
Variable interest rates are ordinarily stated as a percentage of the prime
rate of a bank or a similar standard, such as the 91-day U.S. Treasury bill
rate. Many variable rate municipal securities are subject to payment of
principal on demand by the Fund in not more than seven days. All variable
rate municipal securities will meet the quality standards for the Fund. The
Fund's investment adviser has been instructed by the Trustees to monitor
the pricing, quality, and liquidity of the variable rate municipal
securities, including
participation interests held by the Fund on the basis of published
financial information and reports of the rating agencies and other
analytical services.
MUNICIPAL LEASES. Also included within the general category of municipal
securities are certain lease obligations or installment purchase contract
obligations and participations therein (hereinafter collectively called
"lease obligations") of municipal authorities or entities. Although lease
obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation is
ordinarily backed by the municipality's covenant to budget for, appropriate
and make the payments due under the lease obligation. Interest on lease
obligations is tax-exempt to the same extent as if the municipality had
issued debt obligations to finance the underlying project or purchase.
However, certain lease obligations contain "non-appropriation" clauses
which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated
for such purpose on a yearly basis. In addition to the "non-appropriation"
risk, these securities represent a relatively new type of financing that
has not yet developed the depth of marketability associated with more
conventional bonds, and some lease obligations may be illiquid. Although
"non-appropriation" lease obligations are generally secured by the leased
property, disposition of the property in the event of foreclosure might
prove difficult. In addition, the tax treatment of such obligations in the
event of "non-appropriation" is unclear. The Fund does not intend to invest
more than 10% of its total assets in lease obligations that contain
"non-appropriation" clauses.
If the Fund purchases unrated municipal leases, the Trustees will be
responsible for determining, on an ongoing basis, the credit quality of
such leases and the likelihood that such lease will not be cancelled.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
Pennsylvania municipal securities on a when-issued or delayed delivery basis. In
when-issued and delayed delivery transactions, the Fund relies on the seller to
complete the transaction. The seller's failure to complete the transaction may
cause the Fund to miss a price or yield considered to be advantageous.
TEMPORARY INVESTMENTS. The Fund normally invests its assets in Pennsylvania
municipal securities, as described above. However, from time to time, when the
investment adviser determines that market conditions call for a temporary
defensive posture, the Fund may invest in short-term non-Pennsylvania municipal
tax-exempt obligations or taxable temporary investments. These temporary
investments include: notes issued by or on behalf of municipal or corporate
issuers; obligations issued or guaranteed by the U.S. government, its agencies,
or instrumentalities; other debt securities; commercial paper; certificates of
deposit of banks; and repurchase agreements (arrangements in which the
organization selling the Fund a bond or temporary investment agrees at the time
of sale to repurchase it at a mutually agreed upon time and price).
There are no rating requirements applicable to temporary investments with the
exception of temporary municipal securities which are subject to the same rating
requirements as all other municipal securities in which the Fund invests.
However, the investment adviser will limit temporary investments to those it
considers to be of comparable quality to the acceptable investments in the Fund.
Although the Fund is permitted to make taxable, temporary investments, there is
no current intention of generating income subject to federal regular income tax
or Pennsylvania state personal income tax.
PENNSYLVANIA MUNICIPAL SECURITIES
Pennsylvania municipal securities are generally issued to finance public works,
such as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also issued to
repay outstanding obligations, to raise funds for general operating expenses,
and to make loans to other public institutions and facilities.
Pennsylvania municipal securities include industrial development bonds issued by
or on behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. However, interest on and principal of revenue bonds are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Pennsylvania municipal securities depend on a variety of factors,
including, but not limited to: the general conditions of the municipal bond
market; the size of the particular offering; the maturity of the obligations;
and the rating of the issue. Further, any adverse economic conditions or
developments affecting the Commonwealth of Pennsylvania or its municipalities
could impact the Fund's portfolio. The ability of the Fund to achieve its
investment objective also depends on the continuing ability of the issuers of
Pennsylvania municipal securities and participation interests, or the guarantors
of either, to meet their obligations for the payment of interest and principal
when due. Investing in Pennsylvania municipal securities which meet the Fund's
quality standards may not be possible if the Commonwealth of Pennsylvania or its
municipalities do not maintain their current credit ratings. In addition, any
Pennsylvania constitutional amendments, legislative measures, executive orders,
administrative regulations, and voter initiatives could result in adverse
consequences affecting Pennsylvania municipal securities.
NON-DIVERSIFICATION
The Fund is a non-diversified investment portfolio. As such, there is no limit
on the percentage of assets which can be invested in any single issuer. An
investment in the Fund, therefore, will entail greater risk than would exist in
a diversified portfolio of securities because the higher percentage of
investments among fewer issuers may result in greater fluctuation in the total
market value of the Fund's portfolio. Any economic, political, or regulatory
developments affecting the value of the securities in the Fund's portfolio will
have a greater impact on the total value of the portfolio than would be the case
if the portfolio were diversified among more issuers.
The Fund intends to comply with Subchapter M of the Internal Revenue Code. This
undertaking requires that at the end of each quarter of the taxable year, with
regard to at least 50% of the Fund's
total assets, no more than 5% of its total assets are invested in the securities
of a single issuer; beyond that, no more than 25% of its total assets are
invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a percentage of
its cash value with an arrangement to buy it back on a set date) or pledge
securities except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets and pledge up to 10% of the value of
total assets to secure such borrowings. The Fund does not intend to make any
borrowing during the coming fiscal year.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, can be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.
In order to pass-through to investors the tax-free income from the Fund for
purposes of Pennsylvania state personal income taxes, the Fund will invest in
securities for income earnings rather than trading for profit. The Fund will not
vary its investments, except to: (i) eliminate unsafe investments and
investments not consistent with the preservation of the capital or the tax
status of the investments of the Fund; (ii) honor redemption orders, meet
anticipated redemption requirements, and negate gains from discount purchases;
(iii) reinvest the earnings from securities in like securities; or (iv) defray
normal administrative expenses (the "Pennsylvania Investment Restrictions").
Legislation is currently pending in Pennsylvania which, if enacted, would
eliminate the necessity of the Pennsylvania Investment Restrictions. If such
legislation is enacted, the Trustees may vote to eliminate the Pennsylvania
Investment Restrictions.
The Fund will not invest more than 15% of its net assets in securities which are
illiquid, including repurchase agreements providing for settlement in more than
seven days after notice, and restricted securities determined by the Trustees
not to be liquid.
INTERMEDIATE MUNICIPAL TRUST INFORMATION
--------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Board of
Trustees is responsible for managing the business affairs of the Trust and for
exercising all of the powers of the Trust except those reserved for the
shareholders. The Executive Committee of the Board of Trustees handles the
Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust,
investment decisions for the Fund are made by Federated Management, the Fund's
investment adviser (the "Adviser"), subject to direction by the Trustees. The
Adviser continually conducts investment research and supervision for the Fund
and is responsible for the purchase or sale of portfolio instruments, for which
it receives an annual fee from the Fund.
