FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
THE STARBURST MUNICIPAL INCOME FUND
SPECIAL MEETING OF SHAREHOLDERS
OCTOBER 22, 1996
KNOW ALL PERSONS BY THESE PRESENTS that the
undersigned shareholders of The Starburst
Municipal Income Fund hereby appoint C.
Grant Anderson, Karen M. Brownlee, Patricia
F. Conner, Suzanne W. Land, and Tonya
Kredell or any one of them, true and lawful
attorneys, with the power of substitution
of each, to vote all shares of The
Starburst Municipal Income Fund which the
undersigned is entitled to vote at the
Special Meeting of Shareholders to be held
on October 22, 1996, at Federated Investors
Tower, Pittsburgh, Pennsylvania, at 2:00
p.m., (Eastern time), and at any
adjournment thereof.
Discretionary authority is hereby conferred
as to all other matters as may properly
come before the Special Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. THE ATTORNEYS
NAMED WILL VOTE THE SHARES REPRESENTED BY THIS PROXY IN ACCORDANCE WITH THE
CHOICES MADE ON THIS BALLOT. IF NO CHOICE IS INDICATED AS TO ANY ITEM,
THIS PROXY WILL BE VOTED AFFIRMATIVELY ON THAT MATTER.
PLEASE RETURN BOTTOM PORTION WITH YOUR VOTE IN THE ENCLOSED ENVELOPE AND
RETAIN THE TOP PORTION.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: x
KEEP THIS PORTION FOR YOUR RECORDS
The
Starburst Municipal Income Fund DETACH AND RETURN
THIS PORTION ONLY
VOTE ON PROPOSAL
FOR AGN ABS
1. TO APPROVE OR DISAPPROVE AN AGREEMENT AND PLAN OF
REORGANIZATION WHEREBY FEDERATED INTERMEDIATE
MUNICIPAL TRUST WOULD ACQUIRE ALL OF THE ASSETS OF
THE STARBURST MUNICIPAL INCOME FUND IN EXCHANGE FOR
SHARES OF FEDERATED INTERMEDIATE MUNICIPAL TRUST.
PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR ABOVE. WHEN SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR, GUARDIAN, TRUSTEE, CUSTODIAN, ETC.,
PLEASE GIVE YOUR FULL TITLE AS SUCH. IF A CORPORATION OR PARTNERSHIP,
PLEASE SIGN THE FULL NAME BY AN AUTHORIZED OFFICER OR PARTNER. IF STOCK IS
OWNED JOINTLY, ALL PARTIES SHOULD SIGN.
SIGNATURE SIGNATURE (JOINT OWNERS) DATE
September 3, 1996
RE: THE STARBURST MUNICIPAL INCOME FUND
Dear Valued Compass Brokerage, Inc. Customer,
Enclosed are very important materials relating to your investment in
The
Starburst Municipal Income Fund. As described in these materials, the Board
of
Trustees of The Starburst Funds has unanimously recommended a tax-free
exchange
of shares of The Starburst Municipal Income Fund for shares of Federated
Intermediate Municipal Trust.
The enclosed materials include:
- A letter from an officer of The Starburst Funds describing the
reasons
for the recommendation of the Board of Trustees, including the
identical
investment objectives of the two Funds and the economies of scale
and
potentially lower expense ratios that are likely to be realized by
the
exchange of shares of Funds.
- A Notice of a Special Meeting of the Shareholders of The Starburst
Municipal Income Fund to be held on October 22, 1996 to consider the
tax-free transfer of assets.
- A Prospectus/Proxy Statement that describes, among other things, the
proposed plan of reorganization of The Starburst Municipal Income
Fund
and various fees and expenses, and compares various important
aspects of
The Starburst Municipal Income Fund and Federated Intermediate
Municipal
Trust including applicable fees, charges and expenses and exchange
privileges.
- The Prospectus for Federated Intermediate Municipal Trust, which
contains
more complete information concerning the investment objectives,
management fees, risks and expenses associated with Federated
Intermediate Municipal Trust.
- A proxy voting card (with a postage-paid return envelope).
As a shareholder in The Starburst Municipal Income Fund you have the
right
to vote on the proposed transfer of assets. You should read the enclosed
materials carefully before you vote. Your vote, and your prompt action, are
IMPORTANT.
Compass Brokerage, Inc. is an NASD member broker-dealer and an
affiliate of
Compass Bank. Compass Brokerage's parent company, Compass Bank, serves as
the
investment adviser and custodian of The Starburst Municipal Income Fund.
The
investment adviser and custodian of Federated Intermediate Municipal Trust
are
not affiliated with Compass Brokerage, Inc. or Compass Bank. If the
transfer of
assets is consummated, Compass Brokerage will receive periodic compensation
from
Federated Intermediate Municipal Trust for various shareholder services
with
respect to accounts of Compass Brokerage's customers invested in Federated
Intermediate Municipal Trust. Federated Intermediate Municipal Trust is
distributed by Federated Securities Corp. (a subsidiary of Federated
Investors),
which also is the distributor of The Starburst Municipal Income Fund.
Neither
Federated Securities Corp. nor Federated Investors is affiliated with
Compass
Bank, Compass Brokerage, Inc. or Compass Bancshares, Inc.
Compass Brokerage representatives will be pleased to answer your
questions
and to assist you in understanding the voting process and how to exercise
your
rights as a shareholder. Our representatives may be reached at 1-800-239-
1930
between the hours of 8:30 a.m. and 5:00 p.m., CDT. Please do not hesitate
to
call.
Sincerely,
Randall Reynolds
President, Compass Brokerage,
Inc.
SHARES OF THE STARBURST FUNDS AND SHARES OF FEDERATED INTERMEDIATE
MUNICIPAL
TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY
COMPASS
BROKERAGE, COMPASS BANK, COMPASS BANCSHARES, INC. OR ANY OTHER OF THEIR
AFFILIATES OR ANY OTHER BANK OR FINANCIAL INSTITUTION, AND ARE NOT INSURED
BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC), THE FEDERAL RESERVE
BOARD, OR
ANY FEDERAL AGENCY. IN ADDITION, SHARES OF THE STARBURST FUNDS AND SHARES
OF
FEDERATED INTERMEDIATE MUNICIPAL TRUST INVOLVE RISKS, INCLUDING THE
POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THE STARBURST FUNDS
VERY IMPORTANT
ENCLOSED IS AN IMPORTANT PROXY STATEMENT AND PROXY VOTE CARD
WHICH REQUIRES YOUR SIGNATURE.
THEY RELATE TO THE TRANSFER OF ASSETS OF
THE STARBURST MUNICIPAL INCOME FUND
TO FEDERATED INTERMEDIATE MUNICIPAL TRUST.
PLEASE REVIEW AND CAST YOUR VOTE TODAY!
Dear Valued Shareholder,
We're writing you today to inform you of a recommended change which
affects
The Starburst Municipal Income Fund. Namely, the Board of Trustees has
unanimously recommended a tax-free transfer of assets of The Starburst
Municipal
Income Fund into Federated Intermediate Municipal Trust.
SIMILAR INVESTMENT OBJECTIVES
In recommending this transfer of assets, the Board of Trustees
considered
the fact that Federated Intermediate Municipal Trust has the same
investment
objective as that of The Starburst Municipal Income Fund. Both Funds seek
current income exempt from federal regular income tax.
POTENTIAL ECONOMIES OF SCALE AND LOWER EXPENSE RATIOS
The Board of Trustees has also concluded that economies of scale and
potentially lower expense ratios are likely to be realized by transferring
the
assets of The Starburst Municipal Income Fund into Federated Intermediate
Municipal Trust.
Currently, the projected annual expenses of Federated Intermediate
Municipal Trust are at 0.57%, which is lower than the 0.92% currently
applicable
to shares of The Starburst Municipal Income Fund.
NO TAXABLE CONSEQUENCES--EXCHANGE PRIVILEGES
Because this transfer of assets is tax-free, there are no taxable
consequences for you. And you'll continue to enjoy exchanges among The
Starburst
Funds.
PLEASE VOTE TODAY!
For all of the reasons cited in this letter, the Board of Trustees has
unanimously voted to recommend that you vote "FOR" this transfer of assets.
Because shareholder approval is required for this Fund reorganization,
your
individual vote is of critical importance. This gives you an important say
in
the management of your investment.
A voting card is enclosed. It is essential that you mark your card in
the
appropriate space and return it in the postage-paid envelope provided.
Once shareholder approval has been received, the reorganization of The
Starburst Municipal Income Fund into Federated Intermediate Municipal Trust
is
scheduled to occur on or about October 25, 1996.
If a majority of shareholders do not return their votes, additional
proxy
statements must be sent out, costing money as well as valuable time. So
please,
take a few moments now to fill out and return the enclosed proxy voting
card,
while the material is at hand.
Before voting, please refer to the enclosed prospectus for Federated
Intermediate Municipal Trust for more complete details on its investment
objective, management fees, risks and expenses.
If you have any additional questions on the voting process, or on the
Fund,
please call 1-800-239-1930. A friendly and experienced shareholders'
services
representative will be standing by between 8:30 a.m. and 5:00 p.m., CDT.
Thank you for your prompt attention to this important matter.
Sincerely,
LOGO
The Starburst Funds
J. Christopher Donahue
President
The Starburst Funds and Intermediate Municipal Trust are distributed
by
Federated Securities Corp.
Shares of The Starburst Funds and shares of Intermediate Municipal
Trust
are not deposits or obligations of, or guaranteed or endorsed by Compass
Bank,
Compass Bancshares, Inc. or any of their affiliates, or any other bank or
financial institution, and are not insured by the Federal Deposit Insurance
Corporation ("FDIC"), the Federal Reserve Board or any federal agency. In
addition, shares of The Starburst Funds and shares of Intermediate
Municipal
Trust involve risks, including possible loss of principal invested.
FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp.
is a subsidiary of Federated Investors.
Federated Securities Corp. and Federated Investors
are not affiliated with Compass Bank or
Compass Bancshares, Inc.
