Federated Pennsylvania Intermediate Municipal Trust
(A Portfolio of Intermediate Municipal Trust)
PROSPECTUS
The shares of Federated Pennsylvania Intermediate Municipal Trust (the
"Fund") offered by this prospectus represent interests in a
non-diversified portfolio of securities of Intermediate Municipal
Trust (the "Trust"), an open-end management investment company (a
mutual fund).
The investment objective of the Fund is to provide current income
which is exempt from federal regular income tax and the personal
income taxes imposed by the Commonwealth of Pennsylvania. The Fund
invests primarily in a portfolio of Pennsylvania municipal securities,
including securities of states, territories, and possessions of the
United States which are not issued by or on behalf of the Commonwealth
of Pennsylvania or its political subdivisions, but which are exempt
from federal regular income tax and Pennsylvania state personal income
taxes.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS
OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
This prospectus contains the information you should read and know
before you invest in the Fund. Keep this prospectus for future
reference.
The Fund has also filed a Statement of Additional Information, dated
July 31, 1997, with the Securities and Exchange Commission (the
"SEC"). The information contained in the Statement of Additional
Information is incorporated by reference into this prospectus. You may
request a copy of the Statement of Additional Information or a paper
copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-341-7400. To obtain
other information or to make inquiries about the Fund, contact the
Fund at the address listed in the back of this prospectus. The
Statement of Additional Information, material incorporated by
reference into this document, and other information regarding the Fund
is maintained electronically with the SEC at Internet Web site
(http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated July 31, 1997
TABLE OF CONTENTS
Summary of Fund Expenses 1
Financial Highlights 2
General Information 3
Investment Information 3
Investment Objective 3
Investment Policies 3
Pennsylvania Municipal Securities 5
Investment Risks 5
Non-Diversification 5
Investment Limitations 6
Intermediate Municipal Trust Information 6
Management of the Trust 6
Distribution of Fund Shares 7
Administration of the Fund 7
Net Asset Value 8
Investing in the Fund 8
Share Purchases 8
Minimum Investment Required 8
What Shares Cost 8
Exchanging Securities for Fund Shares 8
Certificates and Confirmations 9
Dividends 9
Capital Gains 9
Redeeming Shares 9
By Telephone 9
By Mail 9
Accounts with Low Balances 10
Shareholder Information 10
Voting Rights 10
Tax Information 10
Federal Income Tax 10
State and Local Taxes 11
Performance Information 11
Financial Statements 12
Report of Independent Public Accountants 22
<TABLE>
<CAPTION>
SUMMARY OF FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1) 0.00%
12b-1 Fee None
Shareholder Services Fee (after waiver)(2) 0.11%
Total Other Expenses (after expense reimbursement) 0.45%
Total Operating Expenses(3) 0.45%
</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 is 0.50%.
(2) The shareholder services fee has been reduced to reflect the
voluntary waiver of a portion of the shareholder services fee. The
shareholder service provider can terminate this voluntary waiver
at any time at its sole discretion. The maximum management fee is
0.25%.
(3) The total operation expenses would have been 2.54% absent the
voluntary waivers of the management fee and a portion of the
shareholder services fee and the voluntary reimbursement of
certain other operating expenses.
The purpose of this table is to assist an investor in understanding
the various costs and expenses that a shareholder of the Fund will
bear, either directly or indirectly. For more complete descriptions of
the various costs and expenses, see "Investing in the Fund" and
"Intermediate Municipal Trust Information." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.
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.
1 Year $ 5
3 Years $ 14
5 Years $ 25
10 Years $ 57
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 22.
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1997 1996 1995 1994(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00 $10.06 $ 9.85 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.49 0.49 0.48 0.23
Net realized and unrealized gain (loss) on 0.16 (0.06) 0.21 (0.15)
investments
Total from investment operations 0.65 0.43 0.69 0.08
LESS DISTRIBUTIONS
Distributions from net investment income (0.49) (0.49) (0.48) (0.23)
NET ASSET VALUE, END OF PERIOD $10.16 $10.00 $10.06 $ 9.85
TOTAL RETURN(B) 6.63% 4.27% 7.35% 0.76%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.45% 0.45% 0.45% 0.25%*
Net investment income 4.85% 4.81% 5.11% 4.76%*
Expense waiver/reimbursement(c) 2.09% 2.69%(d) 3.95%(d) 5.06%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $14,417 $15,054 $8,344 $2,881
Portfolio turnover 45% 11% 41% 39%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from December 5, 1993 (date of
initial public investment) to May 31, 1994.
(b) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense
and net investment income ratios shown above.
(d) For the years ended May 31, 1996, and May 31, 1995, the Adviser
waived $45,372 and $32,714, respectively, of the investment
advisory fee, which represents 0.40% and 0.50% of average net
assets, and for the year ended May 31, 1995, the Adviser
reimbursed other operating expenses of $86,896, which represents
1.33% of average net assets, to comply with certain state expense
limitations. The remainder of the waiver/reimbursement is
voluntary. The expense decrease is reflected in both the expense
and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE
FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED MAY 31, 1997, WHICH CAN
BE OBTAINED FREE OF CHARGE.
GENERAL INFORMATION
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated May 31, 1985. The Declaration of Trust
permits the Trust to offer separate series of shares of beneficial
interest representing interests in separate portfolios of securities.
The shares in any one portfolio may be offered in separate classes.
Shares of the Fund are designed for the investment of monies generally
held by financial institutions in a fiduciary capacity. A minimum
initial investment of $25,000 over a 90-day period is required. The
Fund may not be a suitable investment for non-Pennsylvania taxpayers
or retirement plans since Pennsylvania municipal securities are not
likely to produce competitive after-tax yields for such persons and
entities when compared to other investments.
Shares are sold and redeemed at net asset value without a sales charge
imposed by the Fund.
INVESTMENT INFORMATION
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income
exempt from federal regular income tax and the personal income taxes
imposed by the Commonwealth of Pennsylvania. Interest income of the
Fund that is exempt from federal regular income tax and Pennsylvania
state personal income tax retains its tax-free status when distributed
to the Fund's shareholders. The Fund pursues its investment objective
by investing at least 80% of its net assets in a non-diversified
portfolio of Pennsylvania municipal securities. The portfolio has a
dollar-weighted average maturity of not less than three or more than
ten years. While there is no assurance that the Fund will achieve its
investment objective, it endeavors to do so by following the
investment policies described in this prospectus. The investment
objective and the policy stated above cannot be changed without
approval of shareholders.
INVESTMENT POLICIES
The investment policies described below may be changed by the Board of
Trustees (the "Trustees") without shareholder approval. Shareholders
will be notified before any material change in these policies becomes
effective.
ACCEPTABLE INVESTMENTS
The Pennsylvania municipal securities in which the Fund invests are:
* obligations issued by or on behalf of the Commonwealth of Pennsylvania,
its political subdivisions, or agencies;
* debt obligations of any state, territory, or possession of the United
States, or any political subdivision of any of these; and
* participation interests, as described below, in any of the above
obligations,
the interest from which is, in the opinion of bond counsel for the
issuers or in the opinion of officers of the Fund and/or the
investment adviser to the Fund, exempt from both federal regular
income tax and the personal income taxes imposed by the Commonwealth
of Pennsylvania.
The prices of fixed income securities fluctuate inversely to the
direction of interest rates.
AVERAGE MATURITY
The dollar-weighted average maturity of the Fund's portfolio of
Pennsylvania municipal securities will not be less than three years or
more than ten years. For purposes of determining the dollar-weighted
average maturity of the Fund's portfolio, the maturity of a municipal
security will be its ultimate maturity, unless it is probable that the
issuer of the security will take advantage of maturity-shortening
devices such as a call, refunding, or redemption provision, in which
case the maturity date will be the date on which it is probable that
the security will be called, refunded, or redeemed. If the municipal
security includes the right to demand payment, the maturity of the
security for purposes of determining the Fund's dollar-weighted
average portfolio maturity will be the period remaining until the
principal amount of the security can be recovered by exercising the
right to demand payment.
CHARACTERISTICS
The municipal securities in which the Fund invests are:
* rated within the three highest ratings for municipal securities by
Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa, or A),
Standard & Poor's Ratings Group ("S&P") (AAA, AA, or A), or Fitch
Investors Service, Inc.
("Fitch") (AAA, AA, or A);
* guaranteed at the time of purchase by the U.S. government as to the
payment of principal and interest;
* fully collateralized by an escrow of U.S. government securities or other
securities acceptable to the Fund's investment adviser;
* rated at the time of purchase within Moody's highest short-term
municipal obligation rating (MIG1/VMIG1) or Moody's highest
municipal commercial paper rating (PRIME-1) or S&P's highest
municipal commercial paper rating (SP-1);
* unrated if, at the time of purchase, other municipal securities of
that issuer are rated A or better by Moody's, S&P, or Fitch; or
* unrated if determined to be of equivalent quality to one of the
foregoing rating categories by the Fund's investment adviser.
If a security is subsequently downgraded, the investment adviser will
determine whether it continues to be an acceptable investment; if not,
the security will be sold. A description of the rating categories is
contained in the Appendix to the Statement of Additional Information.
PARTICIPATION INTERESTS
The Fund may purchase participation interests from financial
institutions such as commercial banks, savings associations, and
insurance companies. These participation interests give the Fund an
undivided interest in Pennsylvania municipal securities. The financial
institutions from which the Fund purchases participation interests
frequently provide or secure irrevocable letters of credit or
guarantees to assure that the participation interests are of high
quality.
The Trustees will determine whether participation interests meet the
prescribed quality standards for the Fund.
VARIABLE RATE MUNICIPAL SECURITIES
Some of the Pennsylvania municipal securities which the Fund purchases
may have variable interest rates. Variable interest rates are
ordinarily stated as a percentage of a published interest rate,
interest rate index, or a similar standard, such as the 91-day U.S.
Treasury bill rate. Many variable rate municipal securities are
subject to payment of principal on demand by the Fund in not more than
seven days. All variable rate municipal securities will meet the
quality standards for the Fund. The Fund's investment adviser has been
instructed by the Trustees to monitor the pricing, quality, and
liquidity of the variable rate municipal securities, including
participation interests held by the Fund on the basis of published
financial information and reports of the rating agencies and other
analytical services.
MUNICIPAL LEASES
Also included within the general category of municipal securities are
certain lease obligations or installment purchase contract obligations
and participations therein (hereinafter collectively referred to as
"lease obligations") of municipal authorities or entities. Although
lease obligations do not constitute general obligations of the
municipality for which the municipality's taxing power is pledged, a
lease obligation is ordinarily backed by the municipality's covenant
to budget for, appropriate, and make the payments due under the lease
obligation. Interest on lease obligations is tax-exempt to the same
extent as if the municipality had issued debt obligations to finance
the underlying project or purchase. However, certain lease obligations
contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease or installment purchase
payments in future years unless money is appropriated for such purpose
on a yearly basis. In addition to the "non-appropriation" risk, these
securities represent a relatively new type of financing that has not
yet developed the depth of marketability associated with more
conventional bonds, and some lease obligations may be illiquid.
Although "non-appropriation" lease obligations are generally secured
by the leased property, disposition of the property in the event of
foreclosure might prove difficult. In addition, the tax treatment of
such obligations in the event of "non-appropriation" is unclear. The
Fund does not intend to invest more than 10% of its total assets in
lease obligations that contain "non-appropriation" clauses.
If the Fund purchases unrated municipal leases, the Trustees will be
responsible for determining, on an ongoing basis, the credit quality
of such leases and the likelihood that such leases will not be
canceled.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may purchase Pennsylvania municipal securities on a
when-issued or delayed delivery basis. These transactions are
arrangements in which the Fund purchases securities with payment and
delivery scheduled for a future time. The seller's failure to complete
these transactions may cause the Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more
after entering into these transactions, and the market values of the
securities purchased may vary from the purchase prices.
The Fund may dispose of a commitment prior to settlement if the
investment adviser deems it appropriate to do so. In addition, the
Fund may enter into transactions to sell its purchase commitments to
third parties at current market values and simultaneously acquire
other commitments to purchase similar securities at later dates. The
Fund may realize short-term profits or losses upon the sale of such
commitments.
TEMPORARY INVESTMENTS
The Fund normally invests its assets in Pennsylvania municipal
securities, as described above. However, from time to time, when the
investment adviser determines that market conditions call for a
temporary defensive posture, the Fund may invest in short-term
non-Pennsylvania municipal tax-exempt obligations or taxable temporary
investments. These temporary investments include: notes issued by or
on behalf of municipal or corporate issuers; obligations issued or
guaranteed by the U.S. government, its agencies, or instrumentalities;
other debt securities; commercial paper; certificates of deposit of
banks; and repurchase agreements (arrangements in which the
organization selling the Fund a bond or temporary investment agrees at
the time of sale to repurchase it at a mutually agreed upon time and
price).
There are no rating requirements applicable to temporary investments
with the exception of temporary municipal securities which are subject
to the same rating requirements as all other municipal securities in
which the Fund invests. However, the investment adviser will limit
temporary investments to those it considers to be of comparable
quality to the acceptable investments of the Fund.
Although the Fund is permitted to make taxable, temporary investments,
there is no current intention of generating income subject to federal
regular income tax or Pennsylvania state personal income tax.
PENNSYLVANIA MUNICIPAL SECURITIES
Pennsylvania municipal securities are generally issued to finance
public works, such as airports, bridges, highways, housing, hospitals,
mass transportation projects, schools, streets, and water and sewer
works. They are also issued to repay outstanding obligations, to raise
funds for general operating expenses, and to make loans to other
public institutions and facilities.
Pennsylvania municipal securities include industrial development bonds
issued by or on behalf of public authorities to provide financing aid
to acquire sites or construct and equip facilities for privately or
publicly owned corporations. The availability of this financing
encourages these corporations to locate within the sponsoring
communities and thereby increases local employment.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of its full faith and credit and taxing power
for the payment of principal and interest. However, interest on and
principal of revenue bonds are payable only from the revenue generated
by the facility financed by the bond or other specified sources of
revenue. Revenue bonds do not represent a pledge of credit or create
any debt of or charge against the general revenues of a municipality
or public authority. Industrial development bonds are typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Pennsylvania municipal securities depend on a variety of
factors, including, but not limited to: the general conditions of the
municipal bond market; the size of the particular offering; the
maturity of the obligations; and the rating of the issue. Further, any
adverse economic conditions or developments affecting the Commonwealth
of Pennsylvania or its municipalities could impact the Fund's
portfolio. The ability of the Fund to achieve its investment objective
also depends on the continuing ability of the issuers of Pennsylvania
municipal securities and participation interests, or the guarantors of
either, to meet their obligations for the payment of interest and
principal when due. Investing in Pennsylvania municipal securities
which meet the Fund's quality standards may not be possible if the
Commonwealth of Pennsylvania or its municipalities do not maintain
their current credit ratings. In addition, any Pennsylvania
constitutional amendments, legislative measures, executive orders,
administrative regulations, or voter initiatives could result in
adverse consequences affecting Pennsylvania municipal securities.
NON-DIVERSIFICATION
The Fund is a non-diversified investment portfolio. As such, there is
no limit on the percentage of assets which can be invested in any
single issuer. An investment in the Fund, therefore, will entail
greater risk than would exist in a diversified portfolio of securities
because the higher percentage of investments among fewer issuers may
result in greater fluctuation in the total market value of the Fund's
portfolio. Any economic, political, or regulatory developments
affecting the value of the securities in the Fund's portfolio will
have a greater impact on the total value of the portfolio than would
be the case if the portfolio was diversified among more issuers.
The Fund intends to comply with Subchapter M of the Internal Revenue
Code, as amended. This undertaking requires that at the end of each
quarter of the taxable year, with regard to at least 50% of the Fund's
total assets, no more than 5% of its total assets are invested in the
securities of a single issuer; beyond that, no more than 25% of its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through reverse repurchase
agreements (arrangements in which the Fund sells a portfolio
instrument for a percentage of its cash value with an arrangement to
buy it back on a set date) or pledge securities except, under certain
circumstances, the Fund may borrow up to one-third of the value of its
total assets and pledge up to 10% of the value of total assets to
secure such borrowings. The Fund does not intend to engage in any
borrowing during the coming fiscal year.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, can be changed by the
Trustees without shareholder approval. Shareholders will be notified
before any material change in these limitations becomes effective.
In order to pass-through to investors the tax-free income from the
Fund for purposes of Pennsylvania state personal income taxes, the
Fund will invest in securities for income earnings rather than trading
for profit. The Fund will not vary its investments, except to: (i)
eliminate unsafe investments and investments not consistent with the
preservation of the capital or the tax status of the investments of
the Fund; (ii) honor redemption orders, meet anticipated redemption
requirements, and negate gains from discount purchases; (iii) reinvest
the earnings from securities in like securities; or (iv) defray normal
administrative expenses (the "Pennsylvania Investment Restrictions").
Legislation enacted in December 1993, eliminates the necessity of the
Pennsylvania Investment Restrictions. Consequently, the Trustees may
vote to eliminate the Pennsylvania Investment Restrictions.
The Fund will not invest more than 15% of its net assets in securities
which are illiquid, including repurchase agreements providing for
settlement in more than seven days after notice, and restricted
securities determined by the Trustees not to be liquid.