ADVISORY FEES. The Fund's Adviser receives an annual investment advisory
fee equal to .50 of 1% of the Fund's average daily net assets. Under the
investment advisory contract, the Adviser may reimburse the Fund the
amount, limited to the amount of the advisory fee, by which the Fund's
aggregate annual operating expenses, including its investment advisory fee,
but excluding interest, taxes, brokerage commissions, insurance premiums,
expenses of registering and qualifying the Fund and its shares under
federal and state laws, expenses of withholding taxes, and extraordinary
expenses, exceed a certain percentage of its average daily net assets. This
does not include reimbursement to the Fund of any expenses incurred by
shareholders who use the transfer agent's sub-accounting facilities. The
Adviser can terminate this voluntary reimbursement of expenses at any time
at its sole discretion. The Adviser has also undertaken to reimburse the
Fund for operating expenses in excess of limitations established by certain
states.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Jonathan C. Conley has been the Fund's co-portfolio manager since the
Fund's inception. Mr. Conley joined Federated Investors in 1979 and has
been a Vice President of the Trust's investment adviser since 1982. Mr.
Conley is a Chartered Financial Analyst and received his M.B.A. in Finance
from the University of Virginia.
J. Scott Albrecht has been the Fund's co-portfolio manager since the Fund's
inception. Mr. Albrecht joined Federated Investors in 1989 and has been an
Assistant Vice President of the Trust's investment adviser since 1992. From
1989 until 1991, Mr. Albrecht acted as an investment analyst. Mr. Albrecht
was a municipal credit analyst at Mellon Bank, N.A. from 1985 until 1989.
Mr. Albrecht is a Chartered Financial Analyst and received his M.S. in
Management from Carnegie Mellon University.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors is
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the principal distributor for shares of the Fund.
It is a Pennsylvania corporation organized on November 14, 1969 and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, Inc., a subsidiary
of Federated Investors, provides the Fund with the administrative personnel and
services necessary to operate the Fund. Such services include shareholder
servicing and certain legal and accounting services. Federated Administrative
Services, Inc. provides these at approximate cost.
CUSTODIAN. State Street Bank and Trust Company ("State Street Bank"), Boston,
Massachusetts, is custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company (the
"Transfer Agent" or "FSC"), Pittsburgh, Pennsylvania, is transfer agent for the
Shares of the Fund, and dividend disbursing agent for the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, Washington, D.C.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Fund
are Arthur Andersen & Co., Pittsburgh, Pennsylvania.
EXPENSES OF THE FUND
Holders of shares pay their allocable portion of Fund and Trust expenses.
The Trust expenses for which shareholders pay their allocable portion include,
but are not limited to: the cost of organizing the Trust and continuing its
existence; registering the Trust with federal and state securities authorities;
Trustees' fees; auditors' fees; the cost of meetings of Trustees; legal fees of
the Trust; association membership dues; and such non-recurring and extraordinary
items as may arise from time to time.
The Fund expenses for which shareholders pay their allocable portion include,
but are not limited to: registering the Fund and shares of the Fund; investment
advisory services; taxes and commissions; custodian fees; insurance premiums;
auditors' fees; and such non-recurring and extraordinary items as may arise from
time to time.
NET ASSET VALUE
--------------------------------------------------------------------------------
The Fund's net asset value per share fluctuates. It is determined by dividing
the sum of all securities and other assets, less liabilities, by the number of
shares outstanding.
INVESTING IN THE FUND
--------------------------------------------------------------------------------
SHARE PURCHASES
Shares of the Fund are sold on days on which the New York Stock Exchange is open
for business. Shares may be purchased either by wire or mail. The Fund reserves
the right to reject any purchase request.
To purchase shares of the Fund, open an account by calling Federated Securities
Corp. Information needed to establish the account will be taken over the
telephone.
BY WIRE. To purchase shares of the Fund by Federal Reserve wire, call the Fund
before 4:00 P.M. (Eastern time) to place an order. The order is considered
received immediately. Payment by federal funds must be received before 3:00 P.M.
(Eastern time) on the next business day following the order. Federal funds
should be wired as follows: State Street Bank and Trust Company, Boston,
Massachusetts, Attention: EDGEWIRE: For Credit to: Pennsylvania Intermediate
Municipal Trust; Fund Number (this number can be found on the Account Statement
or by contacting the Fund); Group Number or Order Number; Nominee or Institution
Name; ABA Number 011000028. Shares cannot be purchased on days on which the New
York Stock Exchange is closed and on federal holidays restricting wire
transfers.
BY MAIL. To purchase shares of the Fund by mail, send a check made payable to
Pennsylvania Intermediate Municipal Trust to State Street Bank and Trust
Company, P.O. Box 8602, Boston, Massachusetts 02266-8602. Orders by mail are
considered received when payment by check is converted by State Street Bank into
federal funds. This is normally the next business day after State Street Bank
receives the check.
SUBACCOUNTING SERVICES
Financial institutions are encouraged to open single master accounts. However,
certain financial institutions may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Financial institutions holding shares in a fiduciary, agency,
custodial, or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services provided which may be related to the ownership of
shares. This prospectus should, therefore, be read together with any agreement
between the customer and the institution with regard to the services provided,
the fees charged for those services, and any restrictions and limitations
imposed.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $25,000, plus any non-affiliated
bank or broker's fee, if applicable. However, an account may be opened with a
smaller amount as long as the $25,000 minimum is reached within 90 days. An
institutional investor's minimum investment will be calculated by combining all
accounts it maintains with the Fund.
Individual accounts established through a bank or broker may be subject to a
different minimum investment requirement.
WHAT SHARES COST
Shares of the Fund are sold at their net asset value next determined after an
order is received. There is no sales charge imposed by the Fund. Investors who
purchase shares through a non-affiliated bank or broker may be charged an
additional service fee by that bank or broker.
The net asset value is determined at 4:00 P.M. (Eastern time), Monday through
Friday, except on: (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no shares are tendered for
redemption and no orders to purchase shares are received; or (iii) the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange certain municipal securities or a combination of
securities and cash for Fund shares. The securities and cash must have a market
value of at least $25,000. The Fund reserves the right to determine the
acceptability of the securities to be exchanged. Securities accepted by the Fund
are valued in the same manner as the Fund values its assets. Shareholders
wishing to exchange securities should first contact Federated Securities Corp.
Shares purchased by exchange of municipal securities cannot be redeemed by
telephone for five business days to allow time for the transfer to settle.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, FSC maintains a share account for each
shareholder. Share certificates are not issued unless requested in writing.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during that
month.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared daily and paid monthly to all shareholders invested in
the Fund on the record date. Dividends and distributions are automatically
reinvested in additional shares of the Fund on payment dates at the ex-dividend
date net asset value, unless shareholders request cash payments on the new
account form or by writing to FSC. All shareholders on the record date are
entitled to the dividend.
CAPITAL GAINS
Distributions of net realized long term capital gains realized by the Fund, if
any, will be made at least once every twelve months.
REDEEMING SHARES
--------------------------------------------------------------------------------
The Fund redeems shares at their net asset value next determined after State
Street Bank receives the redemption request. Redemptions will be made on days on
which the Fund computes its net asset
value. Redemption requests must be received in proper form and can be made by
telephone request or by written request.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as "By Mail", should be considered.
BY TELEPHONE. Shareholders may redeem their shares by telephoning the Fund
before 4:00 P.M. (Eastern time). All proceeds will normally be wire transferred
the following business day, but in no event more than seven days, to the
shareholder's account at a domestic commercial bank that is a member of the
Federal Reserve System. If at any time the Fund shall determine it necessary to
terminate or modify this method of redemption, shareholders would be promptly
notified.
An authorization form permitting the Fund to accept telephone redemption
requests must first be completed. It is recommended that investors request this
privilege at the time of their initial application. If not completed at the time
of initial application, authorization forms and information on this service can
be obtained through Federated Securities Corp. Telephone redemption instructions
may be recorded. If reasonable procedures are not followed by the Fund, it may
be liable for losses due to unauthorized or fraudulent telephone instructions.