THE STARBURST FUNDS
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO SHAREHOLDERS OF THE STARBURST MUNICIPAL INCOME FUND:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of The
Starburst Municipal Income Fund ("Municipal Income Fund"), a portfolio of
The
Starburst Funds ("Trust"), will be held at 2:00 p.m. on October 22, 1996 at
Federated Investors Tower, 19th Floor, Pittsburgh, Pennsylvania 15222-3779
for
the following purposes:
1. To approve or disapprove a proposed Agreement and Plan of
Reorganization
between Municipal Income Fund and Federated Intermediate Municipal
Trust
("Federated Intermediate"), a portfolio of Intermediate Municipal
Trust,
whereby Federated Intermediate would acquire all of the assets of
Municipal Income Fund in exchange for Federated Intermediate shares
to
be distributed pro rata by Municipal Income Fund to its
shareholders in
complete liquidation and termination of Municipal Income Fund; and
2. To transact such other business as may properly come before the
meeting
or any adjournment thereof.
By Order of the Board of
Trustees,
LOGO
John W. McGonigle
Secretary
Dated: September 3, 1996
Shareholders of record at the close of business August 26, 1996 are
entitled to vote at the meeting. Whether or not you plan to attend the
meeting,
please sign and return the enclosed proxy card. Your vote is important.
TO SECURE THE LARGEST POSSIBLE REPRESENTATION AND TO SAVE THE EXPENSE OF
FURTHER
MAILINGS, PLEASE MARK YOUR PROXY CARD, SIGN IT, AND RETURN IT IN THE
ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. YOU MAY
REVOKE YOUR PROXY AT ANY TIME AT OR BEFORE THE MEETING OR VOTE IN PERSON IF
YOU
ATTEND THE MEETING.
PROSPECTUS/PROXY STATEMENT
SEPTEMBER 3, 1996
ACQUISITION OF THE ASSETS OF
THE STARBURST MUNICIPAL INCOME FUND,
(A Portfolio of THE STARBURST FUNDS)
BY AND IN EXCHANGE FOR SHARES OF
FEDERATED INTERMEDIATE MUNICIPAL TRUST,
(A Portfolio of INTERMEDIATE MUNICIPAL TRUST)
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Telephone Number: 1-800-341-7400
This Prospectus/Proxy Statement describes the proposed Agreement and
Plan
of Reorganization (the "Plan") whereby Federated Intermediate Municipal
Trust
("Federated Intermediate"), a portfolio of Intermediate Municipal Trust
would
acquire all of the assets of The Starburst Municipal Income Fund
("Municipal
Income Fund"), a portfolio of The Starburst Funds in exchange for Federated
Intermediate shares to be distributed pro rata by Municipal Income Fund to
its
shareholders in complete liquidation and dissolution of Municipal Income
Fund.
As a result of the Plan, each shareholder of Municipal Income Fund will
become
the owner of Federated Intermediate shares having a total net asset value
equal
to the total net asset value of his or her holdings in Municipal Income
Fund.
Municipal Income Fund and Federated Intermediate are referred to,
collectively,
as the "Funds."
The Starburst Funds is an open-end management investment company which
currently includes four portfolios, each of which has a distinct investment
objective. The investment objective of Municipal Income Fund is to provide
current income exempt from federal regular income tax. Intermediate
Municipal
Trust is an open-end management investment company which currently includes
three portfolios, each of which has a distinct investment objective. The
investment objective of Federated Intermediate is to provide current income
exempt from federal regular income tax. For a comparison of the investment
policies of the Funds, see "Summary-Investment Objectives, Policies and
Limitations".
This Prospectus/Proxy Statement should be retained for future
reference. It
sets forth concisely the information about Intermediate Municipal Trust and
Federated Intermediate that a prospective investor should know before
investing
in Federated Intermediate. This Prospectus/Proxy Statement is accompanied
by the
Prospectus of Federated Intermediate dated July 31, 1996, which is
incorporated
herein by reference. The Prospectus of Municipal Income Fund dated December
31,
1995, and the Statements of Additional Information for Federated
Intermediate
and Municipal Income Fund, dated July 31, 1996 and December 31, 1995,
respectively (relating to the Prospectuses of Federated Intermediate and
Municipal Income Fund, respectively, of the same date) and the Statement of
Additional Information dated September 3, 1996 (relating to this
Prospectus/Proxy Statement), and the Annual Report of Federated
Intermediate for
the fiscal year ended May 31, 1996, all containing additional information
have
been filed with the Securities and Exchange Commission and are incorporated
herein by reference. Copies of the Statements of Additional Information may
be
obtained without charge by calling the Funds at the telephone number shown
above.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS
OR
OBLIGATIONS OF COMPASS BANK, COMPASS BANCSHARES, INC. OR ANY OF ITS
AFFILIATES,
OR OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY COMPASS BANK, COMPASS
BANCSHARES, INC., OR ANY OF ITS AFFILIATES, OR 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.
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.
TABLE OF CONTENTS
<TABLE>
<S>
<C>
SUMMARY....................................................................
... 1
RISK
FACTORS..................................................................
6
INFORMATION ABOUT THE
REORGANIZATION.......................................... 6
INFORMATION ABOUT THE STARBURST FUNDS, INTERMEDIATE, MUNICIPAL TRUST,
FEDERATED INTERMEDIATE, AND MUNICIPAL INCOME
FUND............................. 8
VOTING
INFORMATION............................................................
9
AGREEMENT AND PLAN OF
REORGANIZATION.......................................... EXHIBIT A
</TABLE>
SUMMARY
ABOUT THE PROPOSED REORGANIZATION
The Board of Trustees of The Starburst Funds has voted to recommend to
shareholders of Municipal Income Fund the approval of a Plan whereby
Federated
Intermediate would acquire all of the assets of Municipal Income Fund in
exchange for shares of Federated Intermediate to be distributed pro rata by
Municipal Income Fund to its shareholders in complete liquidation and
termination of Municipal Income Fund (the "Reorganization"). As a result of
the
Reorganization, each shareholder of Municipal Income Fund will become the
owner
of Federated Intermediate shares having a total net asset value equal to
the
total net asset value of his or her holdings in Municipal Income Fund on
the
date of the Reorganization, i.e., the Closing Date.
As a condition to the Reorganization transactions, Intermediate
Municipal
Trust and The Starburst Funds will receive an opinion of counsel that the
Reorganization will be considered a tax-free "reorganization" under
applicable
provisions of the Internal Revenue Code so that no gain or loss will be
recognized by either the Federated Intermediate or Municipal Income Fund or
their shareholders. The opinion of counsel also will state that the tax
basis of
the Federated Intermediate shares received by Municipal Income Fund
shareholders
will be the same as the tax basis of their shares in Municipal Income Fund.
In recommending the Reorganization, the Boards of Trustees of The
Starburst
Funds and Intermediate Municipal Trust considered the cost structure,
market
presence and performance of Municipal Income Fund and have concluded that
economies of scale, and potentially lower expense ratios, could be realized
by
transferring the assets of Municipal Income Fund into Intermediate
Municipal
Trust.
The following discussion compares certain key aspects of the Funds.
Summary of Portfolio Expenses
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
COMBINED
MUNICIPAL/
MUNICIPAL
FEDERATED
INCOME
FEDERATED INTERMEDIATE
FUND
INTERMEDIATE FUND
--------- ----
- -------- ------------
<S> <C> <C>
<C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)................ 2.50%
None None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)................ None
None None
Contingent Deferred Sales Charge (as a percentage of
original purchase price or redemption
proceeds, as applicable)........................... None
None None
Redemption Fees (as a percentage of amount
redeemed, if applicable)........................... None
None None
Exchange Fee......................................... None
None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
COMBINED
MUNICIPAL/
MUNICIPAL
FEDERATED
INCOME
FEDERATED INTERMEDIATE
FUND
INTERMEDIATE FUND
--------- ----
- -------- ------------
<S> <C> <C>
<C>
Management Fee (after waiver)(1)..................... 0.00%
0.36% 0.36%
12b-1 Fee (after waiver)(2).......................... 0.06%
None None
Total Other Expenses (after waiver)(3)............... 0.86%
0.21% 0.21%
Shareholder Service Fee (after waiver)(4)............ None
0.06% 0.06%
Total Fund Operating Expenses(5)................ 0.92%
0.57% 0.57%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of
the
management fee. The adviser can terminate this voluntary waiver at any
time
at its sole discretion. The maximum management fee for Municipal Income
is
0.75% and for Federated Intermediate is 0.40%.
(2) Under the Municipal Income Fund's rule 12b-1 Distribution Plan, the
Municipal Income Fund can pay the distributor up to 0.25% as a 12b-1
fee.
The 12b-1 fee has been reduced to reflect the voluntary waiver of
compensation by the distributor. The distributor can terminate this
voluntary waiver at any time at its sole discretion.
(3) Total Other Expenses for the Municipal Income Fund would have been
0.99%
absent the voluntary waiver by the administrator and custodian. The
administrator and custodian can terminate these voluntary waivers at
any
time at their sole discretion.
(4) The maximum shareholder services fee is 0.25%.
(5) Total Fund Operating Expenses for the Municipal Income Fund, Federated
Intermediate, and Combined Municipal/Federated Intermediate would have
been
2.00%, 0.81% and 0.81%, respectively, absent the voluntary waivers
described
in notes (1), (2), (3) and (4) above.
The purpose of this table is to assist an investor in understanding
the
various costs and expenses that a shareholder of the Funds will bear,
either
directly or indirectly. Wire-transferred redemptions of less than $5,000
may be
subject to additional fees.
Example:
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.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
5 YEARS 10 YEARS
------- --------
- -------- ---------
<S> <C> <C>
<C> <C>
Municipal Income Fund............................ $34 $ 54
$ 75 $ 135
Federated Intermediate........................... $ 6 $ 18
$ 32 $ 71
Combined Municipal/Federated Intermediate Fund... $ 6 $ 18
$ 32 $ 71
</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.
INVESTMENT OBJECTIVES, POLICIES, AND LIMITATIONS
The investment objective of both Federated Intermediate and Municipal
Income Fund is current income exempt from federal regular income tax.
Each Fund pursues its respective investment objective by investing at
least
80% of its net assets in a diversified portfolio of municipal securities.