INTERMEDIATE MUNICIPAL TRUST INFORMATION
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The Trust is managed by a Board of Trustees. The Trustees are
responsible for managing the business affairs of the Trust and for
exercising all of the powers of the Trust except those reserved for
the shareholders. The Executive Committee of the Board of Trustees
handles the Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER
Pursuant to an investment advisory contract with the Trust, investment
decisions for the Fund are made by Federated Management, the Fund's
investment adviser, subject to direction by the Trustees. The adviser
continually conducts investment research and supervision for the Fund
and is responsible for the purchase or sale of portfolio instruments,
for which it receives an annual fee from the Fund.
ADVISORY FEES
The Fund's adviser receives an annual investment advisory fee equal
to 0.50% of the Fund's average daily net assets. Also, the adviser
may voluntarily choose to waive a portion of its fee or reimburse
other expenses of the Fund, but reserves the right to terminate such
waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND
Federated Management, a Delaware business trust organized on April
11, 1989, is a registered investment adviser under the Investment
Advisers Act of 1940, as amended. It is a subsidiary of Federated
Investors. All of the Class A (voting) shares of Federated Investors
are owned by a trust, the trustees of which are John F. Donahue,
Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue, who is President and
Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors
serve as investment advisers to a number of investment companies and
private accounts. Certain other subsidiaries also provide
administrative services to a number of investment companies. With
over $110 billion invested across more than 300 funds under
management and/or administration by its subsidiaries, as of December
31, 1996, Federated Investors is one of the largest mutual fund
investment managers in the United States. With more than 2,000
employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work
in and through 4,500 financial institutions nationwide.
Both the Trust and the adviser have adopted strict codes of ethics
governing the conduct of all employees who manage the Fund and its
portfolio securities. These codes recognize that such persons owe a
fiduciary duty to the Fund's shareholders and must place the interests
of shareholders ahead of the employees' own interests. Among other
things, the codes: require preclearance and periodic reporting of
personal securities transactions; prohibit personal transactions in
securities being purchased or sold, or being considered for purchase
or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less
than sixty days. Violations of the codes are subject to review by the
Trustees and could result in severe penalties.
PORTFOLIO MANAGER'S BACKGROUND
J. Scott Albrecht has been the Fund's portfolio manager since the Fund's
inception. Mr. Albrecht joined Federated Investors in 1989 and has been a
Vice President of the Fund's investment adviser since 1994. From 1992 to
1994, Mr. Albrecht served as an Assistant Vice President of the Fund's
investment adviser. In 1991, Mr. Albrecht acted as an investment analyst.
Mr. Albrecht is a Chartered Financial Analyst and received his M.S. in
Public Management from Carnegie Mellon University.
Mary Jo Ochson has been the Fund's portfolio manager since July 1997. Ms.
Ochson joined Federated Investors in 1982 and has been a Senior Vice
President of the Fund's investment adviser since January 1996. From 1988
through 1995, Ms. Ochson served as a Vice President of the Fund's investment
adviser. Ms. Ochson is a Chartered Financial Analyst and received her M.B.A.
in Finance from the University of Pittsburgh.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the principal distributor for shares of the
Fund. It is a Pennsylvania corporation organized on November 14, 1969, and
is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES
Federated Services Company, a subsidiary of Federated Investors,
provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Fund.
Federated Services Company provides these at an annual rate which
relates to the average aggregate daily net assets of all funds advised
by subsidiaries of Federated Investors as specified below:
MAXIMUM AVERAGE AGGREGATE
ADMINISTRATIVE FEE DAILY NET ASSETS
0.15% on the first $250 million
0.125% on the next $250 million
0.10% on the next $250 million
0.075% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at
least $125,000 per portfolio and $30,000 per each additional class of
shares. Federated Services Company may choose voluntarily to waive a
portion of its fee.
SHAREHOLDER SERVICES
The Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors,
under which the Fund may make payments up to 0.25% of the average
daily net asset value of the Fund shares, computed at an annual rate,
to obtain certain personal services for shareholders and to maintain
shareholder accounts. From time to time and for such periods as deemed
appropriate, the amount stated above may be reduced voluntarily. 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
the Fund and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS
In addition to payments made pursuant to the Shareholder Services
Agreement, Federated Securities Corp. and Federated Shareholder
Services, from their own assets, may pay financial institutions
supplemental fees for the performance of substantial sales services,
distribution-related support services, or shareholder services. The
support may include sponsoring sales, educational and training
seminars for their employees, providing sales literature, and
engineering computer software programs that emphasize the attributes
of the Fund. Such assistance will be predicated upon the amount of
shares the financial institution sells or may sell, and/or upon the
type and nature of sales or marketing support furnished by the
financial institution. Any payments made by the distributor may be
reimbursed by the Fund's investment adviser or its affiliates.
NET ASSET VALUE
The Fund's net asset value per share fluctuates. It is determined by
dividing the sum of all securities and other assets, less liabilities,
by the number of shares outstanding.
INVESTING IN THE FUND
SHARE PURCHASES
Shares of the Fund are sold on days on which the New York Stock Exchange is
open for business. Shares may be purchased either by wire or mail. The Fund
reserves the right to reject any purchase request.
To purchase shares of the Fund, open an account by calling Federated
Securities Corp. Information needed to establish the account will be
taken over the telephone.
BY WIRE
To purchase shares of the Fund by Federal Reserve wire, call the Fund
before 1:00 p.m. (Eastern time) to place an order. The order is
considered received immediately. Payment by federal funds must be
received before 3:00 p.m. (Eastern time) that day. Federal funds
should be wired as follows: Federated Shareholder Services Company,
c/o State Street Bank and Trust Company, Boston, Massachusetts;
Attention: EDGEWIRE; For Credit to: Federated Pennsylvania
Intermediate Municipal Trust; Fund Number (this number can be found on
the account statement or by contacting the Fund); Group Number or
Order Number; Nominee or Institution Name; and ABA Number 011000028.
Shares cannot be purchased by wire on holidays when wire transfers are
restricted. Questions on wire purchases should be directed to your
shareholder services representative at the telephone number listed on
your account statement.
BY MAIL
To purchase shares of the Fund by mail, send a check made payable to
Federated Pennsylvania Intermediate Municipal Trust to: Federated
Shareholder Services Company, P.O. Box 8600, Boston, Massachusetts
02266-8600. Orders by mail are considered received when payment by
check is converted by State Street Bank and Trust Company ("State
Street Bank") into federal funds. This is normally the next business
day after State Street Bank receives the check.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $25,000, plus any
financial intermediary fee, if applicable. However, an account may be
opened with a smaller amount as long as the $25,000 minimum is reached
within 90 days. An institutional investor's minimum investment will be
calculated by combining all accounts it maintains with the Fund.
Individual accounts established through a financial intermediary may
be subject to a different minimum investment requirement.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an
order is received. There is no sales charge imposed by the Fund.
Investors who purchase shares through a financial intermediary may be
charged a service fee by that financial intermediary.
The net asset value is determined as of the close of trading (normally
4:00 p.m., Eastern time) on the New York Stock Exchange, Monday
through Friday, except on: (i) days on which there are not sufficient
changes in the value of the Fund's portfolio securities that its net
asset value might be materially affected; (ii) days during which no
shares are tendered for redemption and no orders to purchase shares
are received; or (iii) the following holidays: New Year's Day, Martin
Luther King Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange certain municipal securities or a combination
of securities and cash for Fund shares. The securities and cash must
have a market value of at least $25,000. The Fund reserves the right
to determine the acceptability of the securities to be exchanged.
Securities accepted by the Fund are valued in the same manner as the
Fund values its assets. Shareholders wishing to exchange securities
should first contact Federated Securities Corp.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Shareholder Services Company
maintains a share account for each shareholder. Share certificates are
not issued unless requested in writing.
Detailed confirmations of each purchase and redemption are sent to
each shareholder. Monthly confirmations are sent to report dividends
paid during that month.
DIVIDENDS
Dividends are declared daily and paid monthly to all shareholders
invested in the Fund on the record date. Dividends are declared just
prior to determining net asset value. Shares purchased by wire begin
earning dividends on the business day after the order is received.
Shares purchased by check begin earning dividends on the business day
after the check is converted, upon instruction of the transfer agent,
into federal funds. Dividends are automatically reinvested on payment
dates at the ex-dividend date net asset value in additional shares of
the Fund unless cash payments are requested by contacting the Fund.
CAPITAL GAINS
Distributions of net realized long-term capital gains realized by the
Fund, if any, will be made at least once every twelve months.
REDEEMING SHARES
The Fund redeems shares at their net asset value next determined after
the Fund receives the redemption request. Redemptions will be made on
days on which the Fund computes its net asset value. Investors who
redeem shares through a financial intermediary may be charged a
service fee by that financial intermediary. Redemption requests must
be received in proper form and can be made by telephone request or by
written request.
BY TELEPHONE
Shareholders may redeem their shares by telephoning the Fund before
4:00 p.m. (Eastern time). All proceeds will normally be wire
transferred the following business day, but in no event more than
seven days, to the shareholder's account at a domestic commercial bank
that is a member of the Federal Reserve System. Proceeds from
redemption requests received on holidays when wire transfers are
restricted will be wired the following business day. Questions about
telephone redemptions on days when wire transfers are restricted
should be directed to your shareholder services representative at the
telephone number listed on your account statement. If at any time the
Fund shall determine it necessary to terminate or modify this method
of redemption, shareholders would be promptly notified.
An authorization form permitting the Fund to accept telephone
redemption requests must first be completed. It is recommended that
investors request this privilege at the time of their initial
application. If not completed at the time of initial application,
authorization forms and information on this service can be obtained
through Federated Securities Corp. Telephone redemption instructions
may be recorded. If reasonable procedures are not followed by the
Fund, it may be liable for losses due to unauthorized or fraudulent
telephone instructions.
In the event of drastic economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If such a case should
occur, another method of redemption, such as "By Mail," should be
considered.
BY MAIL
Shares may be redeemed in any amount by mailing a written request to:
Federated Shareholder Services Company, P.O. Box 8600, Boston,
Massachusetts 02266-8600. If share certificates have been issued, they
should be sent unendorsed with the written request by registered or
certified mail to the address noted above.
The written request should state: Federated Pennsylvania Intermediate
Municipal Trust; the account name as registered with the Fund; the
account number; and the number of shares to be redeemed or the dollar
amount requested. All owners of the account must sign the request
exactly as the shares are registered. Normally, a check for the
proceeds is mailed within one business day, but in no event more than
seven days, after the receipt of a proper written redemption request.
Dividends are paid up to and including the day that a redemption
request is processed.
Shareholders requesting a redemption of any amount to be sent to an
address other than that on record with the Fund, or a redemption
payable other than to the shareholder of record must have their
signatures guaranteed by a commercial or savings bank, trust company
or savings association whose deposits are insured by an organization
which is administered by the Federal Deposit Insurance Corporation; a
member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of
1934. The Fund does not accept signatures guaranteed by a notary
public.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the
Fund may redeem shares in any account and pay the proceeds to the
shareholder of record if the account balance falls below the required
minimum value of $25,000 due to shareholder redemptions. This
requirement does not apply, however, if the balance falls below
$25,000 because of changes in the Fund's net asset value. Before
shares are redeemed to close an account, the shareholder is notified
in writing and allowed 30 days to purchase additional shares to meet
the minimum requirement.
SHAREHOLDER INFORMATION
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee
elections and other matters submitted to shareholders for vote. All
shares of each portfolio in the Trust have equal voting rights except
that in matters affecting only a particular fund, only shareholders of
that fund are entitled to vote.
As a Massachusetts business trust, the Trust is not required to hold
annual shareholder meetings. Shareholder approval will be sought only
for certain changes in the Trust's or the Fund's operation and for the
election of Trustees under certain circumstances. Trustees may be
removed by the Trustees or by shareholders at a special meeting.
A special meeting of shareholders for this purpose shall be called by
the Trustees upon the written request of shareholders owning at least
10% of the outstanding shares of all series in the Trust entitled to
vote.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements of the Internal Revenue Code of 1986, as amended (the
"Code"), applicable to regulated investment companies and to receive
the special tax treatment afforded to such companies. The Fund will be
treated as a single, separate entity for federal income tax purposes
so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with
those realized by the Fund.
Shareholders are not required to pay federal regular income tax on any
dividends received from the Fund that represent net interest on
tax-exempt municipal bonds. However, dividends representing net
interest income earned on some municipal bonds may be included in
calculating the federal individual alternative minimum tax or the
federal alternative minimum tax for corporations.
The alternative minimum tax, up to 28% of alternative minimum taxable
income for individuals and 20% for corporations, applies when it
exceeds the regular tax for the taxable year. Alternative minimum
taxable income is equal to the regular taxable income of the taxpayer
increased by certain "tax preference" items not included in regular
taxable income and reduced by only a portion of the deductions allowed
in the calculation of the regular tax.
Interest on certain "private activity" bonds issued after August 7,
1986, is treated as a tax preference item for both individuals and
corporations. Unlike traditional governmental purpose municipal bonds,
which finance roads, schools, libraries, prisons, and other public
facilities, private activity bonds provide benefits to private
parties. The Fund may purchase all types of municipal bonds, including
private activity bonds. Thus, should it purchase any such bonds, a
portion of the Fund's dividends may be treated as a tax preference
item.
In addition, in the case of a corporate shareholder, dividends of the
Fund which represent interest on municipal bonds will become subject
to the 20% corporate alternative minimum tax because the dividends are
included in a corporation's "adjusted current earnings." The corporate
alternative minimum tax treats 75% of the excess of a taxpayer's
pre-tax "adjusted current earnings" over the taxpayer's alternative
minimum taxable income as a tax preference item. "Adjusted current
earnings" is based upon the concept of a corporation's "earnings and
profits." Since "earnings and profits" generally includes the full
amount of any Fund dividend, and alternative minimum taxable income
does not include the portion of the Fund's dividend attributable to
municipal bonds which are not private activity bonds, the difference
will be included in the calculation of the corporation's alternative
minimum tax.
Dividends of the Fund representing net interest income earned on some
temporary investments and any realized net short-term gains are taxed
as ordinary income.
These tax consequences apply whether dividends are received in cash or
as additional shares. Information on the tax status of dividends and
distributions is provided annually.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states
other than Pennsylvania. Shareholders are urged to consult their own
tax advisers regarding the status of their accounts under state and
local tax laws.
PENNSYLVANIA TAXES
Under existing Pennsylvania laws, distributions made by the Fund
derived from interest on obligations free from state taxation in
Pennsylvania are not subject to Pennsylvania personal income taxes.
Distributions made by the Fund will be subject to Pennsylvania
personal income taxes to the extent that they are derived from gain
realized by the Fund from the sale or exchange of otherwise tax-exempt
obligations.
PERFORMANCE INFORMATION
From time to time, the Fund advertises its total return, yield, and
tax-equivalent yield.
Total return represents the change, over a specific period of time, in
the value of an investment in the Fund after reinvesting all income
and capital gains distributions. It is calculated by dividing that
change by the initial investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment
income per share (as defined by the SEC) earned by the Fund over a
thirty-day period by the maximum offering price per share of the Fund
on the last day of the period. This number is then annualized using
semi-annual compounding. The tax-equivalent yield of the Fund is
calculated similarly to the yield, but is adjusted to reflect the
taxable yield that the Fund would have had to earn to equal its actual
yield, assuming a specific tax rate. The yield and the tax-equivalent
yield do not necessarily reflect income actually earned by the Fund
and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
From time to time, advertisements for the Fund may refer to ratings,
rankings, and other information in certain financial publications
and/or compare the Fund's performance to certain indices.