BY MAIL. Shareholders may redeem shares by sending a written request to the
Fund. The written request should include the shareholder's name, the Fund name
the account number, and the share or dollar amount requested. If share
certificates have been issued, they must be properly endorsed and should be sent
by registered or certified mail with the written request.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
- a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
- any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed to the shareholder within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request provided State Street Bank has received payment for
shares from the shareholder.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum value of $25,000 due to
shareholder redemptions. This requirement does not apply, however, if the
balance falls below $25,000 because of changes in the Fund's net asset value.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
--------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights except that in matters
affecting only a particular fund or class, only shares of that fund or class are
entitled to vote.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust's or the Fund's operation and for the election of Trustees
under certain circumstances. Trustees may be removed by the Trustees or by
shareholders at a special meeting. A special meeting of shareholders for this
purpose shall be called by the Trustees upon the written request of shareholders
owning at least 10% of the outstanding shares of all series in the Trust
entitled to vote.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust. To
protect shareholders of the Fund, the Trust has filed legal documents with
Massachusetts that expressly disclaim the liability of shareholders for such
acts or obligations of the Trust. These documents require notice of this
disclaimer to be given in each agreement, obligation, or instrument that the
Trust or its Trustees enter into or sign.
In the unlikely event a shareholder of the Fund is held personally liable for
the Trust's obligations, the Trust is required to use its property to protect or
compensate the shareholder. On request, the Trust will defend any claim made and
pay any judgment against a shareholder for any act or obligation of the Trust.
Therefore, financial loss resulting from liability as a shareholder will occur
only if the Trust cannot meet its obligations to indemnify shareholders and pay
judgments against them from its assets.
TAX INFORMATION
--------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code, as amended, applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for
federal income tax purposes so that income (including capital gains) and losses
realized by the Trust's other portfolios will not be combined for tax purposes
with those realized by the Fund.
Shareholders are not required to pay federal regular income tax on any dividends
received from the Fund that represent net interest on tax-exempt municipal
bonds. However, under the Tax Reform Act of 1986, dividends representing net
interest income earned on some municipal bonds may be included in calculating
the federal individual alternative minimum tax or the federal alternative
minimum tax for corporations.
The alternative minimum tax, up to 28% of alternative minimum taxable income for
individuals and 20% for corporations, applies when it exceeds the regular tax
for the taxable year. Alternative minimum taxable income is equal to the regular
taxable income of the taxpayer increased by certain "tax preference" items not
included in regular taxable income and reduced by only a portion of the
deductions allowed in the calculation of the regular tax.
The Tax Reform Act of 1986 treats interest on certain "private activity" bonds
issued after August 7, 1986, as a tax preference item for both individuals and
corporations. Unlike traditional governmental purpose municipal bonds, which
finance roads, schools, libraries, prisons, and other public facilities, private
activity bonds provide benefits to private parties. The Fund may purchase all
types of municipal bonds, including private activity bonds. Thus, should it
purchase any such bonds, a portion of the Fund's dividends may be treated as a
tax preference item.
In addition, in the case of a corporate shareholder, dividends of the Fund which
represent interest on municipal bonds will become subject to the 20% corporate
alternative minimum tax because the dividends are included in a corporation's
"adjusted current earnings." The corporate alternative minimum tax treats 75% of
the excess of a taxpayer's pre-tax "adjusted current earnings" over the
taxpayer's alternative minimum taxable income as a tax preference item.
"Adjusted current earnings" is based upon the concept of a corporation's
"earnings and profits." Since "earnings and profits" generally includes the full
amount of any Fund dividend, and alternative minimum taxable income does not
include the portion of the Fund's dividend attributable to municipal bonds which
are not private activity bonds, the difference will be included in the
calculation of the corporation's alternative minimum tax.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares. Information on the tax status of dividends and distributions
is provided annually.
PENNSYLVANIA TAXES
The Fund has received a ruling from the Commonwealth of Pennsylvania Department
of Revenue that interest or gain derived by the Fund from obligations free from
state taxation in Pennsylvania is not taxable on pass-through to Fund
shareholders for purposes of Pennsylvania personal income taxes. This is based
upon the existence of the Pennsylvania Investment Restrictions (see "Investment
Limitations"). However, legislation is currently pending in Pennsylvania which,
if enacted, would eliminate the necessity of the Pennsylvania Investment
Restrictions. That legislation would also generally repeal the Pennsylvania
personal income tax exemption for gains from the sale of tax-exempt
obligations, including the exemption for distributions from the Fund to the
extent they are derived from gains from tax-exempt obligations.
In the opinion of Houston, Houston & Donnelly, counsel to the Fund:
- the Fund would not be liable to pay Pennsylvania corporate or personal
property taxes; and
- Fund shares are exempt from personal property taxes imposed by counties
in Pennsylvania to the extent that the the Fund invests in obligations
that are exempt from such taxes.
OTHER STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from state income taxes in states
other than Pennsylvania or from personal property taxes. State laws differ on
this issue, and shareholders are urged to consult their own tax advisers
regarding the status of their accounts under state and local tax laws.
PERFORMANCE INFORMATION
--------------------------------------------------------------------------------
From time to time the Fund advertises its total return, yield, and
tax-equivalent yield.
Total return represents the change, over a specific period of time, in the value
of an investment in the Fund after reinvesting all income and capital gains
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the maximum offering price per share of the Fund on
the last day of the period. This number is then annualized using semi-annual
compounding. The tax-equivalent yield of the Fund is calculated similarly to the
yield, but is adjusted to reflect the taxable yield that the Fund would have had
to earn to equal its actual yield, assuming a specific tax rate. The yield and
the tax-equivalent yield do not necessarily reflect income actually earned by
the Fund and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
ADDRESSES
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Fund
Pennsylvania Intermediate Federated Investors Tower
Municipal Trust Pittsburgh, Pennsylvania 15222-3779
------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8602
Trust Company Boston, Massachusetts 02266-8602
------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen & Co. 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
------------------------------------------------------------------------------------------------
</TABLE>
PENNSYLVANIA
INTERMEDIATE MUNICIPAL
TRUST
PROSPECTUS
A Non-Diversified Portfolio of
Intermediate Municipal Trust
An Open-End, Management
Investment Company
February 15, 1994
FEDERATED SECURITIES CORP.
(LOGO)
---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
3081603A (2/94)
PENNSYLVANIA INTERMEDIATE MUNICIPAL TRUST
(A Portfolio of Intermediate Municipal Trust)
--------------------------------------------------------------------------------
SUPPLEMENT TO STATEMENT OF ADDITIONAL INFORMATION DATED FEBRUARY 15, 1994
A. Please insert the following section after the section entitled "Reverse
Repurchase Agreements" which begins on page 2:
"Portfolio Turnover
The Fund may trade or dispose of portfolio securities as considered
necessary to meet its investment objective. For the period from November
15, 1993 (date of initial public offering) to March 31, 1994, the
portfolio turnover rate for the Fund was 45%."