Federated Intermediate pursues its investment objective by investing at
least
80% of its net assets in a diversified portfolio of municipal securities
with a
dollar-weighted average portfolio maturity of not less than three or more
than
ten years. Municipal Income Fund attempts to achieve its investment
objective by
investing at least 80% of its net assets in a diversified portfolio of
municipal
securities whose average weighted maturity is fifteen years or less. The
municipal securities in which the Funds invest are (i) debt obligations,
including industrial development bonds, issued by or on behalf of any
state,
territory, or possession of the United States, including the District of
Columbia, or any political subdivision of any of these; and (ii)
participation
interests in any of the obligations listed in (i). The municipal securities
in
which the Funds invest are:
- rated within the three highest ratings for municipal securities by
Moody's Investors Service, Inc. ("Moody's") or by Standard & Poor's
Ratings Group ("S&P");
- 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,
in
the case of Federated Intermediate, other securities acceptable to
its
adviser;
- in the case of Federated Intermediate, 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
(PRIME-1) or S&P's highest municipal commercial paper rating (SP-1);
- in the case of Federated Intermediate, unrated if, at the time of
purchase, other municipal securities of that issuer are rated A or
better
by Moody's or S&P; 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 loses its rating or has its rating reduced after either
fund
has purchased it, neither fund is required to sell or otherwise dispose of
the
security, but may consider doing so. Both Funds may enter into repurchase
agreements and may purchase securities on a when-issued or delayed delivery
basis. Both Funds may purchase put options on municipal securities in an
amount
up to 5% of the value of total assets in the case of Municipal Income Fund
and
up to 10% of the value of total assets in the case of Federated
Intermediate.
Federated Intermediate and Municipal Income Fund are subject to
certain
investment limitations. The investment limitations of the two Funds are
substantially identical. These limitations include provisions that, in
effect,
prohibit either fund from: selling any securities short or purchasing any
securities on margin; issuing senior securities, except that each Fund may
borrow up to one-third of the value of its total assets; mortgaging,
pledging,
or hypothecating any assets except to secure permitted borrowings; and
lending
any of their respective assets, except, in the case of Municipal Income
Fund,
portfolio securities up to one-third of the value of its total assets; or
investing more than 15% of the value of their respective net assets in
illiquid
securities.
Reference is hereby made to the Prospectus and the Statement of
Additional
Information of Federated Intermediate dated July 31, 1996, and the
Prospectus
and Statement of Additional Information of Municipal Income Fund, dated
December
31, 1995, which set forth in full the investment objectives, policies and
investment limitations of both funds and which are incorporated by
reference
herein.
DISTRIBUTION ARRANGEMENTS
Federated Securities Corp. is the principal distributor for shares of
Intermediate Municipal Trust and The Starburst Funds. Under a distribution
plan
adopted in accordance with Investment Company Act Rule 12b-1 (the "12b-1
Plan"),
Municipal Income Fund may pay to Federated Securities Corp. an amount
computed
at an annual rate of 0.25 of 1% of its average daily net assets to finance
any
activity which is principally intended to result in the sale of shares
subject
to the 12b-1 Plan. Federated
Intermediate has no 12b-1 Plan and will not, as a result of the
Reorganization,
assume any liabilities or make any voluntary reimbursements on account of
Municipal Income Fund's 12b-1 Plan.
ADVISORY AND OTHER FEES
Federated Management, a Delaware business trust and a subsidiary of
Federated Investors, serves as investment adviser to Federated
Intermediate.
Federated Management receives an annual investment advisory fee equal to
.40 of
1% of Federated Intermediate's average daily net assets. Under the
investment
advisory contract, which provides for the voluntary waiver of the advisory
fee
by Federated Management, Federated Management may voluntarily waive some or
all
of its fee. Federated Management can terminate this voluntary waiver at
anytime
in its sole discretion. Federated Management has also undertaken to
reimburse
Federated Intermediate for operating expenses in excess of limitations
established by certain states.
Compass Bank, an Alabama banking corporation and a wholly-owned
subsidiary
of Compass Bancshares, Inc., a Delaware corporation ("Bancshares"), is the
investment adviser (the "Municipal Income Fund Adviser") to Municipal
Income
Fund. The Municipal Income Fund Adviser is entitled to receive an annual
investment advisory fee equal to 0.75 of 1% of Municipal Income Fund's
average
daily net assets. The advisory fee agreed to be paid by Municipal Income
Fund,
while higher than the advisory fee paid by other mutual funds in general,
is
comparable to the fee paid by many mutual funds with similar objectives and
policies. See also the "Summary of Portfolio Expenses." The Municipal
Income
Fund Adviser has undertaken to reimburse Municipal Income Fund, up to the
amount
of its advisory fee, for operating expenses in excess of limitations
established
by certain states. The Municipal Income Fund Adviser may further
voluntarily
choose to reimburse a portion of its fee and certain expenses of Municipal
Income Fund. Any voluntary agreement to reimburse expenses may be
terminated by
the Municipal Income Fund Adviser at any time in its discretion. To date
the
Municipal Income Fund Adviser has waived 100% of the investment advisory
fee in
light of the low level of assets of the Municipal Income Fund and to reduce
the
impact on investors in the Municipal Income Fund of the other expenses of
the
Municipal Income Fund. However, the Municipal Income Fund Adviser may
terminate
this voluntary waiver at any time. Compass Bank also serves as the
Municipal
Income Fund's custodian, but to date Compass Bank has also waived 100% of
its
fees as custodian. The waiver of the custodian's fees also may be
terminated at
any time.
Federated Administrative Services, a subsidiary of Federated
Investors,
provides the Funds with certain administrative personnel and services
necessary
to operate the Funds. The rate charged to Federated Intermediate for such
administrative services is 0.15 of 1% of the first $250 million of average
aggregate daily net assets of all funds advised by subsidiaries of
Federated
Investors, 0.125 of 1% on the next $250 million, 0.10 of 1% on the next
$250
million and 0.075 of 1% of assets in excess of $750 million. The
administrative
fee received from Intermediate Municipal Trust during any fiscal year shall
be
at least $125,000 per portfolio and $30,000 per each additional class of
shares.
The rate charged to The Starburst Funds for such administrative services is
0.15
of 1% of the first $250 million of average aggregate daily net assets of
The
Starburst Funds, 0.125 of 1% on the next $250 million, 0.10 of 1% on the
next
$250 million and 0.075 of 1% of average aggregate daily net assets of The
Starburst Funds in excess of $750 million. The administrative fee received
from
The Starburst Funds during any fiscal year shall be at least $50,000 per
fund.
The administrative fee expense for Federated Intermediate's most recent
fiscal
year was .075 of 1% of its average aggregate daily net assets. Federated
Intermediate estimates that its administrative fee expense for the current
fiscal year will be .075 of 1% of its average aggregate daily net assets.
The
administrative fee expense for Municipal Income Fund's most recent fiscal
year
was .16 of 1% of its average aggregate daily net assets and would have been
.23
of 1% of average daily net assets absent the voluntary waiver by the
administrator. Municipal Income Fund estimates that its administrative fee
expense for the current fiscal year will be .00 of 1% of its average
aggregate
daily net assets and would be .34 of 1% of average daily net assets absent
the
voluntary waiver by the administrator.
Federated Intermediate has entered into a Shareholder Services
Agreement
with Federated Shareholder Services, a subsidiary of Federated Investors,
under
which Federated Intermediate may make payments up to 0.25 of 1% of the
average
daily net asset value of Federated Intermediate to obtain certain personal
services for shareholders and for the maintenance of shareholder accounts
("shareholder services"). Under the Shareholder Services Agreement,
Federated
Shareholder Services will either perform shareholder services directly or
will
select financial institutions to perform shareholder services. Financial
institutions will receive fees based upon shares owned by their clients or
customers.
The schedules of such fees and the basis upon which such fees will be paid
will
be determined, from time to time, by Federated Intermediate and Federated
Shareholder Services. It is anticipated that Compass Brokerage, Inc. will
receive such shareholder services fees in connection with accounts invested
in
Federated Intermediate.
The total annual operating expenses for Federated Intermediate are
expected
to be .57% of average daily net assets and would be .81% of average daily
net
assets absent the voluntary waiver of the advisory fee. The total annual
operating expenses for Municipal Income Fund are expected to be .99 of 1%
of
average daily net assets and would be 2.35% of average daily net assets
absent
the voluntary waivers of the 12b-1 fee by the distributor, the advisory
fee, the
administrative fee, and the custodial fee.
PURCHASE AND REDEMPTION PROCEDURES
Procedures for the purchase and redemption of shares of Federated
Intermediate are similar to procedures applicable to the purchase and
redemption
of Municipal Income Fund shares. For a complete description of the purchase
and
redemption procedures applicable to purchases and redemptions of shares,
refer
to the Prospectus of Federated Intermediate dated July 31, 1996, and the
Prospectus of Municipal Income Fund dated December 31, 1995, which are
incorporated herein
by reference. Any questions about such procedures may be directed to, and
assistance in
effecting purchases or redemptions of shares of Federated Intermediate may
be
obtained by calling 1-800-341-7400.
Shares of Federated Intermediate are sold on all business days except
on
days on which the New York Stock Exchange is closed and federal holidays
restricting wire transfers. Shares of Federated Intermediate are sold at
their
net asset value next determined after an order is received. The net asset
value
is calculated at 4:00 p.m. (Eastern time) on days shares are sold.
Purchases of
shares of Federated Intermediate may be made by wire or by check. Orders
are
considered received after payment is converted into federal funds. The
minimum
initial investment in Federated Intermediate is $25,000 over a 90-day
period.
The minimum investment in Municipal Income Fund is $1,000 for initial
investments and $100 for subsequent investments. Federated Intermediate's
minimum initial investment requirement will be waived for shareholders who
receive their shares as a result of the contemplated Reorganization.
Redemption requests cannot be executed on days which the New York
Stock
Exchange is closed and federal holidays restricting wire transfers. Shares
are
redeemed at their net asset value next determined after the redemption
request
is received. Proceeds will be distributed by wire or check. Requests for
redemption can be made by telephone or by mail as more particularly
described in
the above-referenced Prospectuses.
EXCHANGE PRIVILEGES
Subject to certain restrictions described in the prospectus for
Municipal
Income Fund, shareholders of the Municipal Income Fund may exchange shares
of
Municipal Income Fund for shares in The Starburst Government Income Fund,
The
Starburst Government Money Market Fund, The Starburst Money Market Fund,
and any
other portfolio of The Starburst Funds. Subject to certain restrictions
described in the prospectus for Municipal Income Fund, shares of Starburst
Funds
with a sales load may be exchanged at net asset value for shares of other
Starburst Funds with an equal sales load or no sales load. Shares of
Starburst
Funds with no sales load acquired by direct purchase or reinvestment of
dividends on such shares may be exchanged for shares of funds with a sales
load
at net asset value, plus the applicable sales load imposed by the fund
shares
being purchased. Shareholders who exercise this exchange privilege must
exchange
shares having a net asset value of at least $1,000. Following the
Reorganization, shareholders who receive shares of Federated Intermediate
as a
result of the Reorganization will continue to enjoy the exchange privilege
with
other Starburst Funds.