PORTFOLIO OF INVESTMENTS
FEDERATED PENNSYLVANIA INTERMEDIATE MUNICIPAL TRUST
MAY 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
CREDIT
AMOUNT
RATING* VALUE
<C> <S>
<S> <C>
INTERMEDIATE-TERM MUNICIPAL SECURITIES -- 98.0%
PENNSYLVANIA -- 96.8%
$ 350,000 Allegheny County, PA HDA, Hospital Revenue Bonds (Series A), 5.45% (Allegheny
General Hospital)/(MBIA INS)/(Original Issue Yield: 5.55%), 9/1/2004
AAA $ 361,602
300,000 Allegheny County, PA HDA, Revenue Bonds (Series A), 5.90% (South Hills Health
System)/(Original Issue Yield: 6.00%), 5/1/2003
A 312,381
300,000 Allegheny County, PA HDA, Revenue Bonds (Series A), 6.00% (South Hills Health
System)/(Original Issue Yield: 6.10%), 5/1/2004
A 313,605
500,000 Allegheny County, PA, Airport Revenue Bonds (Series A), 5.30% (Pittsburgh
International Airport)/(MBIA INS)/(Original Issue Yield: 5.35%), 1/1/2003
AAA 507,940
100,000 Allegheny County, PA, UT GO Bonds (Series C-39), 6.00% (AMBAC INS)/(Original
Issue Yield: 6.098%), 5/1/2012
AAA 103,508
100,000 Allegheny County, PA, UT GO Bonds, 5.40% (MBIA INS)/(Original Issue Yield:
5.50%),
9/15/2005
AAA 103,305
100,000 Altoona, PA Area School District, UT GO Bonds, 5.35% (FGIC INS)/(Original Issue
Yield: 5.40%), 1/15/2004
AAA 102,941
100,000 Altoona, PA City Authority, Water Revenue Bonds, 5.60% (FGIC INS)/(Original Issue
Yield: 5.699%), 11/1/2004
AAA 105,035
150,000 Berks County, PA Municipal Authority, Hospital Revenue Bonds, 5.40% (Reading
Hospital & Medical Center)/(MBIA INS)/(Original Issue Yield: 5.45%), 10/1/2004
AAA 154,565
100,000 Berks County, PA Municipal Authority, Hospital Revenue Bonds, 5.60% (Reading
Hospital & Medical Center)/(MBIA INS)/(Original Issue Yield: 5.65%), 10/1/2006
AAA 104,615
150,000 Cambria County, PA, UT GO (Series A), 5.40% (FGIC INS)/(Original Issue Yield:
5.50%),
8/15/2004
AAA 155,187
100,000 Central Bucks, PA School District, UT GO Bonds, 5.40% (FGIC INS), 5/15/2003
AAA 102,207
100,000 Central Bucks, PA School District, UT GO Bonds, 6.00%, 11/15/2003
Aa 106,966
300,000 Chester County, PA HEFA, Hospital Revenue Bonds (Series 1996A), 5.20% (Chester
County Hospital, PA)/(MBIA INS)/(Original Issue Yield: 5.35%), 7/1/2004
AAA 305,769
100,000 Commonwealth of Pennsylvania, UT GO Bonds (Second Series A), 6.30% (MBIA INS)/
(Original Issue Yield: 6.35%), 11/1/2002
AAA 107,764
150,000 Dauphin County, PA, Revenue Bonds, 6.00% (MBIA INS), 6/1/2002
AAA 156,043
150,000 Dauphin County, PA, Revenue Bonds, 6.10% (MBIA INS), 6/1/2003
AAA 156,396
345,000 Delaware County Authority, PA, (Series 1995) College Revenue Bonds, 5.30%
(Neumann College)/(Connie Lee INS)/(Original Issue Yield: 5.40%), 10/1/2007
AAA 347,750
300,000 Delaware County Authority, PA, Hospital Revenue Bonds, 5.90% (Riddle Memorial
Hospital)/(Original Issue Yield: 6.10%), 1/1/2002
A- 309,195
125,000 Eastern York, PA School District, UT GO Bonds, 5.55% (MBIA INS), 6/1/2003
AAA 129,740
100,000 Elizabethtown, PA Area School District, UT GO Bonds, 5.45%, 2/15/2004
A 101,103
</TABLE>
FEDERATED PENNSYLVANIA INTERMEDIATE MUNICIPAL TRUST
<TABLE>
<CAPTION>
PRINCIPAL
CREDIT
AMOUNT
RATING* VALUE
<C> <S>
<S> <C>
INTERMEDIATE-TERM MUNICIPAL SECURITIES -- CONTINUED
PENNSYLVANIA -- CONTINUED
$ 205,000 Fayette County, PA Hospital Authority, Healthcare Facility Revenue Bonds (Series
1996A), 5.35% (Mount Macrina Manor)/(National City, Pennsylvania LOC), 9/1/2006
A- $ 206,142
220,000 Fayette County, PA Hospital Authority, Healthcare Facility Revenue Bonds (Series
1996A), 5.45% (Mount Macrina Manor)/(National City, Pennsylvania LOC), 9/1/2007
A- 221,555
230,000 Fayette County, PA Hospital Authority, Healthcare Facility Revenue Bonds (Series
1996A), 5.55% (Mount Macrina Manor)/(National City, Pennsylvania LOC), 9/1/2008
A- 231,709
500,000 Fayette County, PA Hospital Authority, Hospital Revenue Bonds (Series 1996A),
5.20%
(Uniontown Hospital)/(Connie Lee INS)/(Original Issue Yield: 5.30%), 6/15/2004
AAA 500,570
125,000 Franklin Park Boro, PA, GO Bonds, 5.50% (AMBAC INS), 11/1/2004
AAA 130,760
500,000 Indiana County, PA Hospital Authority, Revenue Refunding Bonds (Series B), 6.20%
(Indiana Hospital, PA)/(Connie Lee INS)/(Original Issue Yield: 6.30%), 7/1/2006
AAA 534,175
350,000 Lehigh County, PA General Purpose Authority, General Purpose Authority Hospital
Revenue Bonds, 5.30% (Lehigh Valley Hospital Inc.)/(MBIA INS)/(Original Issue
Yield: 5.40%), 7/1/2005
AAA 357,833
575,000 Lehigh County, PA General Purpose Authority, Hospital Refunding Revenue Bonds
(Series 1996A), 5.25% (Muhlenberg Hospital Center)/(Original Issue Yield: 5.30%),
7/15/2004
A 578,697
325,000 Lower Dauphin, PA School District, UT GO Bonds,
5.75% (AMBAC INS)/(United States Treasury PRF),
9/15/2002 (@100)
AAA 337,292
330,000 McKeesport, PA Area School District, UT GO Bonds (Series A), 5.40% (FSA INS)/
(Original Issue Yield: 5.50%), 10/1/2006
AAA 341,596
675,000 New Castle, PA Area Hospital Authority, Hospital Revenue Bonds (Series 1997),
6.00% (Jameson Memorial Hospital)/(MBIA INS), 7/1/2010
AAA 717,512
180,000 North Penn, PA Water Authority, Revenue Bonds, 5.80% (FGIC INS)/(Original Issue
Yield: 5.85%), 11/1/2005
AAA 189,076
110,000 North Penn, PA Water Authority, Revenue Bonds, 6.10% (FGIC INS), 11/1/2003
AAA 118,349
500,000 Northeastern, PA Hospital & Education Authority, Health Care Revenue Bonds
(Series 1994 A), 6.10% (Wyoming Valley Health Care, PA)/(AMBAC INS)/(Original
Issue Yield: 6.25%), 1/1/2003
AAA 530,240
150,000 Penn Trafford, PA School District, UT GO Bonds, 5.55% (MBIA INS), 5/1/2006
AAA 155,968
100,000 Pennsylvania Housing Finance Authority, SFM Revenue Bonds (Series 38), 5.30%,
4/1/2003
AA 101,162
100,000 Pennsylvania Housing Finance Authority, SFM Revenue Bonds (Series 41-B), 5.90%,
10/1/2005
AA 101,928
100,000 Pennsylvania Housing Finance Authority, SFM Revenue Bonds (Series 42), 5.90%,
10/1/2004
AA 102,174
345,000 Pennsylvania Housing Finance Authority, SFM Revenue Bonds (Series 43), 6.35%,
4/1/2001
AA 356,043
</TABLE>
FEDERATED PENNSYLVANIA INTERMEDIATE MUNICIPAL TRUST
<TABLE>
<CAPTION>
PRINCIPAL
CREDIT
AMOUNT
RATING* VALUE
<C> <S>
<S> <C>
INTERMEDIATE-TERM MUNICIPAL SECURITIES -- CONTINUED
PENNSYLVANIA -- CONTINUED
$ 500,000 Pennsylvania Intergovernmental Coop Authority, Special Tax Revenue Refunding
Bonds, Philadelphia Funding Program, 5.20% (FGIC INS)/(Original Issue Yield:
5.32%),
6/15/2007
AAA $ 507,370
125,000 Pennsylvania State Higher Education Facilities Authority, Health Services Revenue
Bonds (Series A), 6.00% (University of Pennsylvania), 1/1/2003
AA- 132,018
200,000 Pennsylvania State Higher Education Facilities Authority, Revenue Bonds (Series
L),
5.50% (State System of Higher Education, Commonwealth of PA)/(AMBAC INS)/
(Original Issue Yield: 5.55%), 6/15/2005
AAA 207,370
110,000 Pennsylvania State Higher Education Facilities Authority, University Revenue
Bonds
(Series 1996), 5.25% (Drexel University)/(PNC Bank, N.A. LOC)/(Original Issue
Yield: 5.35%), 8/1/2005
A1 110,236
150,000 Pennsylvania State Higher Education Facilities Authority, University Revenue
Bonds
(Series 1996), 5.35% (Drexel University)/(PNC Bank, N.A. LOC)/(Original Issue
Yield: 5.45%), 8/1/2006
A1 150,432
475,000 Pennsylvania State Higher Education Facilities Authority, University Revenue
Bonds
(Series 1996), 5.45% (Drexel University)/(PNC Bank, N.A. LOC)/(Original Issue
Yield: 5.55%), 8/1/2007
A1 477,242
125,000 Pennsylvania State Turnpike Commission, Turnpike Revenue Bonds (Series P), 5.45%,
12/1/2002
A 129,255
100,000 Pennsylvania State University, Second Revenue Refunding Bonds, 5.55%
(AMBAC INS)/(Original Issue Yield: 5.70%), 8/15/2006
AAA 103,746
125,000 Perkiomen Valley School District, PA, UT GO Bonds, 5.50%, 2/1/2004
A1 128,523
300,000 Philadelphia, PA Gas Works, Revenue Bonds (14th Series), 5.50% (FSA
INS)/(Original
Issue Yield: 6.10%), 7/1/2004
AAA 311,106
100,000 Philadelphia, PA Hospitals & Higher Education
Facilities Authority, Hospital Revenue Bonds
(Series 1994), 5.25% (Wills Eye Hospital,
PA)/(Original Issue Yield:
5.40%),
7/1/2003
A 100,486
150,000 Philadelphia, PA Water & Wastewater System, Revenue Bonds, 5.50% (FGIC INS),
6/15/2003
AAA 155,328
100,000 Richland School District, PA, UT GO Bonds, 5.30% (MBIA INS)/(Original Issue
Yield: 5.45%), 11/1/2003
AAA 102,981
125,000 Solanco, PA School District, UT GO Bonds, 5.60% (FGIC INS), 2/15/2004
AAA 130,123
600,000 Southeastern, PA Transportation Authority, Special Revenue Bonds, 5.75%
(FGIC INS), 3/1/2008
AAA 632,172
100,000 Spring Ford, PA School District, UT GO Refunding
Bonds (Series AA), 5.80% (FGIC INS), 8/1/2005
AAA 102,678
200,000 Swarthmore Boro Authority PA, College Revenue Bonds, 6.00% (Swarthmore
College)/(Original Issue Yield: 6.10%), 9/15/2006
AA 212,642
</TABLE>
FEDERATED PENNSYLVANIA INTERMEDIATE MUNICIPAL TRUST
<TABLE>
<CAPTION>
PRINCIPAL
CREDIT
AMOUNT
RATING* VALUE
<C> <S>
<S> <C>
INTERMEDIATE-TERM MUNICIPAL SECURITIES -- CONTINUED
PENNSYLVANIA -- CONTINUED
$ 185,000 Warren County, PA School District, UT GO Bonds, 5.85% (FGIC INS), 9/1/2001
AAA $ 191,664
110,000 Warren County, PA School District, UT GO Bonds, 6.10% (FGIC INS), 9/1/2003
AAA 114,547
Total 13,960,317
VIRGIN ISLANDS -- 1.2%
170,000 Virgin Islands HFA, SFM Revenue Refunding Bonds
(Series A), 5.80% (GNMA COL), 3/1/2005
AAA 172,397
TOTAL INVESTMENTS (IDENTIFIED COST
$13,723,427)(A) $14,132,714
</TABLE>
At May 31, 1997, 8.8% of the total investments at market value were
subject to alternative minimum tax.
(a) The cost of investments for federal tax purposes amounts to
$13,723,427. The net unrealized appreciation of investments on a
federal tax basis amounts to $409,287 which is comprised of
$409,470 appreciation and $183 depreciation at May 31, 1997.
* Please refer to the Appendix of the Statement of Additional
Information for an explanation of the credit ratings. Current credit
ratings are unaudited.
Note: The categories of investments are shown as a percentage of net assets
($14,416,769) at May 31, 1997.
The following acronyms are used throughout this portfolio:
AMBAC -- American Municipal Bond Assurance Corporation COL --
Collateralized FGIC -- Financial Guaranty Insurance Company FSA --
Financial Security Assurance GNMA -- Government National Mortgage
Association GO -- General Obligation HDA -- Hospital Development
Authority HEFA -- Health and Education Facilities Authority HFA --
Housing Finance Authority INS -- Insured LOC -- Letter of Credit MBIA
- -- Municipal Bond Investors Assurance PRF -- Prerefunded SFM -- Single
Family Mortgage UT -- Unlimited Tax
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
FEDERATED PENNSYLVANIA INTERMEDIATE MUNICIPAL TRUST
MAY 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost
$13,723,427) $14,132,714
Income receivable 215,183
Receivable for investments sold 826,470
Receivable for shares sold 8,500
Deferred expenses 7,078
Total assets 15,189,945
LIABILITIES:
Payable for investments purchased $ 716,198
Payable for shares redeemed 5,700
Income distribution payable 44,728
Payable to Bank 2,523
Accrued expenses 4,027
Total liabilities 773,176
NET ASSETS for 1,418,321 shares outstanding $14,416,769
NET ASSETS CONSIST OF:
Paid in capital $14,184,456
Net unrealized appreciation of investments 409,287
Accumulated net realized loss on investments (176,974)
Total Net Assets $14,416,769
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$14,416,769 / 1,418,321 shares outstanding $10.16
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
FEDERATED PENNSYLVANIA INTERMEDIATE MUNICIPAL TRUST
YEAR ENDED MAY 31, 1997
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 824,635
EXPENSES:
Investment advisory fee $ 77,730
Administrative personnel and services fee 125,000
Custodian fees 11,325
Transfer and dividend disbursing agent fees and expenses 20,676
Directors'/Trustees' fees 4,089
Auditing fees 14,438
Legal fees 3,024
Portfolio accounting fees 54,346
Shareholder services fee 38,865
Share registration costs 13,409
Printing and postage 15,023
Insurance premiums 2,669
Taxes 25
Miscellaneous 15,498
Total expenses 396,117
Waivers and reimbursements --
Waiver of investment advisory fee $ (77,730)
Waiver of shareholder services fee (21,764)
Reimbursement of other operating expenses (225,981)
Total waivers and reimbursements (325,475)
Net expenses 70,642
Net investment income 753,993
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 11,890
Net change in unrealized appreciation of investments 250,674
Net realized and unrealized gain on investments 262,564
Change in net assets resulting from operations $ 1,016,557
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED PENNSYLVANIA INTERMEDIATE MUNICIPAL TRUST
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 753,993 $ 547,070
Net realized gain (loss) on investments ($14,828 and $87,417
net losses, respectively,
as computed for federal tax purposes) 11,890 (26,717)
Net change in unrealized appreciation/depreciation 250,674 (126,841)
Change in net assets resulting from operations 1,016,557 393,512
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income (753,993) (547,070)
SHARE TRANSACTIONS --
Proceeds from sale of shares 5,435,406 13,768,008
Net asset value of shares issued to shareholders in payment of 170,651 118,987
distributions declared
Cost of shares redeemed (6,506,058) (7,023,515)
Change in net assets resulting from share transactions (900,001) 6,863,480
Change in net assets (637,437) 6,709,922
NET ASSETS:
Beginning of period 15,054,206 8,344,284
End of period $14,416,769 $15,054,206
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
FEDERATED PENNSYLVANIA INTERMEDIATE MUNICIPAL TRUST
MAY 31, 1997
ORGANIZATION
Intermediate Municipal Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended (the "Act") as an open-end,
management investment company. As of May 31, 1997, the Trust consists
of three portfolios. The financial statements included herein are only
those of Federated Pennsylvania Intermediate Municipal Trust (the
"Fund"), a non-diversified portfolio. The financial statements of the
other portfolios are presented separately. The assets of each
portfolio are segregated and a shareholder's interest is limited to
the portfolio in which shares are held. The investment objective of
the Fund is to provide current income exempt from federal regular
income tax and the personal income taxes imposed by the Commonwealth
of Pennsylvania.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. These policies are in conformity with generally accepted
accounting principles.
INVESTMENT VALUATIONS
Municipal bonds are valued by an independent pricing service, taking
into consideration yield, liquidity, risk, credit quality, coupon,
maturity, type of issue, and any other factors or market data the
pricing service deems relevant. Short-term securities are valued at
the prices provided by an independent pricing service. However,
short-term securities with remaining maturities of sixty days or less
at the time of purchase may be valued at amortized cost, which
approximates fair market value.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and
discount, if applicable, are amortized as required by the Internal
Revenue Code, as amended (the "Code"). Distributions to shareholders
are recorded on the ex-dividend date.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly,
no provisions for federal tax are necessary.
At May 31, 1997, the Fund, for federal tax purposes, had a capital
loss carryforward of $176,976, which will reduce the Fund's taxable
income arising from future net realized gain on investments, if any,
to the extent permitted by the Code, and thus will reduce the amount
of the distributions to shareholders which would otherwise be
necessary to relieve the Fund of any liability for federal tax.
Pursuant to the Code, such capital loss carryforward will expire as
follows:
EXPIRATION YEAR EXPIRATION AMOUNT
2003 $74,731
2004 $87,417
2005 $14,828
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions.
The Fund records when-issued securities on the trade date and
maintains security positions such that sufficient liquid assets will
be available to make payment for the securities purchased. Securities
purchased on a when-issued or delayed delivery basis are marked to
market daily and begin earning interest on the settlement date.