B. Please insert the following information as a second paragraph under the
section entitled "Fund Ownership" on page 7:
"As of May 9, 1994, the following shareholders of record owned 5% or
more of the outstanding shares of the Fund: FIRSTNAT Co., First National
Bank (as record owner holding Shares for its clients), West Chester,
Pennsylvania, owned approximately 64,394 (30.80%) Shares; Univest
Company, Union National Bank & Trust, Souderton, Pennsylvania, owned
approximately 44,971 (21.51%) Shares; Federated Disbursing Corp.,
Pittsburgh, Pennsylvania, owned approximately 22,884 (10.95%) Shares;
BBCT Co., First Columbia Bank & Trust Co., Bloomsburg, Pennsylvania,
owned approximately 17,899 (8.56%) Shares; Gratru Company, Penn Central
National Bank, Huntingdon, Pennsylvania, owned approximately 17,403
(8.32%) Shares; and NAVALCO, Valley Bank & Trust Co., Chambersburg,
Pennsylvania, owned approximately 12,259 (5.86%) shares.
C. Please insert the following sub-section after the sub-section entitled
"Adviser to the Fund" under the main section entitled "Investment
Advisory Services" on page 7:
"Advisory Fees
For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectus.
During the period from November 15, 1993 (date of initial public
offering) to March 31, 1994, the Fund's Adviser earned $2,178, all of
which was voluntarily waived, in addition, the Adviser reimbursed other
operating expenses of $25,800.
D. Please insert the following section after the section entitled "Tax
Status" on page 9:
"Total Return"
The Fund's cumulative total return from November 15, 1993 (date of
initial public offering) to March 31, 1994 was (0.16%). Cumulative total
return reflects the Fund's total performance over a specific period of
time. The Fund's total return is representative of only four months of
investment activity since the Fund's effective date.
The average annual total return for the Fund is the average compounded
rate of return for a given period that would equate a $1,000 initial
investment to the ending redeemable value of that investment. The ending
redeemable value is computed by multiplying the number of shares owned
at the end of the period by the maximum offering price per share at the
end of the period. The number of shares owned at the end of the period
is based on the number of shares purchased at the beginning of the
period with $1,000, adjusted over the period by any additional shares,
assuming the monthly reinvestment of all dividends and distributions.
E. Please insert the following information as a final paragraph under the
section entitled "Yield" on page 10:
"The Fund's yield for the thirty-day and seven-day, period ended March
31, 1994 was 5.13% and 4.78%, respectively."
F. Please insert the following information as a final paragraph under the
section entitled "Tax-Equivalent Yield" on page 10:
"The Fund's tax-equivalent yield for the thirty-day and seven-day period
ended March 31, 1994, was 7.13% and 6.64%, respectively."
May 31, 1994
FEDERATED SECURITIES CORP.
(LOGO)
--------------------------------------------------------------------------------
Distributor
004330-A (5/94)
PENNSYLVANIA INTERMEDIATE MUNICIPAL TRUST
(A PORTFOLIO OF INTERMEDIATE MUNICIPAL TRUST)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus of
Pennsylvania Intermediate Municipal Trust (the "Fund") dated February 15, 1994.
This Statement is not a prospectus itself. To receive a copy of the prospectus,
write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated February 15, 1994
FEDERATED SECURITIES CORP.
(LOGO)
---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
3081603B (2/94)
TABLE OF CONTENTS
--------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
---------------------------------------------------------------
Acceptable Investments 1
When-Issued and Delayed
Delivery Transactions 2
Temporary Investments 2
Investment Limitations 3
Investment Risks 4
MANAGEMENT OF INTERMEDIATE MUNICIPAL TRUST 5
---------------------------------------------------------------
Officers and Trustees 5
Fund Ownership 7
The Funds 7
Trustee Liability 7
INVESTMENT ADVISORY SERVICES 7
---------------------------------------------------------------
Adviser to the Fund 7
ADMINISTRATIVE SERVICES 8
---------------------------------------------------------------
BROKERAGE TRANSACTIONS 8
---------------------------------------------------------------
PURCHASING SHARES 8
---------------------------------------------------------------
Conversion to Federal Funds 8
DETERMINING NET ASSET VALUE 8
---------------------------------------------------------------
Valuing Municipal Bonds 8
Use of Amortized Cost 9
REDEEMING SHARES 9
---------------------------------------------------------------
Redemption in Kind 9
TAX STATUS 9
---------------------------------------------------------------
The Fund's Tax Status 9
Shareholders' Tax Status 9
YIELD 10
---------------------------------------------------------------
TAX-EQUIVALENT YIELD 10
---------------------------------------------------------------
Tax-Equivalency Table 10
PERFORMANCE COMPARISONS 11
---------------------------------------------------------------
APPENDIX 12
---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
--------------------------------------------------------------------------------
The Fund is a portfolio in Intermediate Municipal Trust (the "Trust"). The Trust
was established as a Massachusetts business trust under a Declaration of Trust
dated May 31, 1985.
INVESTMENT OBJECTIVE AND POLICIES
--------------------------------------------------------------------------------
The Fund's investment objective is to provide current income which is exempt
from federal regular income tax and the personal income taxes imposed by the
Commonwealth of Pennsylvania. The investment objective cannot be changed without
approval of shareholders.
ACCEPTABLE INVESTMENTS
The Fund invests primarily in a portfolio of municipal securities which are
exempt from federal regular income tax and Pennsylvania state personal income
taxes. These securities include those issued by or on behalf of the Commonwealth
of Pennsylvania and Pennsylvania municipalities, and those issued by states,
territories and possessions of the United States which are exempt from federal
regular income tax and the Pennsylvania state personal income taxes.
CHARACTERISTICS
The Pennsylvania municipal securities in which the Fund invests have the
characteristics set forth in the prospectus.
A Pennsylvania municipal security will be determined by the Fund's
adviser to meet the quality standards established by the Fund's Board of
Trustees if it is of comparable quality to municipal securities within
the Fund's rating requirements. The Trustees consider the
creditworthiness of the issuer of a municipal security, the issuer of a
participation interest if the Fund has the right to demand payment from
the issuer of the interest, or the guarantor of payment by either of
those issuers. The Fund is not required to sell a municipal security if
the security's rating is reduced below the required minimum subsequent to
its purchase by the Fund. The investment adviser considers this event,
however, in its determination of whether the Fund should continue to hold
the security in its portfolio. If Moody's Investors Service, Inc.,
Standard & Poor's Corporation or Fitch Investors Services, Inc. ratings
change because of changes in those organizations or in their rating
systems, the Fund will try to use comparable ratings as standards in
accordance with the investment policies described in the Fund's
prospectus.
TYPES OF ACCEPTABLE INVESTMENTS
Examples of Pennsylvania municipal securities are:
- municipal notes and municipal commercial paper;
- serial bonds sold with differing maturity dates;
- tax anticipation notes sold to finance working capital needs of
municipalities;
- bond anticipation notes sold prior to the issuance of longer-term
bonds;
- pre-refunded municipal bonds; and
- general obligation bonds secured by a municipality pledge of taxation.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Fund the right
to demand payment of the principal amounts of the participation interests
plus accrued interest on short notice (usually within seven days).
VARIABLE RATE MUNICIPAL SECURITIES
Variable interest rates generally reduce changes in the market value of
municipal securities from their original purchase prices. Accordingly, as
interest rates decrease or increase, the potential for capital
appreciation or depreciation is less for variable rate municipal
securities than for fixed income obligations. Many municipal securities
with variable interest rates purchased by the Fund are subject to
repayment of principal (usually within seven days) on the Fund's demand.