Except as described above, Federated Intermediate does not offer
exchange
privileges. As a result, following the consummation of the contemplated
Reorganization, shareholders who purchase shares of Federated Intermediate
through Compass Brokerage, Inc. after the Reorganization will not have
exchange
privileges with any other funds, including the remaining Starburst Funds.
Such
shareholders of Federated Intermediate who redeem shares of Federated
Intermediate after the consummation of the contemplated Reorganization
would be
required to pay any applicable sales charge or load imposed by any fund
into
which redemption proceeds are invested.
TAX CONSEQUENCES
As a condition to the Reorganization transactions, Intermediate
Municipal
Trust and The Starburst Funds will receive an opinion of counsel that the
Reorganization will be considered a tax-free "reorganization" under
applicable
provisions of the Internal Revenue Code so that no gain or loss will be
recognized by either Federated Intermediate or Municipal Income Fund or
their
respective shareholders. The opinion of counsel will also state that the
tax
basis of Federated Intermediate shares received by Municipal Income Fund
shareholders will be the same as the tax basis of their shares in Municipal
Income Fund.
RISK FACTORS
Because of the similarities in the investment objectives, policies and
portfolio composition of Federated Intermediate and Municipal Income Fund,
the
relative risks involved in investing in Federated Intermediate, as outlined
in
the section entitled "Investment Objectives, Policies and Limitations," can
be
considered similar to those associated with Municipal Income Fund.
In addition to the risks described above, there are certain risks and
considerations affecting municipal securities which an investor should take
into
account when investing in these securities. Briefly, these risks include,
but
are not limited to, fluctuation of the value of shares of Federated
Intermediate
and the continuing ability of the issuers of municipal securities and
participation interests, or the guarantors of either, to meet their
obligations
for the payment of principal and interest when due. Additional risk factors
of
municipal securities are described in Federated Intermediate's Prospectus
dated
July 31, 1996 and Municipal Income Fund's Prospectus dated December 31,
1995,
each of which is incorporated by reference into this Prospectus/Proxy
Statement.
INFORMATION ABOUT THE REORGANIZATION
BACKGROUND AND REASONS FOR THE PROPOSED REORGANIZATION
Municipal Income Fund was organized in 1991 in order to provide an
investment vehicle that pursues current income exempt from federal regular
income tax. Although the Board of Trustees of The Starburst Funds is
satisfied
with Municipal Income Fund's performance, both the Board of Trustees of The
Starburst Funds and the Municipal Income Fund Adviser are concerned about
the
relatively small amount of total assets invested in Municipal Income Fund
and
the relatively high level of operating expenses sustained by Municipal
Income
Fund. In this setting, the Municipal Income Fund Adviser and the
distributor
proposed to representatives of Municipal Income Fund that the Board
consider a
sale of all of the Municipal Income Fund's assets to Federated
Intermediate. In
connection with this proposal, the Municipal Income Fund Adviser and the
distributor emphasized that the comparatively larger asset projections of
Federated Intermediate, combined with Municipal Income Fund, would enable
shareholders of Municipal Income Fund to benefit from increased
diversification
of investments and other economies of scale. The Board of Trustees of The
Starburst Funds has concluded that economies of scale and potentially lower
expense ratios could be realized by transferring the assets of Municipal
Income
Fund into Federated Intermediate; however, there is no assurance that these
results will be achieved.
The Trustees of Intermediate Municipal Trust, including the
independent
Trustees, have unanimously concluded that consummation of the
Reorganization is
in the best interests of Intermediate Municipal Trust and the shareholders
of
Federated Intermediate and that the interests of Federated Intermediate
shareholders would not be diluted as a result of effecting the
Reorganization
and have unanimously approved the Plan. Likewise, the Trustees of The
Starburst
Funds, including the independent Trustees have unanimously concluded that
consummation of the Reorganization is in the best interests of The
Starburst
Funds and the shareholders of Municipal Income Fund and that the interests
of
Municipal Income Fund shareholders would not be diluted as a result of
effecting
the Reorganization and have unanimously approved the Plan.
DESCRIPTION OF THE PLAN OF REORGANIZATION
The Plan provides that on or about October 25, 1996 (the "Closing
Date")
Federated Intermediate will acquire all of the assets of Municipal Income
Fund
in exchange for Federated Intermediate shares to be distributed pro rata by
Municipal Income Fund to its shareholders in complete liquidation and
termination of Municipal Income Fund. Shareholders of Municipal Income Fund
will
become shareholders of Federated Intermediate as of 4:00 p.m. (Eastern
time) on
the Closing Date and will begin accruing dividends from Federated
Intermediate
on the next day. Shareholders of Municipal Income Fund will earn their last
dividend from Municipal Income Fund on the Closing Date.
Consummation of the Reorganization is subject to the conditions set
forth
in the Plan, including receipt of an opinion in form and substance
satisfactory
to Intermediate Municipal Trust and The Starburst Funds, as described under
the
caption "Federal Income Tax Consequences" below. The Plan may be terminated
and
the Reorganization may be abandoned at any time before or after approval by
shareholders of Municipal Income Fund prior to the Closing Date by either
The
Starburst Funds or Intermediate Municipal Trust if either believes that
consummation of the Reorganization would not be in the best interests of
its
shareholders.
Federated Management is responsible for the payment of all expenses of
the
Reorganization incurred by either Fund, whether or not the Reorganization
is
consummated. Such expenses include, but are not limited to, legal fees,
registration fees, transfer taxes (if any), the fees of banks and transfer
agents and the costs of preparing, printing, copying and mailing proxy
solicitation materials to shareholders of Municipal Income Fund and the
costs of
holding the Special Meeting of Shareholders.
The foregoing brief summary of the Plan entered into between Municipal
Income Fund and Federated Intermediate is qualified in its entirety by the
terms
and provisions of the Plan, a copy of which is attached hereto as Exhibit A
and
incorporated herein by reference.
DESCRIPTION OF FEDERATED INTERMEDIATE SHARES
Shares of Federated Intermediate to be issued to shareholders of
Municipal
Income Fund under the Plan will be fully paid and nonassessable when issued
and
transferable without restriction and will have no preemptive or conversion
rights. Reference is hereby made to the Prospectus of Federated
Intermediate
dated July 31, 1996 provided herewith for additional information about
Federated
Intermediate shares.
FEDERAL INCOME TAX CONSEQUENCES
As a condition to the Reorganization, Intermediate Municipal Trust and
The
Starburst Funds will receive an opinion from Dickstein Shapiro Morin &
Oshinsky
LLP, counsel to Intermediate Municipal Trust and The Starburst Funds, to
the
effect that, on the basis of the existing provisions of the Internal
Revenue
Code of 1986, as amended (the "Code"), current administrative rules and
court
decisions, for federal income tax purposes: (1) the Reorganization as set
forth
in the Plan will constitute a tax-free reorganization under section
368(a)(1)(C)
of the Code; (2) no gain or loss will be recognized by Federated
Intermediate
upon its receipt of Municipal Income Fund's assets solely in exchange for
Federated Intermediate shares; (3) no gain or loss will be recognized by
Municipal Income Fund upon the transfer of its assets to Federated
Intermediate
in exchange for Federated Intermediate shares or upon the distribution
(whether
actual or constructive) of Federated Intermediate shares to Municipal
Income
Fund shareholders in exchange for their shares of Municipal Income Fund;
(4) no
gain or loss will be recognized by shareholders of Municipal Income Fund
upon
the exchange of their Municipal Income Fund shares for Federated
Intermediate
shares; (5) the tax basis of Municipal Income Fund's assets acquired by
Federated Intermediate will be the same as the tax basis of such assets to
Municipal Income Fund immediately prior to the Reorganization; (6) the tax
basis
of Federated Intermediate shares received by each shareholder of Municipal
Income Fund pursuant to the Plan will be the same as the tax basis of
Municipal
Income Fund shares held by such shareholder immediately prior to the
Reorganization; (7) the holding period of the assets of Municipal Income
Fund in
the hands of Federated Intermediate will include the period during which
those
assets were held by Municipal Income Fund; and (8) the holding period of
Federated Intermediate shares received by each shareholder of Municipal
Income
Fund pursuant to the Plan will include the period during which the
Municipal
Income Fund shares exchanged therefor were held by such shareholder,
provided
the Municipal Income Fund shares were held as capital assets on the date of
the
Reorganization.
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS AND OBLIGATIONS
Intermediate Municipal Trust and The Starburst Funds are organized as
business trusts pursuant to Declarations of Trust under the laws of the
Commonwealth of Massachusetts. The rights of shareholders of Federated
Intermediate and Municipal Income Fund as set forth in their respective
Declarations
of Trust are substantially identical. Set forth below is a brief summary of
the
significant rights of shareholders of Federated Intermediate and Municipal
Income Fund.
Neither Fund is required to hold annual meetings of shareholders.
Shareholder approval is necessary only for certain changes in operations or
the
election of Trustees under certain circumstances. A special meeting of
shareholders of either Fund for any permissible purpose is required to be
called
by the Trustees upon the written request of the holders of at least 10% of
the
outstanding shares of the relevant Fund.
Under certain circumstances, shareholders of Federated Intermediate or
Municipal Income Fund may be held personally liable as partners under
Massachusetts law for obligations of Intermediate Municipal Trust or The
Starburst Funds, as the case may be. To protect shareholders of all
portfolios
of Intermediate Municipal Trust and The Starburst Funds, Intermediate
Municipal
Trust and The Starburst Funds have filed legal documents with the
Commonwealth
of Massachusetts that expressly disclaim the liability of shareholders of
portfolios of Intermediate Municipal Trust and The Starburst Funds,
respectively, for such acts or obligations of Intermediate Municipal Trust
and
The Starburst Funds, respectively. These documents require that notice of
this
disclaimer be given in each agreement, obligation or instrument that
Intermediate Municipal Trust and The Starburst Funds or their Trustees
enter
into or sign on behalf of Intermediate Municipal Trust and The Starburst
Funds.
In the unlikely event a shareholder of a portfolio of Intermediate
Municipal Trust or The Starburst Funds is held personally liable for
obligations
of Intermediate Municipal Trust or The Starburst Funds, Intermediate
Municipal
Trust and The Starburst Funds are required to use their property to protect
or
compensate the shareholder. On request, Intermediate Municipal Trust and
The
Starburst Funds will defend any claims made and pay any judgment against a
shareholder of a portfolio of Intermediate Municipal Trust and The
Starburst
Funds for any act or obligation of Intermediate Municipal Trust and The
Starburst Funds. Therefore, financial loss resulting from liability as a
shareholder of a portfolio of Intermediate Municipal Trust and The
Starburst
Funds will occur only if Intermediate Municipal Trust or The Starburst
Funds
cannot meet their obligations to indemnify shareholders and pay judgments
against them from the assets of Intermediate Municipal Trust or The
Starburst
Funds.