DEFERRED EXPENSES
The costs incurred by the Fund with respect to registration of its
shares in its first fiscal year, excluding the initial expense of
registering its shares, have been deferred and are being amortized
over a period not to exceed five years from the Fund's commencement
date.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual
results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without
par value).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1997 1996
<S> <C> <C>
Shares sold 536,995 1,358,404
Shares issued to shareholders in payment of distributions declared 16,821 11,708
Shares redeemed (641,073) (694,299)
Net change resulting from share transactions (87,257) 675,813
</TABLE>
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Management, the Fund's investment adviser (the "Adviser"),
receives for its services an annual investment advisory fee equal to
0.50% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee and certain
operating expenses of the Fund. The Adviser can modify or terminate
this voluntary waiver and reimbursement at any time at its sole
discretion.
ADMINISTRATIVE FEE
Federated Services Company ("FServ"), under the Administrative
Services Agreement, provides the Fund with administrative personnel
and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received
during the period of the Administrative Services Agreement shall be at
least $125,000 per portfolio and $30,000 per each additional class of
shares.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated
Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25% of
average daily net assets of the Fund for the period. The fee paid to
FSS is used to finance certain services for shareholders and to
maintain shareholder accounts. FSS may voluntarily choose to waive any
portion of its fee. FSS can modify or terminate this voluntary waiver
at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ, through its subsidiary, Federated Shareholder Services Company
("FSSC") serves as transfer and dividend disbursing agent for the
Fund. The fee paid to FSSC is based on the size, type, and number of
accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Trust's accounting records for which it receives a
fee. The fee is based on the level of the Trust's average daily net
assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES
Organizational and start-up administrative service expenses of $56,196
were borne initially by the Adviser. The Fund has agreed to reimburse
the Adviser for the organizational and start-up administrative
expenses during the five-year period following effective date. For the
period ended May 31, 1997, the Fund paid $13,425 pursuant to this
agreement.
INTERFUND TRANSACTIONS
During the period ended May 31, 1997, the Trust engaged in purchase
and sale transactions with funds that have a common investment adviser
(or affiliated investment advisers), common Directors/Trustees, and/or
common Officers. These purchase and sale transactions were made at
current market value pursuant to Rule 17a-7 under the Act amounting to
$8,440,388 and $4,750,000, respectively.
GENERAL
Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities,
for the period ended May 31, 1997, were as follows:
PURCHASES $6,879,755
SALES $7,492,487
CONCENTRATION OF CREDIT RISK
Since the Fund invests a substantial portion of its assets in issuers
located in one state, it will be more susceptible to factors adversely
affecting issuers of that state than would be a comparable tax-exempt
mutual fund that invests nationally. In order to reduce the credit
risk associated with such factors, at May 31, 1997, 78.2% of the
securities in the portfolio of investments are backed by letters of
credit or bond insurance of various financial institutions and
financial guaranty assurance agencies. The percentage of investments
insured by or supported (backed) by a letter of credit from any one
institution or agency did not exceed 24.2% of total investments.
SUBSEQUENT EVENT
The Board of Trustees and Management of Intermediate Municipal Trust,
on behalf of its portfolio, Federated Ohio Intermediate Municipal
Trust, submitted a proposal to sell all of Federated Ohio Intermediate
Municipal Trust's assets to Federated Ohio Municipal Income Fund, a
portfolio of Municipal Securities Income Trust, dated May 23, 1997. A
special meeting of shareholders of Federated Ohio Intermediate Trust
was held on July 7, 1997 in which shareholders approved the proposed
agreement. The agreement provides that the Federated Ohio Municipal
Income Fund will acquire all of the assets of Federated Ohio
Intermediate Municipal Trust in exchange for Class F Shares of
Federated Ohio Municipal Income Fund to be distributed pro rata to the
holders of shares of the Federated Ohio Intermediate Municipal Trust
in complete liquidation of the Federated Ohio Intermediate Municipal
Trust on or about July 11, 1997.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of INTERMEDIATE MUNICIPAL
TRUST (Federated Pennsylvania Intermediate Municipal Trust):
We have audited the accompanying statement of assets and liabilities
of Federated Pennsylvania Intermediate Municipal Trust (an investment
portfolio of Intermediate Municipal Trust, a Massachusetts business
trust), including the schedules of portfolio of investments, as of May
31, 1997, the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years then
ended, and the financial highlights (see page 2 of the prospectus) for
the periods presented. These financial statements and financial
highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements
and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of May 31, 1997, by correspondence
with the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Federated Pennsylvania Intermediate Municipal
Trust, an investment portfolio of Intermediate Municipal Trust, as of
May 31, 1997, the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period
then ended, and financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
July 7, 1997
NOTES
NOTES
[Graphic]
Federated Pennsylvania Intermediate Municipal Trust
(A Portfolio of Intermediate Municipal Trust)
PROSPECTUS
JULY 31, 1997
An Open-End, Management Investment Company
FEDERATED PENNSYLVANIA INTERMEDIATE MUNICIPAL TRUST
Federated Investors Tower
Pittsburgh, PA 15222-3779
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Federated Management
Federated Investors Tower Pittsburgh, PA 15222-3779
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT PUBLIC ACCOUNTANTS Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
Federated Securities Corp., Distributor
Cusip 458810306
3081603A (7/97)
[Graphic]
FEDERATED PENNSYLVANIA INTERMEDIATE MUNICIPAL TRUST
(A PORTFOLIO OF INTERMEDIATE MUNICIPAL TRUST)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of Federated Pennsylvania Intermediate Municipal Trust (the
"Fund"), a portfolio of Intermediate Municipal Trust (the "Trust")
dated July 31, 1997. This Statement is not a prospectus. You may
request a copy of a prospectus or a paper copy of this Statement, if
you have received it electronically,
free of charge by calling 1-800-341-7400.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated July 31, 1997
[Graphic]
Federated Investors
Federated Securities Corp., Distributor
Cusip 458810306
3081603B (7/97)
[Graphic]
TABLE OF CONTENTS
GENERAL INFORMATION ABOUT THE FUND 1
INVESTMENT OBJECTIVE AND POLICIES 1
Acceptable Investments 1
When-Issued and Delayed Delivery Transactions 2
Temporary Investments 2
Portfolio Turnover 3
Investment Limitations 3
Investment Risks 4
INTERMEDIATE MUNICIPAL TRUST MANAGEMENT 5
Officers and Trustees 5
Fund Ownership 8
Trustees' Compensation 9
Trustee Liability 9
INVESTMENT ADVISORY SERVICES 9
Adviser to the Fund 9
Advisory Fees 10
OTHER SERVICES 10
Fund Administration 10
Custodian and Portfolio Accountant 10
Transfer Agent 10
Independent Public Accountants 10
SHAREHOLDER SERVICES 10
BROKERAGE TRANSACTIONS 11
PURCHASING SHARES 11
Conversion to Federal Funds 11
DETERMINING NET ASSET VALUE 11
Valuing Municipal Bonds 11
Use of Amortized Cost 11
REDEEMING SHARES 12
Redemption in Kind 12
EXCHANGING SECURITIES FOR FUND SHARES 12
Tax Consequences 12
MASSACHUSETTS PARTNERSHIP LAW 12
TAX STATUS 13
The Fund's Tax Status 13
Shareholders' Tax Status 13
TOTAL RETURN 13
YIELD 13
TAX-EQUIVALENT YIELD 14
Tax-Equivalency Table 14
PERFORMANCE COMPARISONS 14
Economic and Market Information 15
ABOUT FEDERATED INVESTORS 15
Mutual Fund Market 16
APPENDIX 17
Standard and Poor's Ratings Group
("S&P") Municipal Bond Ratings 17
Moody's Investors Service, Inc.
Municipal Bond Ratings 17
Fitch Investors Service, Inc. Investment
Grade Bond Ratings 17
Standard and Poor's Ratings Group
Municipal Note Ratings 17
Moody's Investors Service, Inc.
Short-Term Loan Ratings 18
Standard and Poor's Ratings Group
Commercial Paper Ratings 18
Moody's Investors Service, Inc.
Commercial Paper Ratings 18
GENERAL INFORMATION ABOUT THE FUND
The Fund is a portfolio in Intermediate Municipal Trust (the "Trust").
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated May 31, 1985. On September 1, 1993, the
name of the Trust was changed from "Federated Intermediate Municipal
Trust" to "Intermediate Municipal Trust." On December 19, 1994, the
name of the Fund was changed from "Pennsylvania Intermediate Municipal
Trust" to "Federated Pennsylvania Intermediate Municipal Trust."
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide current income which is
exempt from federal regular income tax and the personal income taxes
imposed by the Commonwealth of Pennsylvania. The investment objective
cannot be changed without approval of shareholders.
ACCEPTABLE INVESTMENTS
The Fund invests primarily in a portfolio of municipal securities
which are exempt from federal regular income tax and Pennsylvania
state personal income taxes. These securities include those issued by
or on behalf of the Commonwealth of Pennsylvania and Pennsylvania
municipalities, and those issued by states, territories and
possessions of the United States which are exempt from federal regular
income tax and the Pennsylvania state personal income taxes.
CHARACTERISTICS
The Pennsylvania municipal securities in which the Fund invests
have the characteristics set forth in the prospectus.
A Pennsylvania municipal security will be determined by the Fund's
adviser to meet the quality standards established by the Trust's
Board of Trustees (the "Trustees") if it is of comparable quality
to municipal securities within the Fund's rating requirements. The
Trustees consider the creditworthiness of the issuer of a
municipal security, the issuer of a participation interest if the
Fund has the right to demand payment from the issuer of the
interest, or the guarantor of payment by either of those issuers.
The Fund is not required to sell a municipal security if the
security's rating is reduced below the required minimum subsequent
to its purchase by the Fund. The investment adviser considers this
event, however, in its determination of whether the Fund should
continue to hold the security in its portfolio. If Moody's
Investors Service, Inc., Standard & Poor's Ratings Group or Fitch
Investors Services, Inc. ratings change because of changes in
those organizations or in their rating systems, the Fund will try
to use comparable ratings as standards in accordance with the
investment policies described in the Fund's prospectus.
TYPES OF ACCEPTABLE INVESTMENTS
Examples of Pennsylvania municipal securities are:
* municipal notes and municipal commercial paper;
* serial bonds sold with differing maturity dates;
* tax anticipation notes sold to finance working capital needs of
municipalities;
* bond anticipation notes sold prior to the issuance of longer-term bonds;
* pre-refunded municipal bonds; and
* general obligation bonds secured by a municipality pledge of taxation.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases
participation interests frequently provide or secure from another
financial institution irrevocable letters of credit or guarantees
and give the Fund the right to demand payment of the principal
amounts of the participation interests plus accrued interest on
short notice (usually within seven days).
VARIABLE RATE MUNICIPAL SECURITIES
Variable interest rates generally reduce changes in the market
value of municipal securities from their original purchase prices.
Accordingly, as interest rates decrease or increase, the potential
for capital appreciation or depreciation is less for variable rate
municipal securities than for fixed income obligations. Many
municipal securities with variable interest rates purchased by the
Fund are subject to repayment of principal (usually within seven
days) on the Fund's demand. The terms of these variable rate
demand instruments require payment of principal and accrued
interest from the issuer of the municipal obligations, the issuer
of the participation interests, or a guarantor of either issuer.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of
participation interests which represent undivided proportional
interests in lease payments by a governmental or non-profit
entity. The lease payments and other rights under the lease
provide for and secure the payments on the certificates. Lease
obligations may be limited by municipal charter or the nature of
the appropriation for the lease. In particular, lease obligations
may be subject to periodic appropriation. If the entity does not
appropriate funds for future lease payments, the entity cannot be
compelled to make such payments. Furthermore, a lease may provide
that the certificate trustee cannot accelerate lease obligations
upon default. The trustee would only be able to enforce lease
payments as they became due. In the event of default or failure of
appropriation, it is unlikely that the trustee would be able to
obtain an acceptable substitute source of payment.
In determining the liquidity of municipal lease securities, the
Fund's investment adviser, under the authority delegated by the
Trustees, will base its determination on the following factors:
* whether the lease can be terminated by the lessee;
* the potential recovery, if any, from a sale of the leased property upon
termination of the lease;
* the lessee's general credit strength (e.g., its debt, administrative,
economic and financial characteristics and prospects);
* the likelihood that the lessee will discontinue appropriating
funding for the leased property because the property is no longer
deemed essential to its operations (e.g., the potential for an
"event of non-appropriation"); and
* any credit enhancement or legal recourse provided upon an event
of non-appropriation or other termination of the lease.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses,
other than normal transaction costs, are incurred. However, liquid
assets of the Fund sufficient to make payment for the securities to be
purchased are segregated on the Fund's records at the trade date.
These assets are marked to market daily and are maintained until the
transaction has been settled. The Fund may engage in when-issued and
delayed delivery transactions to an extent that would cause the
segregation of an amount up to 20% of the total value of its assets.
TEMPORARY INVESTMENTS
The Fund may also invest in temporary investments during times of
unusual market conditions for defensive purposes.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell
U.S. government securities or certificates of deposit to the Fund
and agree at the time of sale to repurchase them at a mutually
agreed upon time and price within one year from the date of
acquisition. The Fund or its custodian will take possession of the
securities subject to repurchase agreements. To the extent that
the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any
sale of such securities. In the event that such a defaulting
seller filed for bankruptcy or became insolvent, disposition of
such securities by the Fund might be delayed pending court action.
The Fund believes that under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would
rule in favor of the Fund and allow retention or disposition of
such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions,
such as broker/dealers, which are deemed by the Fund's adviser to
be creditworthy pursuant to guidelines established by the
Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse
repurchase agreement, the Fund transfers possession of a portfolio
instrument to another person, such as a financial institution,
broker, or dealer in return for a percentage of the instrument's
market value in cash and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by
remitting the original consideration plus interest at an agreed
upon rate. The use of reverse repurchase agreements may enable the
Fund to avoid selling portfolio instruments at a time when a sale
may be deemed to be disadvantageous, but the ability to enter into
reverse repurchase agreements does not ensure that the Fund will
be able to avoid selling portfolio instruments at a
disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the
Fund, in a dollar amount sufficient to make payment for the
obligations to be purchased, are segregated at the trade date.
These securities are marked to market daily and maintained until
the transaction is settled.
PORTFOLIO TURNOVER
The Fund may trade or dispose of portfolio securities as considered
necessary to meet its investment objective. For the year ended May 31,
1997 and 1996, the portfolio turnover rates for the Fund were 45% and
11%, respectively.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any
securities on margin, but may obtain such short-term credits as
may be necessary for clearance of purchases and sales of
securities.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may
borrow money and engage in reverse repurchase agreements in
amounts up to one-third of the value of its total assets,
including the amounts borrowed.
The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage, but rather as a temporary,
extraordinary, or emergency measure or to facilitate management of
the portfolio by enabling the Fund to meet redemption requests
when the liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings in excess of 5% of its total assets
are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate its assets
except to secure permitted borrowings. In those cases, it may
mortgage, pledge, or hypothecate assets having a market value not
exceeding 10% of the value of its total assets at the time of the
pledge.
UNDERWRITING
The Fund will not underwrite any issue of securities except as it
may be deemed to be an underwriter under the Securities Act of
1933 in connection with the sale of securities in accordance with
its investment objective, policies, and limitations.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate or invest in real
estate limited partnerships, although it may invest in municipal
bonds secured by real estate or interests in real estate.
INVESTING IN COMMODITIES
The Fund will not buy or sell commodities, commodity contracts, or
commodities futures contracts.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except that it may
acquire publicly or non-publicly issued municipal bonds or
temporary investments or enter into repurchase agreements in
accordance with its investment objective, policies, and
limitations or its Declaration of Trust.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such
purchase, 25% or more of the value of its total assets would be
invested in any one industry or in industrial development bonds or
other securities, the interest upon which is paid from revenues of
similar types of projects. However, the Fund may invest as
temporary investments more than 25% of the value of its assets in
cash or cash items, securities issued or guaranteed by the U.S.
government, its agencies, or instrumentalities, or instruments
secured by these money market instruments, i.e., repurchase
agreements.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the
Trustees without shareholder approval. Shareholders will be notified
before any material change in these limitations becomes effective.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment
companies except as part of a merger, consolidation, or other
acquisition.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in
securities which are illiquid, including repurchase agreements
providing for settlement in more than seven days after notice, and
certain restricted securities not determined by the Trustees to be
liquid.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not
result in a violation of such restriction.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings and loan having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of
investment to be "cash items."
INVESTMENT RISKS
Yields on Pennsylvania municipal securities depend on a variety of
factors, including: the general conditions of the municipal bond
market; the size of the particular offering; the maturity of the
obligations; and the rating of the issue. Further, any adverse
economic conditions or developments affecting the Commonwealth of
Pennsylvania or its county and local governments could impact the
Fund's portfolio. The Fund's concentration in securities issued by the
Commonwealth of Pennsylvania and its political subdivisions provides a
greater level of risk than a fund which is diversified across numerous
states and municipal entities. The ability of the Commonwealth or its
municipalities to meet their obligations will depend on the
availability of tax and other revenues; economic, political and
demographic conditions within Pennsylvania; and their underlying
fiscal condition.
The Commonwealth of Pennsylvania's budget stability depends largely
upon expenditure controls which keep spending in line with what is
considered a relatively limited revenue base. The Commonwealth
maintains moderate debt levels and has a sound economic position which
has shifted over time from very heavy reliance on manufacturing and
mining industries to a more stable employment base. The Commonwealth
restored structural balance to its budget in fiscal year 1993 through
tax increases, spending controls and conservative debt management.