The terms of these variable rate demand instruments require payment of
principal and accrued interest from the issuer of the municipal
obligations, the issuer of the participation interests, or a guarantor of
either issuer.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of participation
interests which represent undivided proportional interests in lease
payments by a governmental or non-profit entity. The lease payments and
other rights under the lease provide for and secure the payments on the
certificates. Lease obligations may be limited by municipal charter or
the nature of the appropriation for the lease. In particular, lease
obligations may be
--------------------------------------------------------------------------------
subject to periodic appropriation. If the entity does not appropriate
funds for future lease payments, the entity cannot be compelled to make
such payments. Furthermore, a lease may provide that the certificate
trustee cannot accelerate lease obligations upon default. The trustee
would only be able to enforce lease payments as they became due. In the
event of default or failure of appropriation, it is unlikely that the
trustee would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the Fund's
investment adviser, under the authority delegated by the Board of
Trustees ("Trustees"), will base its determination on the following
factors:
- whether the lease can be terminated by the lessee;
- the potential recovery, if any, from a sale of the leased property
upon termination of the lease;
- the lessee's general credit strength (e.g., its debt, administrative,
economic and financial characteristics and prospects);
- the likelihood that the lessee will discontinue appropriating funding
for the leased property because the property is no longer deemed
essential to its operations (e.g., the potential for an "event of non-
appropriation"); and
- any credit enhancement or legal recourse provided upon an event of
non-appropriation or other termination of the lease.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The Fund engages in
when-issued and delayed delivery transactions only for the purpose of acquiring
portfolio securities consistent with the Fund's investment objective and
policies, not for investment leverage. These transactions are made to secure
what is considered to be an advantageous price and yield for the Fund.
Settlement dates may be a month or more after entering into these transactions,
and the market values of the securities purchased may vary from the purchase
prices.
No fees or expenses, other than normal transaction costs, are incurred. However,
liquid assets of the Fund sufficient to make payment for the securities to be
purchased are segregated on the Fund's records at the trade date. These
securities are marked to market daily and maintained until the transaction is
settled.
The Fund does not intend to engage in these transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.
TEMPORARY INVESTMENTS
The Fund may also invest in temporary investments during times of unusual market
conditions for defensive purposes.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements in which banks, broker/dealers,
and other recognized financial institutions sell U.S. government
securities or certificates of deposit to the Fund and agree at the time
of sale to repurchase them at a mutually agreed upon time and price
within one year from the date of acquisition. The Fund or its custodian
will take possession of the securities subject to repurchase agreements.
To the extent that the original seller does not repurchase the securities
from the Fund, the Fund could receive less than the repurchase price on
any sale of such securities. In the event that such a defaulting seller
filed for bankruptcy or became insolvent, disposition of such securities
by the Fund might be delayed pending court action. The Fund believes that
under the regular procedures normally in effect for custody of the Fund's
portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of the Fund and allow
retention or disposition of such securities. The Fund will only enter
into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are deemed by the Fund's
adviser to be creditworthy pursuant to guidelines established by the
Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. This
transaction is similar to borrowing cash. In a reverse repurchase
agreement the Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer in
return for a percentage of the instrument's market value in cash and
agrees that on a stipulated date in the future the Fund will repurchase
the portfolio instrument by remitting the original consideration plus
interest at an agreed upon rate. The use of reverse repurchase agreements
may enable the Fund to avoid selling portfolio instruments at a time when
a sale may be deemed to be disadvantageous, but the ability to enter into
reverse repurchase agreements does not ensure that the Fund will be able
to avoid selling portfolio instruments at a disadvantageous time.
--------------------------------------------------------------------------------
When effecting reverse repurchase agreements, liquid assets of the Fund,
in a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked
to market daily and maintained until the transaction is settled.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as may be necessary for
clearance of purchases and sales of securities.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money and engage in reverse repurchase agreements in amounts up to
one-third of the value of its total assets, including the amounts
borrowed.
The Fund will not borrow money or engage in reverse repurchase agreements
for investment leverage, but rather as a temporary, extraordinary, or
emergency measure or to facilitate management of the portfolio by
enabling the Fund to meet redemption requests when the liquidation of
portfolio securities is deemed to be inconvenient or disadvantageous. The
Fund will not purchase any securities while borrowings in excess of 5% of
its total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate its assets except to
secure permitted borrowings. In those cases, it may mortgage, pledge, or
hypothecate assets having a market value not exceeding 10% of the value
of its total assets at the time of the pledge.
UNDERWRITING
The Fund will not underwrite any issue of securities except as it may be
deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objective, policies, and limitations.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate or invest in real estate
limited partnerships, although it may invest in municipal bonds secured
by real estate or interests in real estate.
INVESTING IN COMMODITIES
The Fund will not buy or sell commodities, commodity contracts, or
commodities futures contracts.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except that it may acquire
publicly or non-publicly issued municipal bonds or temporary investments
or enter into repurchase agreements in accordance with its investment
objective, policies, and limitations or its Declaration of Trust.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such purchase,
25% or more of the value of its total assets would be invested in any one
industry or in industrial development bonds or other securities, the
interest upon which is paid from revenues of similar types of projects.
However, the Fund may invest as temporary investments more than 25% of
the value of its assets in cash or cash items, securities issued or
guaranteed by the U.S. government, its agencies, or instrumentalities, or
instruments secured by these money market instruments, i.e., repurchase
agreements.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies
except as part of a merger, consolidation, or other acquisition.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
Officers and Trustees of the Trust or its investment adviser owning
individually more than 1/2 of 1% of the issuer's securities together own
more than 5% of the issuer's securities.
--------------------------------------------------------------------------------
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in securities
which are illiquid, including repurchase agreements providing for
settlement in more than seven days after notice, and certain restricted
securities not determined by the Trustees to be liquid.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
industrial development bonds where the principal and interest are the
responsibility of companies (or guarantors, where applicable) with less
than three years of continuous operations, including the operation of any
predecessor.
INVESTING IN MINERALS
The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, although it may invest in
the securities of issuers which invest in or sponsor such programs.
In addition, to comply with investment restrictions of a certain state, the Fund
will not invest in real estate limited partnerships.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
For purposes of its policies and limitations, the Fund considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic bank
or savings and loan having capital, surplus, and undivided profits in excess of
$100,000,000 at the time of investment to be "cash items."
INVESTMENT RISKS
Yields on Pennsylvania municipal securities depend on a variety of factors,
including: the general conditions of the municipal bond market; the size of the
particular offering; the maturity of the obligations; and the rating of the
issue. Further, any adverse economic conditions or developments affecting the
Commonwealth of Pennsylvania or its county and local governments could impact
the Fund's portfolio. The Fund's concentration in securities issued by the
Commonwealth of Pennsylvania and its political subdivisions provides a greater
level of risk than a fund which is diversified across numerous states and
municipal entities. The ability of the Commonwealth or its municipalities to
meet their obligations will depend on the availability of tax and other
revenues; economic, political and demographic conditions within Pennsylvania;
and their underlying fiscal condition.
The Commonwealth of Pennsylvania's budget stability depends largely upon
expenditure controls which keep spending in line with what is considered a
relatively limited revenue base. The Commonwealth maintains reasonable debt
levels and has a sound economic position which has shifted over time from very
heavy reliance on manufacturing and mining industries to a more stable
employment base. As a result of the national recession the Commonwealth incurred
large operating deficits in fiscal years 1990 and 1991, depleted the rainy day
fund and put the general fund in a deficit position. Structural stability was
regained through a $2.7 billion tax increase and strict cost containment in
fiscal 1992. For fiscal 1993 and future budget years the Commonwealth will
concentrate on controlling expenditure growth, building their depleted cash
position and continuing to broaden the economy's employment base. Local
government finances were also strained by the regional recession and the budget
instability of the Commonwealth. Reductions in state assistance and increased
social service demands have made it more difficult for local governments
(counties, cities, towns) to operate with balanced budgets. School districts in
the Commonwealth are provided additional credit support through Pennsylvania's
Act 150 which provides subsidized debt service for qualified projects and an
intercept mechanism of state aid payments which would be used to pay bondholders
in the case of a missed debt service payment.