CAPITALIZATION
The following table sets forth the capitalization of Municipal Income
Fund
and Federated Intermediate as of June 30, 1996, and on a pro forma basis as
of
that date:
<TABLE>
<CAPTION>
MUNICIPAL
INCOME FEDERATED
PRO FORMA*
FUND
INTERMEDIATE COMBINED
---------- -----------
- - -----------
<S> <C> <C>
<C>
Net Assets 14,201,224 213,249,532
227,450,756
Shares Outstanding 1,356,551 20,436,830
21,798,583
Price Per Share 10.47 10.43
10.43
</TABLE>
* Adjustment to reflect share balance as a result of the combination based
on
exchange ratio of 1.003835091 (the net asset value of $10.47 divided by
the
net asset value of $10.43)
INFORMATION ABOUT THE INTERMEDIATE MUNICIPAL TRUST,
THE STARBURST FUNDS, FEDERATED INTERMEDIATE, AND
MUNICIPAL INCOME FUND
Information about Intermediate Municipal Trust, The Starburst Funds,
Federated Intermediate and Municipal Income Fund is contained in their
respective Prospectuses dated (in the case of Intermediate Municipal Trust
and
Federated Intermediate) July 31, 1996, and (in the case of The Starburst
Funds
and Municipal Income Fund) December 31, 1995, which are incorporated by
reference herein. A copy of the Prospectus for Federated Intermediate is
included herewith. Additional information about The Starburst Funds and
Federated Intermediate is included in the Statement of Additional
Information of
Federated Intermediate dated July 31, 1996 (relating to the Prospectus of
Federated Intermediate of the same date), and September 3, 1996 (relating
to
this Prospectus/Proxy Statement) which are incorporated herein by
reference.
Additional information about The Starburst Funds and Municipal Income Fund
is
included in the Statement of Additional Information of Municipal Income
Fund
dated December 31, 1995, and September 3, 1996 (relating to this
Prospectus/Proxy Statement) which are
incorporated herein by reference. Copies of the Statements of Additional
Information, which have been filed with the Securities and Exchange
Commission
(the "SEC"), may be obtained without charge by contacting The Starburst
Funds at
1-800-239-1930 or by writing to The Starburst Funds at Federated Investors
Tower, Pittsburgh, PA 15222-3779.
Intermediate Municipal Trust and The Starburst Funds, on behalf of the
respective Funds, are subject to the informational requirements of the
Securities Act of 1933 (the "1933 Act"), the Securities Exchange Act of
1934
(the "1934 Act") and the Investment Company Act of 1940 (the "1940 Act")
and in
accordance therewith file reports and other information with the SEC.
Reports,
proxy and information statements and other information filed by
Intermediate
Municipal Trust or The Starburst Funds, on behalf of the respective Funds,
can
be obtained by calling or writing to Intermediate Municipal Trust or The
Starburst Funds and can also be inspected and copied by the public at the
public
reference facilities maintained by the SEC in Washington, D.C. located at
Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at certain of its
regional offices located at Suite 1400, Northwestern Atrium Center, 500
West
Madison Street, Chicago, IL 60621 and 13th Floor, Seven World Trade Center,
New
York, NY 10048. Copies of such material also may be obtained at prescribed
rates
from the Public Reference Branch, Office of Consumer Affairs and
Information
Services, SEC, 450 Fifth Street, N.W., Washington, D.C. 20549.
This Prospectus/Proxy Statement and the related Statement of
Additional
Information do not contain all of the information set forth in the
registration
statement that Intermediate Municipal Trust has filed with the SEC under
the
1933 Act to which reference is hereby made. Statements contained herein
concerning the provisions of documents are necessarily summaries of such
documents, and each such statement is qualified in its entirety by
reference to
the copy of the applicable documents filed with the SEC. The SEC file
number for
Intermediate Municipal Trust's prospectuses and related Statements of
Additional
Information which are incorporated by reference herein is Registration No.
33-298237. The SEC file number for Prospectuses and related Statements of
Additional Information for The Starburst Funds which are incorporated by
reference herein is Registration No. 33-30950.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with the
solicitation by the Board of Trustees of Municipal Income Fund of proxies
for
use at the Special Meeting of Shareholders (the "Meeting") to be held on
October
22, 1996 and at any adjournment thereof. The proxy confers discretionary
authority on the persons designated therein to vote on other business not
currently contemplated which may properly come before the Meeting. A proxy,
if
properly executed, duly returned and not revoked, will be voted in
accordance
with the specifications thereon; if no instructions are given, such proxy
will
be voted in favor of the Plan. A shareholder may revoke a proxy at any time
prior to use by filing with the Secretary of The Starburst Funds an
instrument
revoking the proxy, by submitting a proxy bearing a later date or by
attending
and voting at the Meeting.
The cost of the solicitation, including the printing and mailing of
proxy
materials, will be borne by Federated Management. In addition to
solicitations
through the mails, proxies may be solicited by officers, employees and
agents of
The Starburst Funds and Federated Management at no additional cost to The
Starburst Funds. Such solicitations may be made by telephone. Federated
Management will reimburse custodians, nominees and fiduciaries for the
reasonable costs incurred by them in connection with forwarding
solicitation
materials to the beneficial owners of shares held of record by such
persons.
OUTSTANDING SHARES AND VOTING REQUIREMENTS
The Board of Trustees has fixed the close of business on August 26,
1996 as
the record date for the determination of shareholders entitled to notice
of, and
to vote at, the Special Meeting of Shareholders and any adjournment
thereof. As
of the record date, there were 1,150,492 shares of Municipal Income Fund
outstanding. Each Municipal Income Fund share is entitled to one vote and
fractional shares have proportionate voting rights. On such date, no person
owned of record, or to the knowledge of the Municipal Income Fund Adviser,
beneficially owned, 5% or more of Municipal Income Fund's outstanding
shares. On
the record date, the trustees and officers of The Starburst Funds as a
group
owned less than 1% of the outstanding shares of Municipal Income Fund.
The votes of the shareholders of Federated Intermediate are not being
solicited, since their approval or consent is not necessary for approval of
the
Reorganization. As of the record date, there
were 20,345,555 shares of Federated Intermediate outstanding. On such date,
no
person owned of record, or to the knowledge of Federated Management,
beneficially owned, 5% or more of Federated Intermediate's outstanding
shares.
On the record date, the trustees and officers of Intermediate Municipal
Trust as
a group owned less than 1% of the outstanding shares of Federated
Intermediate.
Approval of the Plan requires the affirmative vote of the majority of
the
votes entitled to be cast by Municipal Income Fund's shareholders. The
votes of
shareholders of Federated Intermediate are not being solicited since their
approval is not required in order to effect the Reorganization.
A majority of the outstanding shares of Municipal Income Fund,
represented
in person or by proxy, will be required to constitute a quorum at the
Special
Meeting for the purpose of voting on the proposed Reorganization. For
purposes
of determining the presence of a quorum, shares represented by abstentions
and
"broker non-votes" will be counted as present, but not as votes cast, at
the
Special Meeting. Under the Declaration of Trust, the approval of any action
submitted to shareholders is determined on the basis of a majority of votes
entitled to be cast at the Special Meeting.
If at the time any session of the Special Meeting is called to order,
a
quorum is not present in person or by proxy, the persons named as proxies
may
vote those proxies which have been received to adjourn the Special Meeting
to a
later date. In the event that a quorum is present but sufficient votes in
favor
of one or more of the proposals have not been received, the persons named
as
proxies may propose one or more adjournments of the Special Meeting to
permit
further solicitation of proxies with respect to any such proposal. All such
adjournments will require the affirmative vote of a majority of the shares
present in person or by proxy at the session of the Special Meeting to be
adjourned. The persons named as proxies will vote those proxies which they
are
entitled to vote in favor of the proposal, in favor of such an adjournment,
and
will vote those proxies required to be voted against the proposal, against
any
such adjournment. A vote may be taken on one or more of the proposals in
this
proxy statement prior to any such adjournment if sufficient votes for its
approval have been received and it is otherwise appropriate. In the event
the
requisite vote in favor of the Reorganization is not received after such
adjournments, if any, the Board of Trustees of The Starburst Funds would
consider other options, which may include liquidation of Municipal Income
Fund.
DISSENTER'S RIGHT OF APPRAISAL
Shareholders of Municipal Income Fund objecting to the Reorganization
have
no appraisal or dissenter's rights under the Declaration of Trust or
Massachusetts law. Under the Plan, if approved by Municipal Income Fund
shareholders, each Municipal Income Fund shareholder will become the owner
of
Federated Intermediate shares having a total net asset value equal to the
total
net asset value of his or her holdings in Municipal Income Fund at the
Closing
Date.
OTHER MATTERS
Management of Municipal Income Fund knows of no other matters that may
properly be, or which are likely to be, brought before the meeting.
However, if
any other business shall properly come before the meeting, the persons
named in
the proxy intend to vote thereon in accordance with their best judgment.
So far as management is presently informed, there is no litigation
pending
or threatened against Intermediate Municipal Trust or The Starburst Funds.
Whether or not shareholders expect to attend the meeting, all
shareholders
are urged to sign, fill in and return the enclosed proxy form promptly.
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated July 26, 1996 (the
"Agreement"),
between INTERMEDIATE MUNICIPAL TRUST, a Massachusetts business trust
("Intermediate"), on behalf of its portfolio, Federated Intermediate
Municipal
Trust (hereinafter called the "Acquiring Fund"), and THE STARBURST FUNDS, a
Massachusetts business trust ("Starburst"), on behalf of its portfolio, The
Starburst Municipal Income Fund (hereinafter called the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization
and liquidation within the meaning of Section 368(a)(1)(C) of the United
States
Internal Revenue Code of 1986, as amended (the "Code"). The reorganization
(the
"Reorganization") will consist of the transfer of all of the assets of the
Acquired Fund in exchange solely for shares of the Acquiring Fund (the
"Acquiring Fund Shares") and the distribution, after the Closing Date
hereinafter referred to, of the Acquiring Fund Shares to the shareholders
of the
Acquired Fund in liquidation of the Acquired Fund as provided herein, all
upon
the terms and conditions hereinafter set forth in this Agreement.