Recurring budgetary pressures include rapid growth in Medicaid
spending and social service programs, and expenditures for additional
correctional facilities. Spending was increased by 2.7% for fiscal
year 1996 based on continued modest improvement in the economy,
adherence to debt control policies and spendable reserves from the
prior year. The 1997 budget includes an estimated $118 million surplus
from fiscal year 1996, tax credit for job creation, and continued
growth in Medicaid expenditures. The Commonwealth has restored the Tax
Stabilization Reserve Fund to approximately $211 million at the end of
fiscal year 1996. Reductions in state assistance and increased social
service demands have made it more difficult for local governments
(counties, cities, towns) to operate with balanced budgets. School
districts in the Commonwealth are provided additional credit support
through Pennsylvania's Act 150 which provides subsidized debt service
for qualified projects and an intercept mechanism of state aid
payments which would be used to pay bondholders in the case of a
missed debt service payment.
Concerning the constitutional provisions pertaining to debt, the
Commonwealth may issue tax anticipation notes for its General Fund
and/or Motor License Fund. However, the aggregate amount of newly
issued and outstanding tax anticipation notes is limited to a maximum
of 20% of the estimated revenues of the appropriate fund for the
fiscal year in which the notes are issued. The notes must mature
within the fiscal year of issuance. The Commonwealth of Pennsylvania
may also issue bond anticipation notes with a term not to exceed three
years. The bond anticipation notes are subject to applicable statutory
limitations pertaining to the issuance of bonds. The ability of the
Fund to achieve its investment objective depends on the continuing
ability of the issuers of Pennsylvania Municipal Securities and
participation interests, or the guarantors of either, to meet their
obligations for the payment of interest and principal when due.
Investing in Pennsylvania Municipal Securities which meet the Fund's
quality standards may not be possible if the Commonwealth of
Pennsylvania and its municipalities do not maintain their current
credit rating.
INTERMEDIATE MUNICIPAL TRUST MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates,
present positions with Intermediate Municipal Trust, and principal
occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee of the
Funds. Mr. Donahue is the father of J. Christopher Donahue, President and
Trustee of the Company.
Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Chairman of the Board, Children's Hospital of Pittsburgh; formerly,
Senior Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.;
Director, Member of Executive Committee, University of Pittsburgh;
Director or Trustee of the Funds.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; Partner or Trustee in private real
estate ventures in Southwest Florida; formerly, President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.
William J. Copeland
One PNC Plaza -- 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
formerly, Vice Chairman and Director, PNC Bank, N.A., and PNC Bank
Corp.; Director, Ryan Homes, Inc.; Director or Trustee of the Funds.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine, University of Pittsburgh; Medical Director,
University of Pittsburgh Medical Center -- Downtown; Member, Board of
Directors, University of Pittsburgh Medical Center; formerly,
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Director or Trustee of the Funds.
Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.
Glen R. Johnson*
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the
Funds; staff member, Federated Securities Corp.
Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Trustee
Consultant; Former State Representative, Commonwealth of
Massachusetts; formerly, President, State Street Bank and Trust
Company and State Street Boston Corporation; Director or Trustee of
the Funds.
Gregor F. Meyer
203 Kensington Ct.
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney, Retired Member of Miller, Ament, Henny & Kochuba; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director or Trustee
of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner,
Mollica & Murray; Director or Trustee of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics; Management Consultant; Trustee,
Carnegie Endowment for International Peace, RAND Corporation, Online
Computer Library Center, Inc., National Defense University and U.S.
Space Foundation; President Emeritus, University of Pittsburgh;
Founding Chairman, National Advisory Council for Environmental Policy
and Technology, Federal Emergency Management Advisory Board and Czech
Management Center, Prague; Director or Trustee of the Funds.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public Relations/Marketing/Conference Planning; Director or Trustee of the
Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company, and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee of the Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice
President, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., Federated Global Research Corp.
and Passport Research, Ltd.; Executive Vice President and Director,
Federated Securities Corp.; Trustee, Federated Shareholder Services
Company; Trustee or Director of some of the Funds; President,
Executive Vice President and Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President, Secretary, and Treasurer
Executive Vice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and Federated
Research; Director, Federated Research Corp. and Federated Global
Research Corp.; Trustee, Federated Shareholder Services Company;
Director, Federated Services Company; President and Trustee, Federated
Shareholder Services; Director, Federated Securities Corp.; Executive
Vice President and Secretary of the Funds; Treasurer of some of the
Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of
the Funds; Director or Trustee of some of the Funds.
* This Trustee is deemed to be an "interested person" as defined in
the Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board between
meetings of the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Arrow Funds; Automated
Government Money Trust; Blanchard Funds; Blanchard Precious Metals
Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG Investor
Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
Adjustable Rate U.S. Government Fund, Inc.; Federated American Leaders
Fund, Inc.; Federated ARMs Fund; Federated Equity Funds; Federated
Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income
Securities, Inc.; Federated Government Trust; Federated High Income
Bond Fund, Inc.; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Insurance Series; Federated
Investment Portfolios; Federated Investment Trust; Federated Master
Trust; Federated Municipal Opportunities Fund, Inc.; Federated
Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated
Short-Term Municipal Trust; Federated Short-Term U.S. Government
Trust; Federated Stock and Bond Fund, Inc.; Federated Stock Trust;
Federated Tax-Free Trust; Federated Total Return Series, Inc.;
Federated U.S. Government Bond Fund; Federated U.S. Government
Securities Fund: 1-3 Years; Federated U.S. Government Securities Fund:
2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income
Securities, Inc.; High Yield Cash Trust; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Term Trust, Inc. -- 1999; Liberty U.S.
Government Money Market Trust; Liquid Cash Trust; Managed Series
Trust; Money Market Management, Inc.; Money Market Obligations Trust;
Money Market Obligations Trust II; Money Market Trust; Municipal
Securities Income Trust; Newpoint Funds; Peachtree Funds; RIMCO
Monument Funds; Targeted Duration Trust; Tax-Free Instruments Trust;
The Planters Funds; The Starburst Funds; The Starburst Funds II; The
Virtus Funds; Trust for Financial Institutions; Trust for Government
Cash Reserves; Trust for Short-Term U.S. Government Securities; Trust
for U.S. Treasury Obligations; Wesmark Funds; and World Investment
Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding
shares.
As of July 2, 1997, the following shareholders of record owned 5% or
more of the outstanding shares of the Fund: Univest & Company,
Souderton, Pennsylvania, owned approximately 289,310 Shares (20.04%);
Charles Schwab & Co., Inc., San Francisco, California, owned
approximately 247,818 Shares (17.17%); Keystone Financial Inc.,
Altoona, Pennsylvania, owned approximately 135,105 Shares (9.36%); and
Harmony Co., Carlisle, Pennsylvania, owned approximately 261,472
Shares (18.12%).
TRUSTEES' COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX+
<S> <C> <S>
John F. Donahue, $0 $0 for the Trust and
Chairman and Trustee 56 other investment companies in the Complex
Thomas G. Bigley, $1,211.91 $108,725 for the Trust and
Trustee 56 other investment companies in the Complex
John T. Conroy, Jr., $1,333.29 $119,615 for the Trust and
Trustee 56 other investment companies in the Complex
William J. Copeland, $1,333.29 $119,615 for the Trust and
Trustee 56 other investment companies in the Complex
James E. Dowd, $1,333.29 $119,615 for the Trust and
Trustee 56 other investment companies in the Complex
Lawrence D. Ellis, M.D., $1,211.91 $108,725 for the Trust and
Trustee 56 other investment companies in the Complex
Edward L. Flaherty, Jr., $1,333.29 $119,615 for the Trust and
Trustee 56 other investment companies in the Complex
Glen R. Johnson, $0 $0 for the Trust and
President and Trustee 8 other investment companies in the Complex
Peter E. Madden, $1,211.91 $108,725 for the Trust and
Trustee 56 other investment companies in the Complex
Gregor F. Meyer, $1,211.91 $108,725 for the Trust and
Trustee 56 other investment companies in the Complex
John E. Murray, Jr., $1,211.91 $108,725 for the Trust and
Trustee 56 other investment companies in the Complex
Wesley W. Posvar, $1,211.91 $108,725 for the Trust and
Trustee 56 other investment companies in the Complex
Marjorie P. Smuts, $1,211.91 $108,725 for the Trust and
Trustee 56 other investment companies in the Complex
</TABLE>
* Information is furnished for the fiscal year ended May 31, 1997.
# The aggregate compensation is provided for the Trust which is
comprised of three portfolios.
+ The information is provided for the last calendar year.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not
be liable for errors of judgment or mistakes of fact or law. However,
they are not protected against any liability to which they would
otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the
conduct of their office.
INVESTMENT ADVISORY SERVICES
ADVISER TO THE FUND
The Fund's investment adviser is Federated Management. It is a subsidiary of
Federated Investors. All the voting securities of Federated Investors are
owned by a trust, the trustees of which are John F. Donahue, his wife, and
his son, J. Christopher Donahue.
The adviser shall not be liable to the Trust, the Fund, or any
shareholder of the Fund for any losses that may be sustained in the
purchase, holding, or sale of any security or for anything done or
omitted by it, except acts or omissions involving willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties
imposed upon it by its contract with the Fund.
ADVISORY FEES
For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectus.
For the year ended May 31, 1997, 1996, and 1995, the adviser earned
$77,730, $56,849, and $32,714, all of which was voluntarily waived. In
addition, the adviser reimbursed other operating expenses of $225,981,
$232,945, and $225,621, respectively.
OTHER SERVICES
FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee
as described in the prospectus. From March 1, 1994 to March 1, 1996,
Federated Administrative Services, a subsidiary of Federated
Investors, served as the Fund's administrator. For purposes of this
Statement of Additional Information, Federated Services Company, and
Federated Administrative Services may hereinafter collectively be
referred to as the "Administrators." For the fiscal years ended May
31, 1997, 1996, and 1995, the Administrators earned $125,000,
$125,000, and $125,000, respectively, none of which was waived.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund. Federated Services
Company, Pittsburgh, Pennsylvania, provides certain accounting and
recordkeeping services with respect to the Fund's portfolio
investments. The fee paid for this service is based upon the level of
the Fund's average net assets for the period plus out-of-pocket
expenses.
TRANSFER AGENT
Federated Services Company, through its registered transfer agent,
Federated Shareholder Services Company, maintains all necessary
shareholder records. For its services, the transfer agent receives a
fee based upon the size, type and number of accounts and transactions
made by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen
LLP, Pittsburgh, Pennsylvania.
SHAREHOLDER SERVICES
This arrangement permits the payment of fees to Federated Shareholder
Services and financial institutions to cause services to be provided
which are necessary for the maintenance of shareholder accounts and to
encourage personal services to shareholders by a representative who
has knowledge of the shareholder's particular circumstances and goals.
These activities and services may include, but are not limited to:
providing office space, equipment, telephone facilities, and various
clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and to maintain shareholder accounts and
records; processing purchase and redemption transactions and automatic
investments of client account cash balances; answering routine client
inquiries; and assisting clients in changing dividend options, account
designations, and addresses.
By adopting the Shareholder Services Agreement, the Trustees expect
that the Fund will benefit by: (1) providing personal services to
shareholders; (2) investing shareholder assets with a minimum of delay
and administrative detail; (3) enhancing shareholder recordkeeping
systems; and (4) responding promptly to shareholders' requests and
inquiries concerning their accounts.
For the fiscal year ended May 31, 1997, the Fund paid $38,865 pursuant
to the Shareholder Services Agreement, of which $21,764 was waived.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the
order at a favorable price. In working with dealers, the adviser will
generally use those who are recognized dealers in specific portfolio
instruments, except when a better price and execution of the order can
be obtained elsewhere. The adviser makes decisions on portfolio
transactions and selects brokers and dealers subject to guidelines
established by the Trustees. The adviser may select brokers and
dealers who offer brokerage and research services. These services may
be furnished directly to the Fund or to the adviser and may include:
advice as to the advisability of investing in securities; security
analysis and reports; economic studies; industry studies; receipt of
quotations for portfolio evaluations; and similar services. Research
services provided by brokers and dealers may be used by the adviser or
its affiliates in advising the Fund and other accounts. To the extent
that receipt of these services may supplant services for which the
adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses. The adviser and its affiliates exercise
reasonable business judgment in selecting brokers who offer brokerage
and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research
services provided. During the fiscal years ended May 31, 1997, 1996,
and 1995, the Fund paid no brokerage commissions.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the adviser, investments of the
type the Fund may make may also be made by those other accounts. When
the Fund and one or more other accounts managed by the adviser are
prepared to invest in, or desire to dispose of, the same security,
available investments or opportunities for sales will be allocated in
a manner believed by the adviser to be equitable to each. In some
cases, this procedure may adversely affect the price paid or received
by the Fund or the size of the position obtained or disposed of by the
Fund. In other cases, however, it is believed that coordination and
the ability to participate in volume transactions will be to the
benefit of the Fund.
PURCHASING SHARES
Except under certain circumstances described in the prospectus, shares
are sold at their net asset value on days the New York Stock Exchange
is open for business. The procedure for purchasing shares is explained
in the prospectus under "Investing in the Fund."
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that
the maximum interest may be earned. Federated Services Company acts as
the shareholder's agent in depositing checks and converting them into
federal funds.
DETERMINING NET ASSET VALUE
Net asset value generally changes each day. The days on which net
asset value is calculated by the Fund are described in the prospectus.
VALUING MUNICIPAL BONDS
The Trustees use an independent pricing service to value municipal
bonds. The independent pricing service takes into consideration yield,
stability, risk, quality, coupon rate, maturity, type of issue,
trading characteristics, special circumstances of a security or
trading market, and any other factors or market data it considers
relevant in determining valuations for normal institutional size
trading units of debt securities, and does not rely exclusively on
quoted prices.
USE OF AMORTIZED COST
The Trustees have decided that the fair value of debt securities
authorized to be purchased by the Fund with remaining maturities of 60
days or less at the time of purchase, shall be their amortized cost
value, unless the particular circumstances of the security indicate
otherwise. Under this method, portfolio instruments and assets are
valued at the acquisition cost as adjusted for amortization of premium
or accumulation of discount rather than at current market value. The
Executive Committee continually assesses this method of valuation and
recommends changes where necessary to assure that the Fund's portfolio
instruments are valued at their fair value as determined in good faith
by the Trustees.
REDEEMING SHARES
The Fund redeems shares at the next computed net asset value after the
Fund receives the redemption request. Redemption procedures are
explained in the prospectus under "Redeeming Shares." Although State
Street Bank does not charge for telephone redemptions, it reserves the
right to charge a fee for the cost of wire-transferred redemptions of
less than $5,000.
REDEMPTION IN KIND
Although the Fund intends to redeem shares in cash, it reserves the
right under certain circumstances to pay the redemption price in whole
or in part by a distribution of securities from the Fund's portfolio.
Redemption in kind will be made in conformity with applicable
Securities and Exchange Commission rules, taking such securities at
the same value employed in determining net asset value and selecting
the securities in a manner the Trustees determine to be fair and
equitable.
The Fund has elected to be governed by Rule 18f-1 of the Investment
Company Act of 1940, as amended, under which the Trust is obligated to
redeem shares for any one shareholder in cash only up to the lesser of
$250,000 or 1% of the Fund's net asset value during any 90-day period.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange municipal securities they already own for
shares or they may exchange a combination of municipal securities and
cash for shares. An investor should forward the securities in
negotiable form with a letter of transmittal and authorization to
Federated Securities Corp. The Fund will notify the investor of its
acceptance and valuation of the securities within five business days
of their receipt by State Street Bank. The Fund values securities in
the same manner as the Fund values its assets. The basis of the
exchange will depend upon the net asset value of Fund shares on the
day the securities are valued. One share of the Fund will be issued
for each equivalent amount of securities accepted.
Any interest earned on the securities prior to the exchange will be
considered in valuing the securities. All interest, dividends,
subscription, or other rights attached to the securities become the
property of the Trust, along with the securities.
TAX CONSEQUENCES
Exercise of this exchange privilege is treated as a sale for federal
income tax purposes. Depending upon the cost basis of the securities
exchanged for shares, a gain or loss may be realized by the investor.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally
liable as partners under Massachusetts law for acts or obligations of
the Trust. To protect shareholders of the Fund, the Trust has filed
legal documents with Massachusetts that expressly disclaim the
liability of shareholders for such acts or obligations of the Trust.
These documents require notice of this disclaimer to be given in each
agreement, obligation, or instrument that the Trust or its Trustees
enter into or sign on behalf of the Fund.
In the unlikely event a shareholder of the Fund is held personally
liable for the Trust's obligations, the Trust is required to use its
property to protect or compensate the shareholder. On request, the
Trust will defend any claim made and pay any judgment against a
shareholder for any act or obligation of the Trust. Therefore,
financial loss resulting from liability as a shareholder will occur
only if the Trust cannot meet its obligations to indemnify
shareholders and pay judgments against them from its assets.
TAX STATUS
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code of 1986, as
amended, applicable to regulated investment companies and to receive
the special tax treatment afforded to such companies. To qualify for
this treatment, the Fund must, among other requirements:
* derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
* derive less than 30% of its gross income from the sale of
securities held less than three months;
* invest in securities within certain statutory limits; and
* distribute to its shareholders at least 90% of its net income earned
during the year.