Concerning the constitutional provisions pertaining to debt, the Commonwealth
may issue tax anticipation notes for its General Fund and/or Motor License Fund.
However, the aggregate amount of newly issued and outstanding tax anticipation
notes is limited to a maximum of 20% of the estimated revenues of the
appropriate fund for the fiscal year in which the notes are issued. The notes
must mature within the fiscal year of issuance. The Commonwealth of Pennsylvania
may also issue bond anticipation notes with a term not to exceed three years.
The bond anticipation notes are subject to applicable statutory limitations
pertaining to the issuance of bonds. The ability of the Fund to achieve its
investment objective depends on the continuing ability of the issuers of
Pennsylvania Municipal Securities and participation interests, or the guarantors
of either, to meet their obligations for the payment of interest and principal
when due. Investing in Pennsylvania Municipal Securities which meet the Fund's
quality standards may not be possible if the Commonwealth of Pennsylvania and
its municipalities do not maintain their current credit rating.
MANAGEMENT OF INTERMEDIATE MUNICIPAL TRUST
--------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with Federated Management,
Federated Investors, Federated Securities Corp., Federated Services Company,
Federated Administrative Services, Inc. and the Funds (as defined below).
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------------
John F. Donahue*+ Chairman and Chairman and Trustee, Federated Investors; Chairman and Trustee, Federated
Federated Investors Trustee Advisers, Federated Management, and Federated Research; Director, Aetna Life
Tower and Casualty Company; Chief Executive Officer and Director, Trustee, or
Pittsburgh, PA Managing General Partner of the Funds; formerly, Director, The Standard Fire
Insurance Company. Mr. Donahue is the father of J. Christopher Donahue, Vice
President of the Trust.
--------------------------------------------------------------------------------------------------------------------------------
John T. Conroy, Jr. Trustee President, Investment Properties Corporation; Senior Vice-President, John R.
Wood/IPC Commercial Wood and Associates, Inc., Realtors; President, Northgate Village
Department Development Corporation; General Partner or Trustee in private real estate
John R. Wood and ventures in Southwest Florida; Director, Trustee, or Managing General
Associates, Inc., Partner of the Funds; formerly, President, Naples Property Management, Inc.
Realtors
3255 Tamiami Trail North
Naples, FL
--------------------------------------------------------------------------------------------------------------------------------
William J. Copeland Trustee Director and Member of the Executive Committee, Michael Baker, Inc.;
One PNC Plaza-23rd Floor Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
Pittsburgh, PA Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan
Homes, Inc.
--------------------------------------------------------------------------------------------------------------------------------
James E. Dowd Trustee Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
571 Hayward Mill Road Trustee, or Managing General Partner of the Funds; formerly, Director, Blue
Concord, MA Cross of Massachusetts, Inc.
--------------------------------------------------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
3471 Fifth Avenue Hospitals; Clinical Professor of Medicine and Trustee, University of
Suite 1111 Pittsburgh; Director, Trustee, or Managing General Partner of the Funds.
Pittsburgh, PA
--------------------------------------------------------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+ Trustee Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat'N Park
5916 Penn Mall Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director, Trustee,
Pittsburgh, PA or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
--------------------------------------------------------------------------------------------------------------------------------
Glen R. Johnson* President and Trustee, Federated Investors; President and/or Trustee of some of the funds;
Federated Investors Trustee staff member, Federated Securities Corp. and Federated Administrative
Tower Services Inc.
Pittsburgh, PA
--------------------------------------------------------------------------------------------------------------------------------
Peter E. Madden Trustee Consultant; State Representative, Commonwealth of Massachusetts; Director,
225 Franklin Street Trustee, or Managing General Partner of the Funds; formerly, President,
Boston, MA State Street Bank and Trust Company and State Street Boston Corporation and
Trustee, Lahey Clinic Foundation, Inc.
--------------------------------------------------------------------------------------------------------------------------------
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare, Inc.;
5916 Penn Mall Director, Eat 'N Park Restaurants, Inc.; Director, Trustee, or Managing
Pittsburgh, PA General Partner of the Funds; formerly, Vice Chairman, Horizon Financial,
F.A.
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------------
Wesley W. Posvar Trustee Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
1202 Cathedral of Endowment for International Peace, RAND Corporation, Online Computer Library
Learning Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak Management
University of Pittsburgh Center; Director, Trustee, or Managing General Partner of the Funds;
Pittsburgh, PA President Emeritus, University of Pittsburgh; formerly, Chairman, National
Advisory Council for Environmental Policy and Technology.
--------------------------------------------------------------------------------------------------------------------------------
Marjorie P. Smuts Trustee Public relations/marketing consultant; Director, Trustee, or Managing
4905 Bayard Street General Partner of the Funds.
Pittsburgh, PA
--------------------------------------------------------------------------------------------------------------------------------
J. Christopher Donahue* Vice President President and Trustee, Federated Investors; Trustee, Federated Advisers,
Federated Investors Federated Management, and Federated Research; President and Director,
Tower Federated Administrative Services, Inc.; Trustee, Federated Services
Pittsburgh, PA Company; President or Vice President of the Funds; Director, Trustee, or
Managing General Partner of some of the Funds. Mr. Donahue is the son of
John F. Donahue, Chairman and Trustee of the Trust.
--------------------------------------------------------------------------------------------------------------------------------
Richard B. Fisher Vice President Executive Vice President and Trustee, Federated Investors; Chairman and
Federated Investors Director, Federated Securities Corp.; President or Vice President of the
Tower Funds; Director or Trustee of some of the Funds.
Pittsburgh, PA
--------------------------------------------------------------------------------------------------------------------------------
Edward C. Gonzales Vice President Vice President, Treasurer, and Trustee, Federated Investors; Vice President
Federated Investors and Treasurer and Treasurer, Federated Advisers, Federated Management, and Federated
Tower Research; Executive Vice President, Treasurer, and Director, Federated
Pittsburgh, PA Securities Corp.; Trustee, Federated Services Company; Chairman, Treasurer,
and Director, Federated Administrative Services, Inc.; Trustee or Director
of some of the Funds; Vice President and Treasurer of the Funds.
--------------------------------------------------------------------------------------------------------------------------------
John W. McGonigle Vice President Vice President, Secretary, General Counsel, and Trustee, Federated
Federated Investors and Secretary Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Tower Federated Management, and Federated Research; Trustee, Federated Services
Pittsburgh, PA Company; Executive Vice President, Secretary, and Director, Federated
Administrative Services, Inc.; Director and Executive Vice President,
Federated Securities Corp.; Vice President and Secretary of the Funds.
--------------------------------------------------------------------------------------------------------------------------------
John A. Staley, IV Vice President Vice President and Trustee, Federated Investors; Executive Vice President,
Federated Investors Federated Securities Corp.; President and Trustee, Federated Advisers,
Tower Federated Management, and Federated Research; Vice President of the Funds;
Pittsburgh, PA Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
President, The Standard Fire Insurance Company and President of its
Federated Research Division.
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* This Trustee is deemed to be an "interested person" of the Trust as defined in
the Investment Company Act of 1940, as amended.
+ Members of the Trust's Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of Trustees
between meetings of the Board.