WHEREAS, Intermediate and Starburst are registered open-end management
investment companies and the Acquired Fund owns securities in which the
Acquiring Fund is permitted to invest;
WHEREAS, both the Acquired Fund and the Acquiring Fund are authorized
to
issue their shares of beneficial interest;
WHEREAS, the Board of Trustees, including a majority of the Trustees
who
are not "interested persons" (as defined under the Investment Company Act
of
1940, as amended (the "1940 Act")), of Intermediate has determined that the
exchange of all of the assets of the Acquired Fund for Acquiring Fund
Shares is
in the best interests of the Acquiring Fund shareholders and that the
interests
of the existing shareholders of the Acquiring Fund would not be diluted as
a
result of this transaction; and
WHEREAS, the Board of Trustees, including a majority of the Trustees
who
are not "interested persons" (as defined under the 1940 Act), of Starburst
has
determined that the exchange of all of the assets of the Acquired Fund for
Acquiring Fund Shares is in the best interests of the Acquired Fund
shareholders
and that the interests of the existing shareholders of the Acquired Fund
would
not be diluted as a result of this transaction;
NOW THEREFORE, in consideration of the premises and of the covenants
and
agreements hereinafter set forth, the parties agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND
SHARES AND LIQUIDATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions contained herein, the Acquired
Fund
agrees to assign, transfer and convey to the Acquiring Fund all of the
assets of
the Acquired Fund, including all securities and cash other than cash in an
amount necessary to pay any unpaid dividends and distributions as provided
in
paragraph 1.5, and the Acquiring Fund agrees in exchange therefor (i) to
deliver
to the Acquired Fund the number of Acquiring Fund Shares, including
fractional
Acquiring Fund Shares, determined as set forth in paragraph 2.3. Such
transaction shall take place at the closing (the "Closing") on the closing
date
(the "Closing Date") provided for in paragraph 3.1. In lieu of delivering
certificates for the Acquiring Fund Shares, the Acquiring Fund shall credit
the
Acquiring Fund Shares to the Acquired Fund's account on the stock record
books
of the Acquiring Fund and shall deliver a confirmation thereof to the
Acquired
Fund.
1.2 The Acquired Fund will discharge all of its liabilities and
obligations
prior to the Closing Date.
1.3 Delivery of the assets of the Acquired Fund to be transferred
shall be
made on the Closing Date and shall be delivered to State Street Bank and
Trust
Company, Boston, Massachusetts, the Acquiring Fund's custodian (the
"Custodian"), for the account of the Acquiring Fund, together with proper
instructions and all necessary documents to transfer to the account of the
Acquiring Fund, free and clear of all liens, encumbrances, rights,
restrictions
and claims. All cash delivered shall be in the form of currency and
immediately
available funds payable to the order of the Custodian for the account of
the
Acquiring Fund.
1.4 The Acquired Fund will pay or cause to be paid to the Acquiring
Fund
any dividends or interest received on or after the Closing Date with
respect to
assets transferred to the Acquiring Fund hereunder. The Acquired Fund will
transfer to the Acquiring Fund any distributions, rights or other assets
received by the Acquired Fund after the Closing Date as distributions on or
with
respect to the securities transferred. Such assets shall be deemed included
in
assets transferred to the Acquiring Fund on the Closing Date and shall not
be
separately valued.
1.5 As soon after the Closing Date as is conveniently practicable (the
"Liquidation Date"), the Acquired Fund will liquidate and distribute pro
rata to
the Acquired Fund's shareholders of record, determined as of the close of
business on the Closing Date (the "Acquired Fund Shareholders"), the
Acquiring
Fund Shares received by the Acquired Fund pursuant to paragraph 1.1. In
addition, each shareholder of record of the Acquired Fund shall have the
right
to receive any unpaid dividends or other distributions which were declared
before the Valuation Date with respect to the shares of the Acquired Fund
that
are held by the shareholder on the Valuation Date. Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund
Shares
then credited to the account of the Acquired Fund on the books of the
Acquiring
Fund to open accounts on the share record books of the Acquiring Fund in
the
names of the Acquired Fund Shareholders and representing the respective pro
rata
number of the Acquiring Fund Shares due such shareholders. All issued and
outstanding shares of the Acquired Fund will simultaneously be canceled on
the
books of the Acquired Fund. Share certificates representing interests in
the
Acquired Fund will represent a number of Acquiring Fund Shares after the
Closing
Date as determined in accordance with Section 2.3. The Acquiring Fund shall
not
issue certificates representing the Acquiring Fund Shares in connection
with
such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of
the
Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be
issued in
the manner described in the Acquiring Fund's current prospectus and
statement of
additional information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund
Shares
in a name other than the registered holder of the Acquired Fund shares on
the
books of the Acquired Fund as of that time shall, as a condition of such
issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares
are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Fund is and shall
remain
the responsibility of the Acquired Fund up to and including the Closing
Date and
such later dates, with respect to liquidation and termination of the
Acquired
Fund, on which the Acquired Fund is liquidated and terminated.
2. VALUATION.
2.1 The value of the Acquired Fund's net assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of
the
close of the New York Stock Exchange (normally 4:00 p.m., Eastern time) on
the
Closing Date (such time and date being hereinafter called the "Valuation
Date"),
using the valuation procedures set forth in the Acquiring Fund's then-
current
prospectus or statement of additional information.
2.2 The net asset value of an Acquiring Fund Share shall be the net
asset
value per share computed as of the close of the New York Stock Exchange
(normally 4:00 p.m., Eastern time) on the Valuation Date, using the
valuation
procedures set forth in the Acquiring Fund's then-current prospectus or
statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall
be determined by dividing the value of the net assets of the Acquired Fund
determined using the same valuation procedures referred to in paragraph 2.1
by
the net asset value of one Acquiring Fund Share determined in accordance
with
paragraph 2.2.
2.4 All computations of value shall be made in accordance with the
regular
practices of the Acquiring Fund.
3. CLOSING AND CLOSING DATE.
3.1 The Closing Date shall be October 25, 1996 or such later date as
the
parties may mutually agree. All acts taking place at the Closing Date shall
be
deemed to take place simultaneously as of the close of business on the
Closing
Date unless otherwise provided. The Closing shall be held at 4:00 p.m.
(Eastern time) at the offices of the Acquiring Fund, Federated Investors
Tower,
Pittsburgh, PA 15222-3779, or such other time and/or place as the parties
may
mutually agree.
3.2 If on the Valuation Date (a) the primary trading market for
portfolio
securities of the Acquiring Fund or the Acquired Fund shall be closed to
trading
or trading thereon shall be restricted; or (b) trading or the reporting of
trading shall be disrupted so that accurate appraisal of the value of the
net
assets of the Acquiring Fund or the Acquired Fund is impracticable, the
Closing
Date shall be postponed until the first business day after the day when
trading
shall have been fully resumed and reporting shall have been restored.
3.3 Federated Shareholder Services Company of Boston, as transfer
agent for
the Acquired Fund, shall deliver at the Closing a certificate of an
authorized
officer stating that its records contain the names and addresses of the
Acquired
Fund Shareholders and the number and percentage ownership of outstanding
shares
owned by each such shareholder immediately prior to the Closing. The
Acquiring
Fund shall issue and deliver a confirmation evidencing the Acquiring Fund
Shares
to be credited on the Closing Date to the Secretary of the Acquired Fund,
or
provide evidence satisfactory to the Acquired Fund that such Acquiring Fund
Shares have been credited to the Acquired Fund's account on the books of
the
Acquiring Fund. At the Closing, each party shall deliver to the other such
bills
of sale, checks, assignments, assumption agreements, share certificates, if
any,
receipts or other documents as such other party or its counsel may
reasonably
request.
4. REPRESENTATIONS AND WARRANTIES.
4.1 Starburst represents and warrants to Intermediate as follows:
(a) Starburst is a business trust duly organized, validly existing and
in
good standing under the laws of the Commonwealth of Massachusetts and has
power
to own all of its properties and assets and to carry out this Agreement.
(b) Starburst is registered under the 1940 Act, as an open-end,
management
investment company, and such registration has not been revoked or rescinded
and
is in full force and effect.
(c) Starburst is not, and the execution, delivery and performance of
this
Agreement will not result, in material violation of its Declaration of
Trust or
By-Laws or of any agreement, indenture, instrument, contract, lease or
other
undertaking to which the Acquired Fund is a party or by which it is bound.
(d) The Acquired Fund has no material contracts or other commitments
outstanding (other than this Agreement) which will result in liability to
it
after the Closing Date.
(e) No litigation or administrative proceeding or investigation of or
before any court or governmental body is currently pending or to its
knowledge
threatened against the Acquired Fund or any of its properties or assets
which,
if adversely determined, would materially and adversely affect its
financial
condition or the conduct of its business. The Acquired Fund knows of no
facts
which might form the basis for the institution of such proceedings, and is
not a
party to or subject to the provisions of any order, decree or judgment of
any
court or governmental body which materially and adversely affects its
business
or its ability to consummate the transactions herein contemplated.
(f) The current prospectus and statement of additional information of
the
Acquired Fund conform in all material respects to the applicable
requirements of
the Securities Act of 1933, as amended (the "1933 Act"), and the 1940 Act
and
the rules and regulations of the Securities and Exchange Commission (the
"Commission") thereunder and do not include any untrue statement of a
material
fact or omit to state any material fact required to be stated therein as
necessary to make the statements therein, in light of the circumstances
under
which they were made, not misleading.
(g) The Statement of Assets and Liabilities of the Acquired Fund at
October
31, 1995 and October 31, 1994 have been audited by Deloitte & Touche LLP,
independent auditors, and have been prepared in accordance with generally
accepted accounting principles, consistently applied, and such statements
(copies of which have been furnished to the Acquiring Fund) fairly reflect
the
financial condition of the Acquired Fund as of such dates, and there are no
known material contingent liabilities of the Acquired Fund as of such dates
not
disclosed therein.
(h) The unaudited Statements of Assets and Liabilities of the Acquired
Fund
at April 30, 1996 and April 30, 1995 have been prepared in accordance with
generally accepted accounting principles,
consistently applied, and such statements (copies of which have been
supplied to
the Acquiring Fund) fairly reflect the financial condition of the Acquired
Fund
as of such dates.