SHAREHOLDERS' TAX STATUS
CAPITAL GAINS
Capital gains or losses may be realized by the Fund on the sale of
portfolio securities and as a result of discounts from par value
on securities held to maturity. Sales would generally be made
because of:
* the availability of higher relative yields;
* differentials in market values;
* new investment opportunities;
* changes in creditworthiness of an issuer; or
* an attempt to preserve gains or limit losses.
Distributions of long-term capital gains are taxed as such,
whether they are taken in cash or reinvested, and regardless of
the length of time the shareholder has owned the shares. Any loss
by a shareholder on Fund shares held for less than six months and
sold after a capital gains distribution will be treated as a
long-term capital loss to the extent of the capital gains
distribution.
TOTAL RETURN
The Fund's average annual total return for the one-year ended May 31,
1997, and for the period from December 5, 1993 (date of initial public
investment) to May 31, 1997 were 6.63% and 5.44%, respectively.
The average annual total return for the Fund is the average compounded
rate of return for a given period that would equate a $1,000 initial
investment to the ending redeemable value of that investment. The
ending redeemable value is computed by multiplying the number of
shares owned at the end of the period by the net asset value per share
at the end of the period. The number of shares owned at the end of the
period is based on the number of shares purchased at the beginning of
the period with $1,000, adjusted over the period by any additional
shares assuming the monthly reinvestment of all dividends and
distributions.
YIELD
The Fund's yield for the thirty-day period ended May 31, 1997, was
4.70%.
The yield for shares of the Fund is determined by dividing the net
investment income per share (as defined by the Securities and Exchange
Commission) earned by the Fund over a thirty-day period by the maximum
offering price per share on the last day of the period. This value is
then annualized using semi-annual compounding. This means that the
amount of income generated during the thirty-day period is assumed to
be generated each month over a twelve-month period and is reinvested
every six months. The yield does not necessarily reflect income
actually earned by the Fund because of certain adjustments required by
the Securities and Exchange Commission and, therefore, may not
correlate to the dividends or other distributions paid to
shareholders.
To the extent that financial institutions and broker/dealers charge
fees in connection with services provided in conjunction with an
investment in the Fund, performance will be reduced for those
shareholders paying those fees.
TAX-EQUIVALENT YIELD
The Fund's tax-equivalent yield for the thirty-day period ended May
31, 1997, was 8.16%.
The tax-equivalent yield for the Fund is calculated similarly to the
yield, but is adjusted to reflect the taxable yield that the Fund
would have had to earn to equal its actual yield, assuming a 39.60%
federal tax rate and assuming that income is 100% tax-exempt.
TAX-EQUIVALENCY TABLE
The Fund may also use a tax-equivalency table in advertising and sales
literature. The interest earned by the municipal bonds in the Fund's
portfolio generally remains free from federal regular income tax,*
Pennsylvania personal income tax and certain local taxes. (Some
portion of the Fund's income may be subject to the federal alternative
minimum tax and state and local taxes.) As the table below indicates,
a "tax-free" investment is an attractive choice for investors,
particularly in times of narrow spreads between tax-free and taxable
yields.
TAXABLE YIELD EQUIVALENT FOR 1997
STATE OF PENNSYLVANIA
<TABLE>
COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
<C> <C> <C> <C> <C>
17.80% 30.80% 33.80% 38.80% 42.40%
JOINT $1- $41,201- $99,601- $151,751- OVER
RETURN 41,200 99,600 151,750 271,050 $271,050
SINGLE $1- $24,651- $59,751- $124,651- OVER
RETURN 24,650 59,750 124,650 271,050 $271,050
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
<C> <C> <C> <C> <C> <C>
1.50% 1.82% 2.17% 2.27% 2.45% 2.60%
2.00% 2.43% 2.89% 3.02% 3.27% 3.47%
2.50% 3.04% 3.61% 3.78% 4.08% 4.34%
3.00% 3.65% 4.34% 4.53% 4.90% 5.21%
3.50% 4.26% 5.06% 5.29% 5.72% 6.08%
4.00% 4.87% 5.78% 6.04% 6.54% 6.94%
4.50% 5.47% 6.50% 6.80% 7.35% 7.81%
5.00% 6.08% 7.23% 7.55% 8.17% 8.68%
5.50% 6.69% 7.95% 8.31% 8.99% 9.55%
6.00% 7.30% 8.67% 9.06% 9.80% 10.42%
</TABLE>
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional
state and local taxes paid on comparable taxable investments were not
used to increase federal deductions.
PERFORMANCE COMPARISONS
The performance of the Fund depends upon such variables as:
* portfolio quality;
* average portfolio maturity;
* type of instruments in which the portfolio is invested;
* changes in interest rates and market value of portfolio securities;
* changes in the Fund's expenses; and
* various other factors.
The Fund's performance fluctuates on a daily basis largely because net
earnings and offering price per share fluctuate daily. Both net
earnings and offering price per share are factors in the computation
of yield and total return as described above.
Investors may use financial publications and/or indices to obtain a
more complete view of the Fund's performance. When comparing
performance, investors should consider all relevant factors such as
the composition of any index used, prevailing market conditions,
portfolio composition of other funds, and methods used to value
portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may
include:
* LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any
change in net asset value over a specific period of time. From
time to time, the Fund will quote its Lipper ranking in the "other
states intermediate municipal debt funds" category in advertising
and sales literature.
* MORNINGSTAR, INC., an independent rating service, is the publisher
of the bi-weekly Mutual Fund Values. Mutual Fund Values rates more
than 1,000 NASDAQ-listed mutual funds of all types, according to
their risk-adjusted returns. The maximum rating is five stars, and
ratings are effective for two weeks.
* LEHMAN BROTHERS FIVE-YEAR STATE GENERAL OBLIGATION BONDS is an
index comprised of all state general obligation debt issues with
maturities between four and six years. These bonds are rated A or
better and represent a variety of coupon ranges. Index figures are
total returns calculated for one, three and twelve month periods
as well as year-to-date. Total returns are also calculated as of
the index inception December 31, 1979.
* LEHMAN BROTHERS TEN-YEAR STATE GENERAL OBLIGATION BONDS is an
index comprised of the same issues noted above except that the
maturities range between nine and eleven years. Index figures are
total returns calculated for the same periods as listed above.
Advertisements and other sales literature for the Fund may quote total
returns which are calculated on nonstandardized base periods. The
total returns represent the historic change in the value of an
investment in the Fund based on monthly reinvestment of dividends over
a specific period of time.
Advertising and other promotional literature may include charts,
graphs and other illustrations using the Fund's returns in general,
that demonstrate basic investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment. In
addition, the Fund can compare its performance, or performance for the
types of securities in which it invests, to a variety of other
investments, such as bank savings accounts, certificates of deposit,
and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Fund may include discussions
of economic, financial and political developments and their effect on
the securities market. Such discussions may take the form of
commentary on these developments by Fund portfolio managers and their
views and analysis on how such developments could affect the Fund. In
addition, advertising and sales literature may quote statistics and
give general information about the mutual fund industry, including the
growth of the industry, from sources such as the Investment Company
Institute.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is
reflected in its investment decision making -- structured,
straightforward, and consistent. This has resulted in a history of
competitive performance with a range of competitive investment
products that have gained the confidence of thousands of clients and
their customers.
The company's disciplined security selection process is firmly rooted
in sound methodologies backed by fundamental and technical research.
Investment decisions are made and executed by teams of portfolio
managers, analysts, and traders dedicated to specific market sectors.
These traders handle trillions of dollars in annual trading volume.
In the municipal sector, as of December 31, 1996, Federated Investors
managed 12 bond funds with approximately $2.0 billion in assets and 21
money market funds with approximately $9.5 billion in total assets. In
1976, Federated introduced one of the first municipal bond mutual
funds in the industry and is now one of the largest institutional
buyers of municipal securities. The Fund may quote statistics from
organizations including The Tax Foundation and the National Taxpayers
Union regarding the tax obligations of Americans.
J. Thomas Madden, Executive Vice President, oversees Federated
Investors' equity and high-yield corporate bond management while
William D. Dawson, Executive Vice President, oversees Federated
Investors' domestic fixed income management. Henry A. Frantzen,
Executive Vice President, oversees the management of Federated
Investors' international and global portfolios.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their
financial goals through mutual funds. These investors, as well as
businesses and institutions, have entrusted over $3.5 trillion to the
more than 6,000 funds available.*
Federated Investors, through its subsidiaries, distributes mutual
funds for a variety of investment applications. Specific markets
include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional
clients nationwide by managing and servicing separate accounts and
mutual funds for a variety of applications, including defined benefit
and defined contribution programs, cash management, and
asset/liability management. Institutional clients include
corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and
financial advisors. The marketing effort to these institutional
clients is headed by John B. Fisher, President, Institutional Sales
Division.
BANK MARKETING
Other institutional clients include close relationships with more than
1,600 banks and trust organizations. Virtually all of the trust
divisions of the top 100 bank holding companies use Federated funds in
their clients' portfolios. The marketing effort to trust clients is
headed by Timothy C. Pillion, Senior Vice President, Bank Marketing &
Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage
firms nationwide -- we have over 2,200 broker/dealer and bank
broker/dealer relationships across the country -- supported by more
wholesalers than any other mutual fund distributor. Federated's
service to financial professionals and institutions has earned it high
ratings in several surveys performed by DALBAR, Inc. DALBAR is
recognized as the industry benchmark for service quality measurement.
The marketing effort to these firms is headed by James F. Getz,
President, Federated Securities Corp.
* Source: Investment Company Institute
APPENDIX
STANDARD AND POOR'S RATINGS GROUP ("S&P") MUNICIPAL BOND RATINGS
AAA -- Debt rated "AAA" has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA -- Debt rated "AA" has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only in small
degree.
A -- Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
NR -- Indicates that no public rating has been requested, that there
is insufficient information on which to base a rating, or that S&P
does not rate a particular type of obligation as a matter of policy.
Plus (+) or minus (-): The ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing
within the major rating categories.
MOODY'S INVESTORS SERVICE, INC. MUNICIPAL BOND RATINGS
AAA -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future.
NR -- Not rated by Moody's.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate or municipal bond
rating system. The modifier 1 indicates that the security ranks in the
higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the issue ranks
in the lower end of its generic rating category.
FITCH INVESTORS SERVICE, INC. INVESTMENT GRADE BOND RATINGS
AAA -- Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA -- Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA."
Because bonds rated in the "AAA" and "AA" categories are not
significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated "F-1+."
A -- Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
NR -- NR indicates that Fitch does not rate the specific issue.
Plus (+) or Minus (-): Plus and minus signs are used with a rating
symbol to indicate the relative position of a credit within the rating
category. Plus and minus signs, however, are not used in the "AAA"
category.
STANDARD AND POOR'S RATINGS GROUP MUNICIPAL NOTE RATINGS
SP-1 -- Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics
will be given a plus sign (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
MOODY'S INVESTORS SERVICE, INC. SHORT-TERM LOAN RATINGS
MIG1/VMIG1 -- This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity
support or demonstrated broad based access to the market for
refinancing.
MIG2/VMIG2 -- This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.
STANDARD AND POOR'S RATINGS GROUP COMMERCIAL PAPER RATINGS
A-1 -- This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign
(+) designation.
A-2 -- Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high
for issues designated A-1.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS
PRIME-1 -- Issuers rated PRIME-1 (or related supporting institutions)
have a superior capacity for repayment of short-term promissory
obligations. PRIME-1 repayment capacity will normally be evidenced by
the following characteristics:
* leading market positions in well-established industries;
* high rates of return on funds employed;
* conservative capitalization structure with moderate reliance on debt and
ample asset protection;
* broad margins in earning coverage of fixed financial charges and high
internal cash generation; and
* well-established access to a range of financial markets and
assured sources of alternative liquidity.
PRIME-2 -- Issuers rated PRIME-2 (or related supporting institutions)
have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the
characteristics cited above, but to a lesser degree. Earnings trends
and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is
maintained.
Federated Intermediate Municipal Trust
(A Portfolio of Intermediate Municipal Trust)
PROSPECTUS
The shares of Federated Intermediate Municipal Trust (the "Fund")
offered by this prospectus represent interests in a diversified
portfolio of securities of Intermediate Municipal Trust (the "Trust"),
an open-end management investment company (a mutual fund).
The objective of the Fund is to provide current income exempt from
federal regular income tax. The Fund pursues this investment objective
by investing in a portfolio of municipal securities with a
dollar-weighted average portfolio maturity of not less than three or
more than ten years.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS
OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
This prospectus contains the information you should read and know
before you invest in the Fund. Keep this prospectus for future
reference.
The Fund has also filed a Statement of Additional Information dated
July 31, 1997, with the Securities and Exchange Commission (the
"SEC"). The information contained in the Statement of Additional
Information is incorporated by reference into this prospectus. You may
request a copy of the Statement of Additional Information or a paper
copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-341-7400. To obtain
other information or to make inquiries about the Fund, contact the
Fund at the address listed in the back of this prospectus. The
Statement of Additional Information, material incorporated by
reference into this document, and other information regarding the Fund
is maintained electronically with the SEC at Internet Web site
(http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated July 31,1997
TABLE OF CONTENTS
Summary of Fund Expenses 1
Financial Highlights 2
General Information 3
Investment Information 3
Investment Objective 3
Investment Policies 3
Municipal Securities 4
Investment Risks 5
Investment Limitations 5
Intermediate Municipal Trust Information 5
Management of the Trust 5
Distribution of Fund Shares 6
Administration of the Fund 6
Net Asset Value 7
Investing in the Fund 7
Share Purchases 7
Minimum Investment Required 7
What Shares Cost 7
Exchanging Securities for Fund Shares 7
Certificates and Confirmations 8
Dividends 8
Capital Gains 8
Redeeming Shares 8
By Telephone 8
By Mail 8
Accounts with Low Balances 9
Shareholder Information 9
Voting Rights 9
Tax Information 9
Federal Income Tax 9
State and Local Taxes 10
Performance Information 10
Financial Statements 11
Report of Independent Public Accountants 24
SUMMARY OF FUND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> Maximum Sales Charge Imposed on Purchases (as a percentage of
offering price) None Maximum Sales Charge Imposed on Reinvested
Dividends (as a percentage of offering price) None Contingent
Deferred Sales Charge (as a percentage of original purchase price or
redemption
proceeds, as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
<CAPTION>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee (after waiver)(1) 0.33%
12b-1 Fee None
Shareholder Services Fee (after waiver)(2) 0.06%
Total Other Expenses 0.24%
Total Operating Expenses(3) 0.57%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary
waiver of a portion of the management fee. The adviser can
terminate this voluntary waiver at any time at its sole
discretion. The maximum management fee is 0.40%.
(2) The shareholder services fee has been reduced to reflect the
voluntary waiver of a portion of the shareholder services fee. The
shareholder service provider can terminate this voluntary waiver
at any time at its sole discretion. The maximum shareholder
services fee is 0.25%.
(3) The total operating expenses would have been 0.83% absent the
voluntary waivers of portions of the management fee and the
shareholder services fee.
The purpose of this table is to assist an investor in understanding
the various costs and expenses that a shareholder of the Fund will
bear, either directly or indirectly. For more complete descriptions of
the various costs and expenses, see "Investing in the Fund" and
"Intermediate Municipal Trust Information." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of period.
1 Year $ 6
3 Years $18
5 Years $32
10 Years $71
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS*
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 24.
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989
1988
<S> <C> <C> <C> <C> <C> <C> <C>
<C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.41 $10.55 $10.52 $10.74 $10.31 $10.09 $ 9.84 $
9.81 $ 9.81 $ 9.83
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.53 0.53 0.54 0.52 0.56 0.59 0.63
0.64 0.64 0.62
Net realized and
unrealized gain
(loss) on investments 0.09 (0.14) 0.03 (0.22) 0.43 0.22 0.25
0.03 -- (0.02)
Total from investment 0.62 0.39 0.57 0.30 0.99 0.81 0.88
0.67 0.64 0.60
operations
LESS DISTRIBUTIONS
Distributions from net
investment income (0.53) (0.53) (0.54) (0.52) (0.56) (0.59) (0.63)
(0.64) (0.64) (0.62)
NET ASSET VALUE, END OF $10.50 $10.41 $10.55 $10.52 $10.74 $10.31 $10.09 $
9.84 $ 9.81 $ 9.81
PERIOD
TOTAL RETURN(A) 6.11% 3.78% 5.67% 2.79% 9.80% 8.19% 9.22%
7.02% 6.77% 6.34%
RATIOS TO AVERAGE
NET ASSETS
Expenses 0.57% 0.57% 0.59% 0.61% 0.48% 0.47% 0.49%
0.50% 0.48% 0.49%
Net investment income 5.09% 5.05% 5.23% 4.82% 5.27% 5.73% 6.32%
6.49% 6.56% 6.25%
Expense 0.26% 0.24% 0.00% 0.01% 0.14% 0.22% 0.30%
0.38% 0.39% 0.31%
waiver/reimbursement(b)
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $232,506 $218,398 $229,285 $302,663 $263,283 $173,702 $116,577
$95,738 $82,211 $91,195
Portfolio turnover 33% 19% 11% 7% 3% 9% 43%
14% 25% 119%
</TABLE>
* During the period from September 6, 1993, to December 21, 1994, the
Fund offered two classes of shares, Institutional Shares and
Institutional Service Shares. As of December 21, 1994, Institutional
Service Shares ceased operations and the class designation for
Institutional Shares was eliminated. The table above does not
reflect Institutional Service Shares.