--------------------------------------------------------------------------------
FUND OWNERSHIP
Officers and Trustees own less than 1% of the outstanding shares of the Fund.
THE FUNDS
"The Funds" and "Funds" mean the following investment companies: A.T. Ohio
Tax-Free Money Fund; American Leaders Fund, Inc.; Annuity Management Series;
Automated Cash Management Trust; Automated Government Money Trust; BankSouth
Select Funds; The Boulevard Funds; California Municipal Cash Trust; Cash Trust
Series, Inc.; Cash Trust Series II; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; FT Series, Inc.; Federated ARMs Fund; Federated
Exchange Fund, Ltd.; Federated GNMA Trust; Federated Government Trust; Federated
Growth Trust; Federated High Yield Trust; Federated Income Securities Trust;
Federated Income Trust; Federated Index Trust; Federated Intermediate Government
Trust; Federated Master Trust; Federated Municipal Trust; Federated
Short-Intermediate Government Trust; Federated Short-Term U.S. Government Trust;
Federated Stock Trust; Federated Tax-Free Trust; Federated U.S. Government Bond
Fund; First Priority Funds; Fixed Income Securities, Inc.; Fortress Adjustable
Rate U.S. Government Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress
Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.; Government Income
Securities, Inc.; High Yield Cash Trust; Insight Institutional Series, Inc.;
Insurance Management Series; Intermediate Municipal Trust; Investment Series
Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty
High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty
Term Trust, Inc.-1999; Liberty U.S. Government Money Market Trust; Liberty
Utility Fund, Inc.; Liquid Cash Trust; Mark Twain Funds; Money Market
Management, Inc.; Money Market Obligations Trust; Money Market Trust; Municipal
Securities Income Trust; New York Municipal Cash Trust; 111 Corcoran Funds; The
Planters Funds; Portage Funds; RIMCO Monument Funds; The Shawmut Funds;
Short-Term Municipal Trust; Signet Select Funds; Star Funds; The Starburst
Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for
Financial Institutions; Trust for Government Cash Reserves; Trust for Short-Term
U.S. Government Securities; and Trust for U.S. Treasury Obligations.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
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ADVISER TO THE FUND
The Fund's investment adviser is Federated Management (the "Adviser"). It is a
subsidiary of Federated Investors. All the Class A (voting) shares of Federated
Investors are owned by a trust, the trustees of which are John F. Donahue, his
wife, and his son, J. Christopher Donahue. John F. Donahue is Chairman and
Trustee of Federated Management; Chairman and Trustee, Federated Investors, and
Chairman and Trustee of the Trust. John A. Staley, IV is President of Federated
Management; Vice President and Trustee, Federated Investors; Executive Vice
President, Federated Securities Corp. and Vice President of the Trust. J.
Christopher Donahue is Trustee, Federated Management; President and Trustee,
Federated Investors; President and Director, Federated Administrative Services,
Inc. and Vice President of the Trust. John W. McGonigle is Trustee of Federated
Management; Trustee, Vice President, Secretary and General Counsel, Federated
Investors; Executive Vice President, Secretary and Director, Federated
Administrative Services, Inc.; Executive Vice President, Director, Federated
Securities Corp.; and Vice President and Secretary of the Trust.
The Adviser shall not be liable to the Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or sale
of any security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Fund.
STATE EXPENSE LIMITATIONS
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2.5% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1.5% per year
of the remaining average net assets, the Adviser will reimburse the Trust
for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this expense
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser will
be limited, in any single fiscal year, by the amount
--------------------------------------------------------------------------------
of the investment advisory fee. This arrangement is not part of the
advisory contract and may be amended or rescinded in the future.
ADMINISTRATIVE SERVICES
--------------------------------------------------------------------------------
Federated Administrative Services, Inc., a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund at approximate cost.
John A. Staley, IV, an officer of the Trust, and Dr. Henry J. Gailliot, an
officer of Federated Management, the adviser to the Fund, hold approximately 15%
and 20%, respectively, of the outstanding common stock and serve as directors of
Commercial Data Services, Inc., a company which provides computer processing
services to Federated Administrative Services, Inc. For the fiscal years ended
May 31, 1993, 1992 and 1991, Federated Administrative Services, Inc. paid
approximately $176,425, $203,964, and $168,470, respectively, for services
provided by Commercial Data Services, Inc.
BROKERAGE TRANSACTIONS
--------------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally use those that are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees. The Adviser may select brokers and dealers who offer
brokerage and research services. These services may be furnished directly to the
Fund or to the Adviser and may include:
- advice as to the advisability of investing in securities;
- security analysis and reports;
- economic studies;
- industry studies;
- receipt of quotations for portfolio evaluations; and
- similar services.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage and
research services provided.
Research services provided by brokers may be used by the Adviser or by
affiliates of Federated Investors in advising other accounts. To the extent that
receipt of these services may supplant services for which the adviser or its
affiliates might otherwise have paid, it would tend to reduce their expenses.
PURCHASING SHARES
--------------------------------------------------------------------------------
Except under certain circumstances described in the respective prospectuses,
shares are sold at their net asset value on days the New York Stock Exchange is
open for business. The procedure for purchasing shares is explained in the
prospectus under "Investing in the Fund".
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that the maximum
interest may be earned. State Street Bank acts as the shareholder's agent in
depositing checks and converting them into federal funds.
DETERMINING NET ASSET VALUE
--------------------------------------------------------------------------------
Net asset value generally changes each day. The days on which net asset value is
calculated by the Fund are described in the prospectus. Net asset value will not
be calculated on the following holidays: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
VALUING MUNICIPAL BONDS
The Trustees use an independent pricing service to value municipal bonds. The
independent pricing service takes into consideration yield, stability, risk,
quality, coupon rate, maturity, type of issue, trading characteristics, special
circumstances of a security or trading market, and any other factors or market
data it considers relevant in determining valuations for normal institutional
size trading units of debt securities, and does not rely exclusively on quoted
prices.
--------------------------------------------------------------------------------
USE OF AMORTIZED COST
The Trustees have decided that the fair value of debt securities authorized to
be purchased by the Fund with remaining maturities of 60 days or less shall be
their amortized cost value, unless the particular circumstances of the security
indicate otherwise. Under this method, portfolio instruments and assets are
valued at the acquisition cost as adjusted for amortization of premium or
accumulation of discount rather than at current market value. The Executive
Committee continually assesses this method of valuation and recommends changes
where necessary to assure that the Fund's portfolio instruments are valued at
their fair value as determined in good faith by the Trustees.
REDEEMING SHARES
--------------------------------------------------------------------------------
The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Shares." Although State Street Bank does not charge
for telephone redemptions, it reserves the right to charge a fee for the cost of
wire-transferred redemptions of less than $5,000.
REDEMPTION IN KIND
The Trust is obligated to redeem shares solely in cash up to $250,000 or 1% of
the net asset value of the Fund, whichever is less, for any one shareholder
within a 90-day period.
Any redemption beyond this amount will also be in cash unless the Trustees
determine that further cash payments will have a material adverse effect on
remaining shareholders. In such a case, the Fund will pay all or a portion of
the remainder of the redemption in portfolio instruments, valued in the same way
that net asset value is determined. The portfolio instruments will be selected
in a manner that the Trustees deem fair and equitable. Such securities will be
readily marketable, to the extent available.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transactions costs.