(i) Since April 30, 1996, there has not been any material adverse
change in
the Acquired Fund's financial condition, assets, liabilities or business
other
than changes occurring in the ordinary course of business, or any
incurrence by
the Acquired Fund of indebtedness maturing more than one year from the date
such
indebtedness was incurred, except as otherwise disclosed to and accepted by
the
Acquiring Fund.
(j) At the Closing Date, all Federal and other tax returns and reports
of
the Acquired Fund required by law to have been filed by such date shall
have
been filed, and all Federal and other taxes shall have been paid so far as
due,
or provision shall have been made for the payment thereof, and to the best
of
the Acquired Fund's knowledge no such return is currently under audit and
no
assessment has been asserted with respect to such returns.
(k) For each fiscal year of its operation, the Acquired Fund has met
the
requirements of Subchapter M of the Code for qualification and treatment as
a
regulated investment company.
(l) All issued and outstanding shares of the Acquired Fund are, and at
the
Closing Date will be, duly and validly issued and outstanding, fully paid
and
non-assessable. All of the issued and outstanding shares of the Acquired
Fund
will, at the time of the Closing, be held by the persons and in the amounts
set
forth in the records of the transfer agent as provided in paragraph 3.3.
The
Acquired Fund does not have outstanding any options, warrants or other
rights to
subscribe for or purchase any of the Acquired Fund shares, nor is there
outstanding any security convertible into any of the Acquired Fund shares.
(m) On the Closing Date, the Acquired Fund will have full right, power
and
authority to sell, assign, transfer and deliver the assets to be
transferred by
it hereunder.
(n) The execution, delivery and performance of this Agreement have
been
duly authorized by all necessary action on the part of Starburst's Trustees
and,
subject to the approval of the Acquired Fund Shareholders, this Agreement
constitutes the valid and legally binding obligation of the Acquired Fund
enforceable in accordance with its terms, subject to the effect of
bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other
similar
laws relating to or affecting creditors' rights generally and court
decisions
with respect thereto, and to general principles of equity and the
discretion of
the court (regardless of whether the enforceability is considered in a
proceeding in equity or at law).
(o) The prospectus/proxy statement of the Acquired Fund (the
"Prospectus/Proxy Statement") to be included in the Registration Statement
referred to in paragraph 5.5 (other than information therein that relates
to the
Acquiring Fund) will, on the effective date of the Registration Statement
and on
the Closing Date, not contain any untrue statement of a material fact or
omit to
state a material fact required to be stated therein or necessary to make
the
statements therein, in light of the circumstances under which such
statements
were made, not misleading.
(p) The Acquired Fund has entered into an agreement under which
Federated
Management will assume the expenses of the reorganization including
accountants'
fees, legal fees, registration fees, transfer taxes (if any), the fees of
banks
and transfer agents and the costs of preparing, printing, copying and
mailing
proxy solicitation materials to the Acquired Fund's shareholders and the
costs
of holding the Special Meeting of Shareholders.
4.2 Intermediate represents and warrants to Starburst as follows:
(a) Intermediate is a business trust duly organized, validly existing
and
in good standing under the laws of the Commonwealth of Massachusetts and
has the
power to carry on its business as it is now being conducted and to carry
out
this Agreement.
(b) Intermediate is registered under the 1940 Act as an open-end,
management investment company, and such registration has not been revoked
or
rescinded and is in full force and effect.
(c) The current prospectus and statement of additional information of
the
Acquiring Fund conform in all material respects to the applicable
requirements
of the 1933 Act and the 1940 Act and the rules and regulations of the
Commission
thereunder and do not include any untrue statement of a material fact or
omit to
state any material fact required to be stated therein or necessary to make
the
statements therein, in light of the circumstances under which they were
made,
not misleading.
(d) Intermediate is not, and the execution, delivery and performance
of
this Agreement will not result, in material violation of its Declaration of
Trust or By-Laws or of any agreement, indenture, instrument, contract,
lease or
other undertaking to which the Acquiring Fund is a party or by which it is
bound.
(e) No litigation or administrative proceeding or investigation of or
before any court or governmental body is currently pending or to its
knowledge
threatened against the Acquiring Fund or any of its properties or assets
which,
if adversely determined, would materially and adversely affect its
financial
condition or the conduct of its business. The Acquiring Fund knows of no
facts
which might form the basis for the institution of such proceedings, and is
not a
party to or subject to the provisions of any order, decree or judgment of
any
court or governmental body which materially and adversely affects its
business
or its ability to consummate the transactions contemplated herein.
(f) The Statement of Assets and Liabilities of the Acquiring Fund at
May
31, 1996, has been audited by Arthur Andersen LLP, independent public
accountants, and have been prepared in accordance with generally accepted
accounting principles, consistently applied, and such statement (copies of
which
have been furnished to the Acquired Fund) fairly reflects the financial
condition of the Acquiring Fund as of such date, and there are no known
material
contingent liabilities of Acquiring Fund as of such date not disclosed
therein.
(g) Since May 31, 1996, there has not been any material adverse change
in
the Acquiring Fund's financial condition, assets, liabilities or business
other
than changes occurring in the ordinary course of business, or any
incurrence by
the Acquiring Fund of any indebtedness, except as otherwise disclosed to
and
accepted by the Acquired Fund.
(h) At the Closing Date, all Federal and other tax returns and reports
of
the Acquiring Fund required by law then to be filed shall have been filed,
and
all Federal and other taxes shown as due on said returns and reports shall
have
been paid or provision shall have been made for the payment thereof.
(i) For each fiscal year of its operation, the Acquiring Fund has met
the
requirements of Subchapter M of the Code for qualification and treatment as
a
regulated investment company.
(j) All issued and outstanding shares of the Acquiring Fund are, and
at the
Closing Date will be, duly and validly issued and outstanding, fully paid
and
non-assessable. The Acquiring Fund does not have outstanding any options,
warrants or other right to subscribe for or purchase any of the Acquiring
Fund
Shares, nor is there outstanding any security convertible into any
Acquiring
Fund Shares.
(k) The execution, delivery and performance of this Agreement have
been
duly authorized by all necessary action, if any, on the part of
Intermediate's
Trustees, and this Agreement constitutes the valid and legally binding
obligation of the Acquiring Fund enforceable in accordance with its terms,
subject to the effect of bankruptcy, insolvency, reorganization,
moratorium,
fraudulent conveyance and other similar laws relating to or affecting
creditors'
rights generally and court decisions with respect thereto, and to general
principles of equity and the discretion of the court (regardless of whether
the
enforceability is considered in a proceeding in equity or at law).
(l) The Prospectus/Proxy Statement to be included in the Registration
Statement (only insofar as it relates to the Acquiring Fund) will, on the
effective date of the Registration Statement and on the Closing Date, not
contain any untrue statement of a material fact or omit to state a material
fact
required to be stated therein or necessary to make the statements therein,
in
light of the circumstances under which such statements were made, not
misleading.
(m) The Acquiring Fund has entered into an agreement under which
Federated
Management will assume the expenses of the reorganization including
accountants'
fees, legal fees, registration fees, transfer taxes (if any), the fees of
banks
and transfer agents and the costs of preparing, printing, copying and
mailing
proxy solicitation materials to the Acquired Fund's shareholders and the
costs
of holding the Special Meeting of Shareholders.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business
in the ordinary course between the date hereof and the Closing Date, it
being
understood that such ordinary course of business will include customary
dividends and distributions.
5.2 The Acquired Fund will call a meeting of the Acquired Fund
Shareholders
to consider and act upon this Agreement and to take all other action
necessary
to obtain approval of the transactions contemplated herein.
5.3 Subject to the provisions of this Agreement, the Acquiring Fund
and the
Acquired Fund will each take, or cause to be taken, all action, and do or
cause
to be done, all things reasonably necessary, proper or advisable to
consummate
and make effective the transactions contemplated by this Agreement.
5.4 As promptly as practicable, but in any case within sixty days
after the
Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in such
form
as is reasonably satisfactory to the Acquiring Fund, a statement of the
earnings
and profits of the Acquired Fund for Federal income tax purposes which will
be
carried over to the Acquiring Fund as a result of Section 381 of the Code
and
which will be certified by the Acquired Fund's President and its Treasurer.
5.5 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement, referred to in paragraph 4.1(n),
all to
be included in a Registration Statement on Form N-14 of the Acquiring Fund
(the
"Registration Statement"), in compliance with the 1933 Act, the Securities
Exchange Act of 1934, as amended, and the 1940 Act in connection with the
meeting of the Acquired Fund Shareholders to consider approval of this
Agreement
and the transactions contemplated herein.
5.6 The Acquiring Fund agrees to use all reasonable efforts to obtain
the
approvals and authorizations required by the 1933 Act, the 1940 Act and
such of
the state Blue Sky or securities laws as it may deem appropriate in order
to
continue its operations after the Closing Date.
5.7 Prior to the Valuation Date, the Acquired Fund shall have declared
a
dividend or dividends, with a record date and ex-dividend date prior to the
Valuation Date, which, together with all previous dividends, shall have the
effect of distributing to its shareholders all of its investment company
taxable
income, if any, plus the excess of its interest income, if any, excludable
from
gross income under Code section 103(a) over its deductions disallowed under
Code
sections 265 and 171(a)(2) for the taxable periods or years ended on or
before
October 31, 1995 and for the period from said date to and including the
Closing
Date (computed without regard to any deduction for dividends paid), and all
of
its net capital gain, if any, realized in taxable periods or years ended on
or
before October 31, 1995 and in the period from said date to and including
the
Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND.
The obligations of the Acquiring Fund to complete the transactions
provided
for herein shall be subject, at its election, to the performance by the
Acquired
Fund of all the obligations to be performed by it hereunder on or before
the
Closing Date and, in addition thereto, the following conditions:
6.1 All representations and warranties of Starburst contained in this
Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
by
this Agreement, as of the Closing Date with the same force and effect as if
made
on and as of the Closing Date.
6.2 Starburst shall have delivered to the Acquiring Fund a statement
of the
Acquired Fund's assets, together with a list of the Acquired Fund's
portfolio
securities showing the tax costs of such securities by lot and the holding
periods of such securities, as of the Closing Date, certified by the
Treasurer
of Starburst.
6.3 The Acquired Fund shall have delivered to the Acquiring Fund on
the
Closing Date a certificate executed in its name by Starburst's President or
Vice
President and Starburst's Treasurer or Assistant Treasurer, in form and
substance satisfactory to Starburst, to the effect that the representations
and
warranties of Starburst made in this Agreement are true and correct at and
as of
the Closing Date, except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as the
Acquiring
Fund shall reasonably request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND.