(a) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense
and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE
FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED MAY 31, 1997, WHICH CAN
BE OBTAINED FREE OF CHARGE.
GENERAL INFORMATION
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated May 31, 1985. The Declaration of Trust
permits the Trust to offer separate series of shares of beneficial
interest representing interests in separate portfolios of securities.
The shares in any one portfolio may be offered in separate classes.
Shares of the Fund are sold primarily to retail and private banking
customers of financial institutions and to accounts for which
financial institutions act in a fiduciary, advisory, agency,
custodial, or similar capacity as a convenient means of accumulating
an interest in a professionally managed, diversified portfolio of
municipal securities. Shares are also designed for funds held by
savings and other institutions, corporations, trusts, brokers,
investment counselors and insurance companies. A minimum initial
investment of $25,000 over a 90-day period is required. The Fund may
not be a suitable investment for retirement plans since it invests in
municipal securities.
Shares are currently sold and redeemed at net asset value without a
sales charge imposed by the Fund.
INVESTMENT INFORMATION
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income
exempt from federal regular income tax. Interest income of the Fund
that is exempt from federal income tax retains its tax-free status
when distributed to the Fund's shareholders. The Fund pursues this
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. While there is no assurance that the Fund will achieve its
investment objective, it endeavors to do so by following the
investment policies described in this prospectus. The investment
objective and the policy stated above cannot be changed without
approval of shareholders.
INVESTMENT POLICIES
The investment policies described below may be changed by the Board of
Trustees (the "Trustees") without shareholder approval. Shareholders
will be notified before any material change in these policies becomes
effective.
ACCEPTABLE INVESTMENTS
The municipal securities in which the Fund invests are:
* 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
* participation interests, as described below, in any of the above
obligations, the interest from which is, in the opinion of bond
counsel for the issuers or in the opinion of officers of the Fund
and/or the investment adviser to the Fund, exempt from federal
regular income tax.
The prices of fixed income securities fluctuate inversely to the
direction of interest rates.
AVERAGE MATURITY
The dollar-weighted average portfolio maturity of the Fund's portfolio
of municipal securities will not be less than three years or more than
ten years. For purposes of determining the dollar-weighted average
portfolio maturity of the Fund's portfolio, the maturity of a
municipal security will be its ultimate maturity, unless it is
probable that the issuer of the security will take advantage of
maturity-shortening devices such as a call, refunding, or redemption
provision, in which case the maturity date will be the date on which
it is probable that the security will be called, refunded, or
redeemed. If the municipal security includes the right to demand
payment, the maturity of the security for purposes of determining the
Fund's dollar-weighted average portfolio maturity will be the period
remaining until the principal amount of the security can be recovered
by exercising the right to demand payment.
CHARACTERISTICS
The municipal securities in which the Fund invests are:
* rated within the three highest ratings for municipal securities by Moody's
Investors Service, Inc. ("Moody's") (Aaa, Aa, or A) or by Standard & Poor's
Ratings Group ("S&P") (AAA, AA, or A);
* guaranteed at the time of purchase by the U.S. government as to the
payment of principal and interest;
* fully collateralized by an escrow of U.S. government securities or other
securities acceptable to the Fund's investment adviser;
* rated at the time of purchase within Moody's highest short-term
municipal obligation rating (MIG1/VMIG1) or Moody's highest
municipal commercial paper rating (PRIME-1) or S&P's highest
municipal commercial paper rating (SP-1);
* unrated if, at the time of purchase, other municipal securities of
that issuer are rated A or better by Moody's 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.
A description of the rating categories is contained in the Appendix to
the Statement of Additional Information.
PARTICIPATION INTERESTS
The Fund may purchase participation interests from financial
institutions such as commercial banks, savings associations, and
insurance companies. These participation interests give the Fund an
undivided interest in one or more underlying municipal securities. The
financial institutions from which the Fund purchases participation
interests frequently provide or obtain irrevocable letters of credit
or guarantees to attempt to assure that the participation interests
are of high quality. The Trustees of the Fund will determine whether
participation interests meet the prescribed quality standards for the
Fund.
VARIABLE RATE MUNICIPAL SECURITIES
Some of the municipal securities which the Fund purchases may have
variable interest rates. Variable interest rates are ordinarily stated
as a percentage of a published interest rate, interest rate index, or
some similar standard, such as the 91-day U.S. Treasury bill rate.
Variable interest rates are adjusted on a periodic basis, e.g., every
30 days. The Fund will consider this adjustment period to be the
maturity of the security for purposes of determining the weighted
average maturity of the portfolio.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may purchase and sell municipal securities on a when-issued
or delayed delivery basis. These transactions are arrangements in
which the Fund purchases securities with payment and delivery
scheduled for a future time. The seller's failure to complete these
transactions may cause the Fund to miss a price or yield considered to
be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the
securities purchased may vary from the purchase prices.
The Fund may dispose of a commitment prior to settlement if the
investment adviser deems it appropriate to do so. In addition, the
Fund may enter into transactions to sell its purchase commitments to
third parties at current market values and simultaneously acquire
other commitments to purchase similar securities at later dates. The
Fund may realize short-term profits or losses upon the sale of such
commitments.
TEMPORARY INVESTMENT
From time to time on a temporary basis, or when the investment adviser
determines that market conditions call for a temporary defensive
posture, the Fund may invest in short-term temporary investments which
may or may not be exempt from federal income tax. Temporary
investments include: tax-exempt variable and floating rate demand
notes; tax-free commercial paper; other temporary municipal
securities; obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities; other debt securities; commercial
paper; certificates of deposit of domestic branches of U.S. banks; and
repurchase agreements (arrangements in which the organization selling
the Fund a security agrees at the time of sale to repurchase it at a
mutually agreed upon time and price).
There are no rating requirements applicable to temporary investments
with the exception of temporary municipal securities which are subject
to the same rating requirements as all other municipal securities in
which the Fund invests. However, the investment adviser will limit
temporary investments to those it considers to be of comparable
quality to the acceptable investments of the Fund.
Although the Fund is permitted to make taxable, temporary investments,
there is no current intention of generating income subject to federal
regular income tax.
MUNICIPAL SECURITIES
Municipal securities are generally issued to finance public works,
such as airports, bridges, highways, housing, hospitals, mass
transportation projects, schools, streets, and water and sewer works.
They are also issued to repay outstanding obligations, to raise funds
for general operating expenses, and to make loans to other public
institutions and facilities.
Municipal securities include industrial development bonds issued by or
on behalf of public authorities to provide financing aid to acquire
sites or construct and equip facilities for privately or publicly
owned corporations. The availability of this financing encourages
these corporations to locate within the sponsoring communities and
thereby increases local employment.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of its full faith and credit and taxing power
for the payment of principal and interest. Interest on and principal
of revenue bonds, however, are payable only from the revenue generated
by the facility financed by the bond or other specified sources of
revenue. Revenue bonds do not represent a pledge of credit or create
any debt of or charge against the general revenues of a municipality
or public authority. Industrial development bonds are typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on municipal securities depend on a variety of factors,
including: the general conditions of the municipal note market and of
the municipal bond market; the size of the particular offering; the
maturity of the obligations; and the rating of the issue. The ability
of the Fund to achieve its investment objective also depends on 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 interest and principal when due.
INVESTMENT LIMITATIONS
The Fund will not:
* borrow money or pledge securities except, under certain
circumstances, the Fund may borrow up to one-third of the value of
its total assets and pledge up to 10% of the value of those assets
to secure such borrowings;
* invest more than 5% of its total assets in purchases of industrial
development bonds, the principal and interest of which are paid by a
company which has an operating history of less than three years; or
* with respect to securities comprising 75% of its assets, invest more
than 5% of its total assets in securities of one issuer (except cash
and cash items, and U.S. government obligations).
The above investment limitations cannot be changed without shareholder
approval. The following limitation, however, may be changed by the
Trustees without shareholder approval. Shareholders will be notified
before any material change in this limitation becomes effective.
The Fund will not:
* invest more than 15% of its net assets in securities which are
illiquid, including repurchase agreements providing for settlement
in more than seven days after notice, and restricted securities
determined by the Trustees to be illiquid.
INTERMEDIATE MUNICIPAL TRUST INFORMATION
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The Trust is managed by a Board of Trustees. The Trustees are
responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the
shareholders. The Executive Committee of the Board of Trustees handles
the Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER
Investment decisions for the Fund are made by Federated Management,
the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision
for the Fund and is responsible for the purchase and sale of portfolio
instruments, for which it receives an annual fee from the Fund.
ADVISORY FEES
The adviser receives an annual investment advisory fee equal to
0.40% of the Fund's average daily net assets. Also, the adviser may
voluntarily choose to waive a portion of its fee or reimburse other
expenses of the Fund, but reserves the right to terminate such
waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND
Federated Management, a Delaware business trust organized on April
11, 1989, is a registered investment adviser under the Investment
Advisers Act of 1940, as amended. It is a subsidiary of Federated
Investors. All of the Class A (voting) shares of Federated Investors
are owned by a trust, the trustees of which are John F. Donahue,
Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue, who is President and
Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors
serve as investment advisers to a number of investment companies and
private accounts. Certain other subsidiaries also provide
administrative services to a number of investment companies. With
over $110 billion invested across more than 300 funds under
management and/or administration by its subsidiaries, as of December
31, 1996, Federated Investors is one of the largest mutual fund
investment managers in the United States. With more than 2,000
employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work
in and through 4,500 financial institutions nationwide.
Both the Trust and the adviser have adopted strict codes of ethics
governing the conduct of all employees who manage the Fund and its
portfolio securities. These codes recognize that such persons owe a
fiduciary duty to the Fund's shareholders and must place the interests
of shareholders ahead of the employees' own interests. Among other
things, the codes: require preclearance and periodic reporting of
personal securities transactions; prohibit personal transactions in
securities being purchased or sold, or being considered for purchase
or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less
than sixty days. Violations of the codes are subject to review by the
Trustees and could result in severe penalties.
PORTFOLIO MANAGER'S BACKGROUND
J. Scott Albrecht has been the Fund's portfolio manager since July 1995. Mr.
Albrecht joined Federated Investors in 1989 and has been a Vice President of
the Fund's investment adviser since 1994. From 1992 to 1994, Mr. Albrecht
served as an Assistant Vice President of the Fund's investment adviser. In
1991, Mr. Albrecht acted as an investment analyst. Mr. Albrecht is a
Chartered Financial Analyst and received his M.S. in Public Management from
Carnegie Mellon University.
Mary Jo Ochson has been the Fund's portfolio manager since July 1997. Ms.
Ochson joined Federated Investors in 1982 and has been a Senior Vice
President of the Fund's investment adviser since January 1996. From 1988
through 1995, Ms. Ochson served as a Vice President of the Fund's investment
adviser. Ms. Ochson is a Chartered Financial Analyst and received her M.B.A.
in Finance from the University of Pittsburgh.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the principal distributor for shares of the
Fund. It is a Pennsylvania corporation organized on November 14, 1969, and
is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES
Federated Services Company, a subsidiary of Federated Investors,
provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Fund.
Federated Services Company provides these at an annual rate which
relates to the average aggregate daily net assets of all funds advised
by subsidiaries of Federated Investors as specified below:
MAXIMUM AVERAGE AGGREGATE
FEE DAILY NET ASSETS
0.15% on the first $250 million
0.125% on the next $250 million
0.10% on the next $250 million
0.075% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at
least $125,000 per portfolio and $30,000 per each additional class of
shares. Federated Services Company may choose voluntarily to waive a
portion of its fee.
SHAREHOLDER SERVICES
The Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors,
under which the Fund may make payments up to 0.25% of the average
daily net asset value of the Fund shares, computed at an annual rate,
to obtain certain personal services for shareholders and to maintain
shareholder accounts. From time to time and for such periods as deemed
appropriate, the amount stated above may be reduced voluntarily. 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
the Fund and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS
In addition to payments made pursuant to the Shareholder Services
Agreement, Federated Securities Corp. and Federated Shareholder
Services, from their own assets, may pay financial institutions
supplemental fees for the performance of substantial sales services,
distribution-related support services, or shareholder services. The
support may include sponsoring sales, educational and training
seminars for their employees, providing sales literature, and
engineering computer software programs that emphasize the attributes
of the Fund. Such assistance will be predicated upon the amount of
shares the financial institution sells or may sell, and/or upon the
type and nature of sales or marketing support furnished by the
financial institution. Any payments made by the distributor may be
reimbursed by the Fund's investment adviser or its affiliates.
NET ASSET VALUE
The Fund's net asset value per share fluctuates. It is determined by
dividing the sum of all securities and other assets, less liabilities,
by the number of shares outstanding.
INVESTING IN THE FUND
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open
for business. Shares may be purchased either by wire or mail.
To purchase shares, open an account by calling Federated Securities
Corp. and obtain a master account number. Information needed to
establish the account will be taken over the telephone. The Fund
reserves the right to reject any purchase request.
BY WIRE
To purchase shares by Federal Reserve wire, call the Fund before 1:00
p.m. (Eastern time) to place an order. The order is considered
received immediately. Payment by federal funds must be received before
3:00 p.m. (Eastern time) that day. Federal funds should be wired as
follows: Federated Shareholder Services Company, c/o State Street Bank
and Trust Company, Boston, Massachusetts; Attention: EDGEWIRE; For
Credit to: Federated Intermediate Municipal Trust; Fund Number (this
number can be found on the account statement or by contacting the
Fund); Group Number or Wire Order Number; Nominee or Institution Name;
and ABA 011000028. Shares cannot be purchased by wire on holidays when
wire transfers are restricted. Questions on wire purchases should be
directed to your shareholder services representative at the telephone
number listed on your account statement.
BY MAIL
To purchase shares by mail, send a check made payable to Federated
Intermediate Municipal Trust to: Federated Shareholder Services
Company, P.O. Box 8600, Boston, Massachusetts 02266-8600. Orders by
mail are considered received when payment by check is converted by
State Street Bank and Trust Company ("State Street Bank") into federal
funds. This is normally the next business day after State Street Bank
receives the check.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $25,000, plus any
financial intermediary fee, if applicable. However, an account may be
opened with a smaller amount as long as the $25,000 minimum is reached
within 90 days. The minimum investment for an institutional investor
will be calculated by combining all accounts it maintains with the
Fund. Accounts established through a financial intermediary may be
subject to a smaller minimum investment.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an
order is received. There is no sales charge imposed by the Fund.
Investors who purchase shares through a financial intermediary may be
charged a service fee by that financial intermediary.
The net asset value is determined as of the close of trading (normally
4:00 p.m., Eastern time) on the New York Stock Exchange, Monday
through Friday, except on: (i) days on which there are not sufficient
changes in the value of the Fund's portfolio securities that its net
asset value might be materially affected; (ii) days during which no
shares are tendered for redemption and no orders to purchase shares
are received; or (iii) the following holidays: New Year's Day, Martin
Luther King Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange certain municipal securities or a combination
of securities and cash for Fund shares. The securities and any cash
must have a market value of at least $25,000. The Fund reserves the
right to determine the acceptability of securities to be exchanged.
Securities accepted by the Fund are valued in the same manner as the
Fund values its assets. Shareholders wishing to exchange securities
should first contact Federated Securities Corp.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Shareholder Services Company
maintains a share account for each shareholder of record. Share
certificates are not issued unless requested by contacting the Fund.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid
during the month.
DIVIDENDS
Dividends are declared daily and paid monthly to all shareholders
invested in the Fund on the record date. Dividends are declared just
prior to determining net asset value. Shares purchased by wire begin
earning dividends on the business day after the order is received.
Shares purchased by check begin earning dividends on the business day
after the check is converted, upon instruction of the transfer agent,
into federal funds. Dividends are automatically reinvested on payment
dates at the ex-dividend date net asset value in additional shares of
the Fund unless cash payments are requested by contacting the Fund.
CAPITAL GAINS
Distributions of net realized long-term capital gains realized by the
Fund, if any, will be made at least once every twelve months.
REDEEMING SHARES
The Fund redeems shares at their net asset value next determined after
the Fund receives the redemption request. Redemptions will be made on
days on which the Fund computes its net asset value. Investors who
redeem shares through a financial intermediary may be charged a
service fee by that financial intermediary. Redemption requests must
be received in proper form and can be made by telephone request or by
written request.
BY TELEPHONE
Shareholders may redeem their shares by telephoning the Fund before
4:00 p.m. (Eastern time). The proceeds will normally be wired the
following business day, but in no event more than seven days, to the
shareholder's account at a domestic commercial bank that is a member
of the Federal Reserve System. Proceeds from redemption requests
received on holidays when wire transfers are restricted will be wired
the following business day. Questions about telephone redemptions on
days when wire transfers are restricted should be directed to your
shareholder services representative at the telephone number listed on
your account statement. If at any time, the Fund shall determine it
necessary to terminate or modify this method of redemption,
shareholders would be promptly notified.
An authorization form permitting the Fund to accept telephone requests
must first be completed. It is recommended that investors request this
privilege at the time of their initial application. If not completed
at the time of initial application, authorization forms and
information on this service can be obtained through Federated
Securities Corp. Telephone redemption instructions may be recorded. If
reasonable procedures are not followed by the Fund, it may be liable
for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If such a case should
occur, another method of redemption, such as "By Mail," should be
considered.