TAX STATUS
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THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code, as amended,
applicable to regulated investment companies and to receive the special tax
treatment afforded to such companies. To qualify for this treatment, the Fund
must, among other requirements:
- derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
- derive less than 30% of its gross income from the sale of securities held less
than three months;
- invest in securities within certain statutory limits; and
- distribute to its shareholders at least 90% of its net income earned during
the year.
SHAREHOLDERS' TAX STATUS
CAPITAL GAINS
Capital gains or losses may be realized by the Fund on the sale of
portfolio securities and as a result of discounts from par value on
securities held to maturity. Sales would generally be made because of:
- the availability of higher relative yields;
- differentials in market values;
- new investment opportunities;
- changes in creditworthiness of an issuer; or
- an attempt to preserve gains or limit losses.
Distributions of long-term capital gains are taxed as such, whether they
are taken in cash or reinvested, and regardless of the length of time the
shareholder has owned the shares. Any loss by a shareholder on Fund
shares held for less than six months and sold after a capital gains
distribution will be treated as a long-term capital loss to the extent of
the capital gains distribution.
YIELD
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The yield for shares of the Fund is determined by dividing the net investment
income per share (as defined by the Securities and Exchange Commission) earned
by the Fund over a thirty-day period by the maximum offering price per share on
the last day of the period. This value is then annualized using semi-annual
compounding. This means that the amount of income generated during the
thirty-day period is assumed to be generated each month over a twelve-month
period and is reinvested every six months. The yield does not necessarily
reflect income actually earned by the Fund because of certain adjustments
required by the Securities and Exchange Commission and, therefore, may not
correlate to the dividends or other distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the Fund,
performance will be reduced for those shareholders paying those fees.
TAX-EQUIVALENT YIELD
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The tax-equivalent yield for the Fund is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that the Fund would have had to earn to
equal its actual yield, assuming a 39.60% federal tax rate and assuming that
income is 100% tax-exempt.
TAX-EQUIVALENCY TABLE
The Fund may also use a tax-equivalency table in advertising and sales
literature. The interest earned by the municipal bonds in the Fund's portfolio
generally remains free from federal regular income tax, Pennsylvania personal
income tax and certain local taxes. (Some portion of the Fund's income may be
subject to the federal alternative minimum tax and state and local taxes.) As
the table below indicates, a "tax-free" investment is an attractive choice for
investors, particularly in times of narrow spreads between tax-free and taxable
yields.
<TABLE>
<S> <C> <C> <C> <C> <C>
TAXABLE YIELD EQUIVALENT FOR 1994
COMMONWEALTH OF PENNSYLVANIA
------------------------------------------------------------------------------------------------------------
TAX BRACKET:
------------------------------------------------------------------------------------------------------------
FEDERAL 15.00% 28.00% 31.00% 36.00% 39.60%
------------------------------------------------------------------------------------------------------------
COMBINED FEDERAL
AND STATE 17.80% 30.80% 33.80% 38.80% 42.40%
------------------------------------------------------------------------------------------------------------
JOINT RETURN: $1-38,000 $38,001-91,850 $91,851-140,000 $140,001-250,000 OVER 250,000
SINGLE RETURN: $1-22,750 $22,751-55,100 $55,101-140,000 $140,001-250,000 OVER 250,000
------------------------------------------------------------------------------------------------------------
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
------------------------------------------------------------------------------------------------------------
1.50% 1.82% 2.17% 2.27% 2.45% 2.60%
2.00% 2.43% 2.89% 3.02% 3.27% 3.47%
2.50% 3.04% 3.61% 3.78% 4.08% 4.34%
3.00% 3.65% 4.34% 4.53% 4.90% 5.21%
3.50% 4.26% 5.06% 5.29% 5.72% 6.08%
4.00% 4.87% 5.78% 6.04% 6.54% 6.94%
4.50% 5.47% 6.50% 6.80% 7.35% 7.81%
5.00% 6.08% 7.23% 7.55% 8.17% 8.68%
5.50% 6.69% 7.95% 8.31% 8.99% 9.55%
6.00% 7.30% 8.67% 9.06% 9.80% 10.42%
</TABLE>
Note: The maximum marginal tax rate for each bracket was used in calculating the
taxable yield equivalent. Furthermore, additional state and local taxes paid on
comparable taxable investments were not used to increase federal deductions.
The chart above is for illustrative purposes only. It is not an indicator of
past or future performance of the Fund.
PERFORMANCE COMPARISONS
--------------------------------------------------------------------------------
The performance of the Fund depends upon such variables as:
- portfolio quality;
- average portfolio maturity;
- type of instruments in which the portfolio is invested;
- changes in interest rates and market value of portfolio securities;
- changes in the Fund's expenses; and
- various other factors.
The Fund's performance fluctuates on a daily basis largely because net earnings
and net asset value per share fluctuate daily. Both net earnings and net asset
value per share are factors in the computation of yield and total return as
described below.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio composition of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
- LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in net asset value over a specific period of time.
From time to time, the Fund will quote its Lipper ranking in the "other states
intermediate municipal debt funds" category in advertising and sales
literature.
- MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
- SHEARSON LEHMAN FIVE-YEAR STATE GENERAL OBLIGATION BONDS is an index comprised
of all state general obligation debt issues with maturities between four and
six years. These bonds are rated A or better and represent a variety of coupon
ranges. Index figures are total returns calculated for one, three and twelve
month periods as well as year-to-date. Total returns are also calculated as of
the index inception December 31, 1979.
- SHEARSON LEHMAN TEN-YEAR STATE GENERAL OBLIGATION BONDS is an index comprised
of the same issues noted above except that the maturities range between nine
and eleven years. Index figures are total returns calculated for the same
periods as listed above.
Advertisements and other sales literature for the Fund may quote total returns
which are calculated on non-standardized base periods. The total returns
represent the historic change in the value of an investment in the Fund based on
monthly reinvestment of dividends over a specific period of time.
APPENDIX
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STANDARD AND POOR'S CORPORATION MUNICIPAL BOND RATINGS
AAA--Debt rated "AAA" has the highest rating assigned by Standard & Poor's
Corporation. Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
NR--Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
Plus (+) or minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
MOODY'S INVESTORS SERVICE, INC. MUNICIPAL BOND RATINGS
AAA--Bonds which are rated AAA are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA--Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group they comprise what are generally known as high grade
bonds. They are rated lower than the best because margins of protection may not
be as large as in AAA securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in AAA securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
NR--Not rated by Moody's.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from AA through B in its corporate or municipal bond rating
system. The modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
FITCH INVESTORS SERVICE, INC.
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA." Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+."
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered strong, but
may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
NR--NR indicates that Fitch does not rate the specific issue.
Plus (+) or Minus (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "AAA" category.
STANDARD AND POOR'S CORPORATION MUNICIPAL NOTE RATINGS
SP-1--Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
sign (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
MOODY'S INVESTORS SERVICE, INC. SHORT-TERM LOAN RATINGS
MIG1/VMIG1--This designation denotes best quality. There is a present strong
protection by established cash flows, superior liquidity support or demonstrated
broad based access to the market for refinancing.
MIG2/VMIG2--This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
--------------------------------------------------------------------------------
STANDARD AND POOR'S CORPORATION COMMERCIAL PAPER RATINGS
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high for issues
designated A-1.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS
PRIME-1--Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. PRIME-1
repayment capacity will normally be evidenced by the following characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance on debt and ample
asset protection.
- Broad margins in earning coverage of fixed financial charges and high internal
cash generation.
- Well-established access to a range of financial markets and assured sources of
alternative liquidity.
PRIME-2--Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
3081603B (2/94)