The obligations of the Acquired Fund to consummate the transactions
provided herein shall be subject, at its election, to the performance by
the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of Intermediate contained in
this
Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
by
this Agreement, as of the Closing Date with the same force and effect as if
made
on and as of the Closing Date.
7.2 The Acquiring Fund shall have delivered to the Acquired Fund on
the
Closing Date a certificate executed in its name by Intermediate's President
or
Vice President and Intermediate's Treasurer or Assistant Treasurer, in form
and
substance reasonably satisfactory to the Acquired Fund, to the effect that
the
representations and warranties of Intermediate made in this Agreement are
true
and correct at and as of the Closing Date, except as they may be affected
by the
transactions contemplated by this Agreement, and as to such other matters
as the
Acquired Fund shall reasonably request.
8. FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRING FUND
AND THE
ACQUIRED FUND.
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other
party to this Agreement shall, at its option, not be required to consummate
the
transactions contemplated by this Agreement.
8.1 The Agreement and the transactions contemplated herein shall have
been
approved by the requisite vote of the holders of the outstanding shares of
the
Acquired Fund in accordance with the provisions of the Acquired Fund's
Declaration of Trust.
8.2 On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this
Agreement or the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities (including those
of
the Commission and of state Blue Sky and securities authorities) deemed
necessary by the Acquiring Fund or the Acquired Fund to permit
consummation, in
all material respects, of the transactions contemplated hereby shall have
been
obtained, except where failure to obtain any such consent, order or permit
would
not involve a risk of a material adverse effect on the assets or properties
of
the Acquiring Fund or the Acquired Fund, provided that either party hereto
may
for itself waive any of such conditions.
8.4 The Registration Statement shall have become effective under the
1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation
or
proceeding for that purpose shall have been instituted or be pending,
threatened
or contemplated under the 1933 Act.
8.5 Starburst and Intermediate shall have received an opinion of
Dickstein
Shapiro Morin & Oshinsky LLP substantially to the effect that for Federal
income
tax purposes:
(a) The transfer of all of the Acquired Fund assets in exchange for
the
Acquiring Fund Shares and the distribution of the Acquiring Fund Shares to
the
Acquired Fund Shareholders in liquidation of the Acquired Fund will
constitute a
"reorganization" within the meaning of Section 368(a)(1)(C) of the Code;
(b) No
gain or loss will be recognized by the Acquiring Fund upon the receipt of
the
assets of the Acquired Fund solely in exchange for the Acquiring Fund
Shares;
(c) No gain or loss will be recognized by the Acquired Fund upon the
transfer of
the Acquired Fund assets to the Acquiring Fund in exchange for the
Acquiring
Fund Shares or upon the distribution (whether actual or constructive) of
the
Acquiring Fund Shares to Acquired Fund Shareholders in exchange for their
shares
of the Acquired Fund; (d) No gain or loss will be recognized by the
Acquired
Fund Shareholders upon the exchange of their Acquired Fund shares for the
Acquiring Fund Shares; (e) The tax basis of the Acquired Fund assets
acquired by
the Acquiring Fund will be the same as the tax basis of such assets to the
Acquired Fund immediately prior to the Reorganization; (f) The tax basis of
the
Acquiring Fund Shares received by each of the Acquired Fund Shareholders
pursuant to the Reorganization will be the same as the tax basis of the
Acquired
Fund shares held by such shareholder immediately prior to the
Reorganization;
(g) The holding period of the assets of the Acquired Fund in the hands of
the
Acquiring Fund will include the period during which those assets were held
by
the Acquired Fund; and (h) The holding period of the Acquiring Fund Shares
to be
received by each Acquired Fund Shareholder will include the period during
which
the Acquired Fund shares exchanged therefor were held by such shareholder
(provided the Acquired Fund shares were held as capital assets on the date
of
the Reorganization).
9. TERMINATION OF AGREEMENT.
9.1 This Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Trustees of
Starburst or
the Board of Trustees of Intermediate at any time prior to the Closing Date
(and
notwithstanding any vote of the Board of Trustees of Starburst) if
circumstances
should develop that, in the opinion of either of the parties' Board of
Trustees,
make proceeding with the Agreement inadvisable.
9.2 If this Agreement is terminated and the exchange contemplated
hereby is
abandoned pursuant to the provisions of this Section 9, this Agreement
shall
become void and have no effect, without any liability on the part of any
party
hereto or the trustees, officers or shareholders of Intermediate or of
Starburst, in respect of this Agreement.
10. WAIVER.
At any time prior to the Closing Date, any of the foregoing conditions
may
be waived by the Board of Trustees of Intermediate or the Board of Trustees
of
Starburst, if, in the judgment of either, such waiver will not have a
material
adverse effect on the benefits intended under this Agreement to the
shareholders
of the Acquiring Fund or of the Acquired Fund, as the case may be.
11. MISCELLANEOUS.
11.1 None of the representations and warranties included or provided
for
herein shall survive consummation of the transactions contemplated hereby.
11.2 This Agreement contains the entire agreement and understanding
between
the parties hereto with respect to the subject matter hereof, and merges
and
supersedes all prior discussions, agreements, and understandings of every
kind
and nature between them relating to the subject matter hereof. Neither
party
shall be bound by any condition, definition, warranty or representation,
other
than as set forth or provided in this Agreement or as may be set forth in a
later writing signed by the party to be bound thereby.
11.3 This Agreement shall be governed and construed in accordance with
the
internal laws of the Commonwealth of Massachusetts, without giving effect
to
principles of conflict of laws.
11.4 This Agreement may be executed in any number of counterparts,
each of
which, when executed and delivered, shall be deemed to be an original.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein
expressed
or implied is intended or shall be construed to confer upon or give any
person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
11.6 The Acquiring Fund is hereby expressly put on notice of the
limitation
of liability as set forth in Article XI of the Declaration of Trust of the
Acquired Fund and agrees that the obligations assumed by the Acquired Fund
pursuant to this Agreement shall be limited in any case to the Acquired
Fund and
its assets and the Acquiring Fund shall not seek satisfaction of any such
obligation from the shareholders of the Acquired Fund, the trustees,
officers,
employees or agents of the Acquired Fund or any of them.
11.7 The Acquired Fund is hereby expressly put on notice of the
limitation
of liability as set forth in Article XI of the Declaration of Trust of the
Acquiring Fund and agrees that the obligations assumed by the Acquiring
Fund
pursuant to this Agreement shall be limited in any case to the Acquiring
Fund
and its assets and the Acquired Fund shall not seek satisfaction of any
such
obligations from the shareholders of the Acquiring Fund, the trustees,
officers,
employees or agents of the Acquiring Fund or any of them.
IN WITNESS WHEREOF, the Acquired Fund and the Acquiring Fund have
caused
this Agreement and Plan of Reorganization to be executed and attested on
its
behalf by its duly authorized representatives as of the date first above
written.
Acquired Fund:
THE STARBURST FUNDS,
on behalf of its Portfolio,
THE STARBURST MUNICIPAL
INCOME FUND
Attest:
<TABLE>
<S> <C>
/s/ C. GRANT ANDERSON By: /s/ JEFFREY W.
STERLING
...........................................
...........................................
Assistant Secretary
Name: Jeffrey W. Sterling
...........................................
Title: Vice President
...........................................
</TABLE>
Acquiring Fund:
INTERMEDIATE MUNICIPAL TRUST
on behalf of its Portfolio,
FEDERATED INTERMEDIATE
MUNICIPAL FUND
Attest:
<TABLE>
<S> <C>
/s/ S. ELLIOTT COHAN By: /s/ J. CHRISTOPHER
DONAHUE
...........................................
...........................................
Assistant Secretary
Name: J. Christopher
Donahue
...........................................
Title: Executive Vice
President
...........................................
</TABLE>
G00948-06 (8/96)
ACQUISITION OF THE ASSETS OF
THE STARBURST MUNICIPAL INCOME FUND
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
TELEPHONE NUMBER: 1-800-245-5000
BY AND IN EXCHANGE FOR SHARES OF
FEDERATED INTERMEDIATE MUNICIPAL TRUST
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
TELEPHONE NUMBER: 1-800-245-5000
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information dated September 3, 1996 is not a
prospectus. A Prospectus/ Proxy Statement dated September 3, 1996 related
to the
above-referenced matter may be obtained from Intermediate Municipal Trust
on
behalf of its portfolio Federated Intermediate Municipal Trust, Federated
Investors Tower, Pittsburgh, Pennsylvania 15222-3779. This Statement of
Additional Information should be read in conjunction with such
Prospectus/Proxy
Statement.
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Statement dated September 3, 1996
LOGO
TABLE OF CONTENTS
1. Statement of Additional Information of Federated Intermediate Municipal
Trust, dated July 31, 1996
2. Statement of Additional Information of The Starburst Municipal Income
Fund,
dated
December 31, 1995
3. Financial Statements of Federated Intermediate Municipal Trust, dated
May 31,
1996
4. Financial Statements of The Starburst Municipal Income Fund dated
October 31,
1995
The Statement of Additional Information of Federated Intermediate Municipal
Trust dated July 31, 1996, is incorporated herein by reference to Post-
Effective
Amendment No. 26 to Intermediate Municipal Trust's Registration Statement
on
Form N-1A (File No. 33-298237) which was filed with the Securities and
Exchange
Commission on or about July 25, 1996.
The Statement of Additional Information of The Starburst Municipal Income
Fund
dated December 31, 1995, is incorporated herein by reference to Post-
Effective
Amendment No. 22 to the Registration Statement of The Starburst Funds on
Form
N-1A (File No. 33-30950) which was filed with the Securities and Exchange
Commission on or about December 28, 1995. A copy may be obtained from The
Starburst Funds at Federated Investors Tower, Pittsburgh, PA 15222-3779.
Telephone Number: 1-800-239-1930.
The audited financial statements of Federated Intermediate Municipal Trust
dated
May 31, 1996 and The Starburst Municipal Income Fund dated October 31, 1995
are
incorporated herein by reference to their respective Prospectuses dated
July 31,
1996 and December 31, 1995, and filed with the Securities and Exchange
Commission on or about July 25, 1996 and December 28, 1995, respectively.
The pro forma financial statements required by Item 14 of Form N-14 need
not be
prepared because the net asset value of The Starburst Municipal Income Fund
does
not exceed ten percent of Federated Intermediate Municipal Trust's net
asset
value, measured as of a date within thirty days prior to the date of filing
of
this registration statement.
G00948-07 (8/96)