BY MAIL
Shares may be redeemed in any amount by mailing a written request to:
Federated Shareholder Services Company, P.O. Box 8600, Boston,
Massachusetts 02266-8600. If share certificates have been issued, they
should be sent unendorsed with the written request by registered or
certified mail to the address noted above.
The written request should state: Federated Intermediate Municipal
Trust; the account name as registered with the Fund; the account
number; and the number of shares to be redeemed or the dollar amount
requested. All owners of the account must sign the request exactly as
the shares are registered. Normally, a check for the proceeds is
mailed within one business day, but in no event more than seven days,
after the receipt of a proper written redemption request. Dividends
are paid up to and including the day that a redemption request is
processed.
Shareholders requesting a redemption of any amount to be sent to an
address other than that on record with the Fund, or a redemption
payable other than to the shareholder of record must have their
signatures guaranteed by a commercial or savings bank, trust company
or savings association whose deposits are insured by an organization
which is administered by the Federal Deposit Insurance Corporation; a
member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of
1934. The Fund does not accept signatures guaranteed by a notary
public.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the
Fund may redeem shares in any account and pay the proceeds to the
shareholder of record if the account balance falls below a required
minimum value of $25,000 due to shareholder redemptions. This
requirement does not apply, however, if the balance falls below
$25,000 because of changes in the Fund's net asset value. Before
shares are redeemed to close an account, the shareholder is notified
in writing and allowed 30 days to purchase additional shares to meet
the minimum requirement.
SHAREHOLDER INFORMATION
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee
elections and other matters submitted to shareholders for vote. All
shares of each portfolio in the Trust have equal voting rights except
that, in matters affecting only a particular Fund, only shares of that
Fund are entitled to vote. As a Massachusetts business trust, the
Trust is not required to hold annual shareholder meetings. Shareholder
approval will be sought only for certain changes in the Trust's or the
Fund's operation and for the election of Trustees under certain
circumstances.
Trustees may be removed by the Trustees or by shareholders at a
special meeting. A special meeting of the Trust shall be called by the
Trustees upon the written request of shareholders owning at least 10%
of the outstanding shares of the Trust entitled to vote.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements of the Internal Revenue Code of 1986, as amended (the
"Code"), applicable to regulated investment companies and to receive
the special tax treatment afforded to such companies. The Fund will be
treated as a single, separate entity for federal income tax purposes
so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with
those realized by the Fund.
Shareholders are not required to pay the federal regular income tax on
any dividends received from the Fund that represent net interest on
tax-exempt municipal bonds. However, dividends representing net
interest earned on some municipal bonds are included in calculating
the federal individual alternative minimum tax or the federal
alternative minimum tax for corporations.
The alternative minimum tax, up to 28% of alternative minimum taxable
income for individuals and 20% for corporations, applies when it
exceeds the regular tax for the taxable year. Alternative minimum
taxable income is equal to the regular taxable income of the taxpayer
increased by certain "tax preference" items not included in regular
taxable income and reduced by only a portion of the deductions allowed
in the calculation of the regular tax.
Interest on certain "private activity" bonds issued after August 7,
1986, is treated as a tax preference item for both individuals and
corporations. Unlike traditional governmental purpose municipal bonds,
which finance roads, schools, libraries, prisons and other public
facilities, private activity bonds provide benefits to private
parties. The Fund may purchase all types of municipal bonds, including
private activity bonds. Thus, while the Fund has no present intention
of purchasing any private activity bonds, should it purchase any such
bonds, a portion of the Fund's dividends may be treated as a tax
preference item.
In addition, in the case of a corporate shareholder, dividends of the
Fund which represent interest on municipal bonds may be subject to the
20% corporate alternative minimum tax because the dividends are
included in a corporation's "adjusted current earnings." The corporate
alternative minimum tax treats 75% of the excess of a taxpayer's
pre-tax "adjusted current earnings" over the taxpayer's alternative
minimum taxable income as a tax preference item. "Adjusted current
earnings" is based upon the concept of a corporation's "earnings and
profits." Since "earnings and profits" generally includes the full
amount of any Fund dividend, and alternative minimum taxable income
does not include the portion of the Fund's dividend attributable to
municipal bonds which are not private activity bonds, the difference
will be included in the calculation of the corporation's alternative
minimum tax.
Dividends of the Fund representing net interest income earned on some
temporary investments and any realized net short-term gains are taxed
as ordinary income.
These tax consequences apply whether dividends are received in cash or
as additional shares. Information on the tax status of dividends and
distributions is provided annually.
STATE AND LOCAL TAXES
Distributions representing net interest received on tax-exempt
municipal securities are not necessarily free from income taxes of any
state or local taxing authority. Shareholders are urged to consult
their own tax advisers regarding the status of their accounts under
state and local tax laws.
PERFORMANCE INFORMATION
From time to time, the Fund advertises its total return, yield, and
tax-equivalent yield.
Total return represents the change, over a specific period of time, in
the value of an investment in the Fund after reinvesting all income
and capital gains distributions. It is calculated by dividing that
change by the initial investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment
income per share (as defined by the SEC) earned by the Fund over a
thirty-day period by the maximum offering price per share of the Fund
on the last day of the period. This number is then annualized using
semi-annual compounding. The tax-equivalent yield of the Fund is
calculated similarly to the yield, but is adjusted to reflect the
taxable yield that the Fund would have had to earn to equal its actual
yield, assuming a specific tax rate. The yield and the tax-equivalent
yield do not necessarily reflect income actually earned by the Fund
and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
From time to time, advertisements for the Fund may refer to ratings,
rankings and other information in certain financial publications
and/or compare the Fund's performance to certain indices.
PORTFOLIO OF INVESTMENTS
FEDERATED INTERMEDIATE MUNICIPAL TRUST
MAY 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
INTERMEDIATE-TERM MUNICIPAL SECURITIES -- 96.9%
ALABAMA -- 0.7%
$ 1,500,000 Alabama Water PCA, PCR Bonds, 6.35% (AMBAC INS), AAA $ 1,601,340
8/15/2001
ALASKA -- 3.0%
7,000,000 Alaska State Housing Finance Corp., General Mortgage
Revenue Bonds (Series A),
5.65% (MBIA INS), 12/1/2012 AAA 7,012,110
ARIZONA -- 2.9%
1,500,000 Phoenix, AZ, UT GO Refunding Bonds (Series A), 7.40%, AA 1,627,560
7/1/2000
5,000,000 Salt River Project, AZ Agricultural Improvement &
Power District, Electric System
Revenue Bonds (Series A), 7.10%, 1/1/2000 AA 5,188,150
Total 6,815,710
CALIFORNIA -- 2.9%
2,250,000 California State, UT GO Bonds, (Series AV), 7.80%, AA 2,487,555
10/1/2000
1,800,000 Los Angeles, CA Department of Water & Power, Electric
Plant Revenue Bonds,
2nd Issue, 9.00%, 6/1/2000 AA 2,027,412
1,875,000 Los Angeles, CA Department of Water & Power, Electric
Plant Revenue Bonds,
2nd Issue, 9.00%, 6/1/2001 AA 2,177,944
Total 6,692,911
FLORIDA -- 2.4%
185,000 Dade County, FL, UT GO Public Imps., 6.70% (MBIA INS), AAA 188,965
6/1/2003
2,000,000 Florida State Board of Education Administration, UT GO
Capital Outlay Bonds
(Series C), 6.25% (Florida State), 6/1/2001 AA 2,127,280
3,000,000 Florida State Board of Education Administration, UT GO
Capital Outlay Bonds,
6.00% (Florida State), 6/1/2001 AA 3,163,710
Total 5,479,955
GEORGIA -- 3.7%
2,000,000 Georgia Municipal Electric Authority, Revenue Bonds AA- 2,096,780
(Series U), 6.50%, 1/1/2000
1,000,000 Georgia Municipal Electric Authority, Revenue Bonds AA- 1,065,890
(Series U), 6.60%, 1/1/2001
5,000,000 Georgia State, UT GO Bonds (Series A), 7.70%, 2/1/2001 AA+ 5,534,650
Total 8,697,320
HAWAII -- 4.2%
5,000,000 Hawaii State, UT GO Bonds (Series BT), 8.00%, 2/1/2001 AA 5,566,600
1,000,000 Hawaii State, UT GO Bonds (Series BU), 5.85% (Original AA 1,051,270
Issue Yield: 5.95%), 11/1/2001
3,000,000 Honolulu, HI City & County, UT GO Bonds (Series
A), 6.30% (Original Issue
Yield: 6.40%), 8/1/2001 AA 3,197,700
Total 9,815,570
</TABLE>
FEDERATED INTERMEDIATE MUNICIPAL TRUST
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
INTERMEDIATE-TERM MUNICIPAL SECURITIES -- CONTINUED
ILLINOIS -- 6.8%
$ 3,100,000 Cook County, IL, GO Capital Improvement Bonds (Series
1996), 5.50% (FGIC INS),
11/15/2008 AAA $ 3,210,608
50,000 Du Page, IL Water Commission, UT GO Bonds, 5.95%, AA+ 52,342
3/1/2001
3,000,000 Du Page, IL Water Commission, UT GO Bonds, 6.05%, AA+ 3,173,730
3/1/2002
90,000 Illinois Health Facilities Authority, Revenue Bonds,
6.40% (Northwestern Memorial
Hospital), 8/15/1999 AA 93,722
3,800,000 Illinois Health Facilities Authority, Revenue
Refunding Bonds (Series A), 5.70%
(Advocate Health Care Network)/(Original Issue Yield: AA 3,802,926
5.75%), 8/15/2011
3,000,000 Illinois Municipal Electric Agency, Power Supply
System Revenue Bonds (Series A),
6.20% (AMBAC INS), 2/1/2001 AAA 3,156,000
100,000 Illinois State, UT GO Bonds, 6.75%, 6/1/1997 AA- 100,008
2,000,000 University of Illinois, Auxiliary Facilities Revenue
Bonds, 6.40% (Original Issue Yield:
6.45%), 4/1/2001 AA 2,126,940
Total 15,716,276
INDIANA -- 2.1%
4,800,000 Indiana Health Facility Financing Authority, Hospital
Revenue Bonds (Series 1996A),
5.50% (Clarian Health Partners, Inc.)/(Original Issue AA 4,811,904
Yield: 5.65%), 2/15/2010
MARYLAND -- 0.9%
1,000,000 University of Maryland, Auxiliary Facility & Tuition
Revenue Bonds (Series A), 5.80%
(Original Issue Yield: 5.85%), 2/1/2002 AA+ 1,048,770
1,000,000 Washington Suburban Sanitation District, MD, UT GO
Revenue Bonds (Second
Series), 6.90% (United States Treasury PRF), 6/1/2009 AA 1,102,790
(@102)
Total 2,151,560
MICHIGAN -- 4.6%
2,000,000 Michigan State Building Authority, Revenue Bonds
(Series II), 6.25% (AMBAC INS)/
(Original Issue Yield: 6.35%), 10/1/2000 AAA 2,108,420
3,705,000 Michigan State Housing Development Authority, (Series
B) Rental Housing Revenue
Bonds, 5.65% (MBIA INS), 10/1/2007 AAA 3,751,016
3,605,000 Michigan State Housing Development Authority, (Series
B) Rental Housing Revenue
Bonds, 5.65% (MBIA INS), 4/1/2007 AAA 3,648,909
1,000,000 Royal Oak, MI Hospital Finance Authority, Revenue
Refunding Bonds, 7.40% (William
Beaumont Hospital, MI), 1/1/2000 AA 1,071,390
Total 10,579,735
</TABLE>
FEDERATED INTERMEDIATE MUNICIPAL TRUST
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
INTERMEDIATE-TERM MUNICIPAL SECURITIES -- CONTINUED
MISSOURI -- 4.6%
$ 5,000,000 Missouri State HEFA, Health Facilities Revenue Bonds
(Series A), 6.00% (BJC Health
System, MO)/(Original Issue Yield: 6.05%), 5/15/2005 AA $ 5,372,350
5,000,000 Missouri State HEFA, Health Facilities Revenue Bonds
(Series A), 6.10% (BJC Health
System, MO)/(Original Issue Yield: 6.15%), 5/15/2006 AA 5,359,550
Total 10,731,900
NEVADA -- 0.5%
1,000,000 Clark County, NV School District, LT GO Bonds (Series AAA 1,142,280
A), 9.75% (MBIA INS), 6/1/2000
NEW HAMPSHIRE -- 1.2%
2,555,000 New Hampshire State, UT GO Bonds (Series A), 6.40%, AA 2,731,040
6/15/2001
NEW JERSEY -- 0.0%
100,000 New Jersey State Transportation Trust Fund Agency,
Revenue Bonds, 5.90%,
6/15/1999 A+ 103,202
NEW YORK -- 8.1%
3,500,000 Hempstead, NY IDA, Resource Recovery Revenue Bonds
(Series 1997), 5.00%
(American Ref-Fuel Company)/(MBIA INS)/(Original Issue AAA 3,408,020
Yield: 5.18%), 12/1/2009
1,500,000 Municipal Assistance Corp. of New York, Revenue Bonds
(Series 62), 6.60% (United
States Treasury PRF), 7/1/2000 (@102) AA- 1,533,525
6,000,000 New York City, NY, UT GO Bonds (Series E), 5.30% (FGIC
INS)/(Original Issue Yield:
5.40%), 8/1/2009 AAA 6,012,600
2,500,000 New York State Environmental Facilities Corp., State
Water Pollution Control Bonds
(Series 1994E), 6.15% (Original Issue Yield: 6.25%), A- 2,703,450
6/15/2004
4,000,000 New York State Thruway Authority, Highway & Bridge
Fund Revenue Bonds
(Series B), 5.625% (FGIC INS)/(Original Issue Yield: AAA 4,195,840
5.75%), 4/1/2005
1,000,000 Triborough Bridge & Tunnel Authority, NY, Revenue
Bonds (Series S), 6.625%
(Original Issue Yield: 6.70%), 1/1/2001 A+ 1,069,430
Total 18,922,865
NORTH CAROLINA -- 6.1%
2,720,000 Charlotte-Mecklenburg Hospital Authority, NC, Health
Care Revenue Bonds
(Series 1996A), 5.50% (Charlotte-Mecklenburg Hospital,
NC)/(Original Issue
Yield: 5.60%), 1/15/2008 AA 2,825,182
3,355,000 Charlotte-Mecklenburg Hospital Authority, NC, Health
Care System Revenue Bonds,
5.90% (Original Issue Yield: 5.95%), 1/1/2002 AA 3,519,194
5,350,000 North Carolina Municipal Power Agency No. 1, Catawba
Electric Revenue Refunding
Bonds, 6.00% (Original Issue Yield: 6.05%), 1/1/2004 A 5,588,878
2,000,000 North Carolina Municipal Power Agency No. 1, Catawba
Electric Revenue Refunding
Bonds, 7.25%, 1/1/2007 A 2,280,040
Total 14,213,294
</TABLE>
FEDERATED INTERMEDIATE MUNICIPAL TRUST
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
INTERMEDIATE-TERM MUNICIPAL SECURITIES -- CONTINUED
OHIO -- 4.6%
$ 100,000 Columbus, OH, UT GO Refunding Bonds, 5.80%, 1/1/2000 AAA $ 103,568
2,500,000 Hamilton County, OH Sewer System, Improvement &
Revenue Refunding Bonds
(Series A), 6.20%, 12/1/2000 AA- 2,633,500
3,195,000 Lucas County, OH, Hospital Revenue Refunding Bonds
(Series 1996), 5.50%
(ProMedica Healthcare Obligated Group)/(MBIA
INS)/(Original Issue Yield: 5.75%),
11/15/2008 AAA 3,294,972
2,840,000 Lucas County, OH, Hospital Revenue Refunding Bonds
(Series 1996), 6.00%
(ProMedica Healthcare Obligated Group)/(MBIA INS), AAA 3,065,439
11/15/2007
1,400,000 Montgomery County, OH Health Facilities Authority,
Revenue Bonds (Series A),
6.20% (Sisters of Charity Health Care System)/(MBIA
INS)/(Original Issue Yield:
6.30%), 5/15/2001 AAA 1,482,516
Total 10,579,995
OKLAHOMA -- 0.9%
2,000,000 Oklahoma State Industrial Authority, Health System
Revenue Bonds (Series C),
5.70% (Baptist Medical Center, OK)/(AMBAC
INS)/(Original Issue Yield: 5.80%),
8/15/2002 AAA 2,085,660
PENNSYLVANIA -- 7.3%
4,570,000 Harrisburg, PA Authority, Revenue Bonds (Pooled Bond
Program) (Series I of
1996), 5.35% (MBIA INS)/(Original Issue Yield: 5.50%), AAA 4,658,155
4/1/2008
1,500,000 Pennsylvania Infrastructure Investment Authority,
Revenue Bonds, 6.15%
(Pennvest), 9/1/2001 AA 1,586,385
3,500,000 Pennsylvania Intergovernmental Coop Authority, Special
Tax Revenue Bonds,
5.45% (FGIC INS)/(Original Issue Yield: 5.55%), AAA 3,562,020
6/15/2008
3,000,000 Pennsylvania State Higher Education Facilities
Authority, Health Services Revenue
Bonds (Series A), 5.50% (Allegheny Delaware Valley
Obligated Group)/(MBIA INS)/
(Original Issue Yield: 5.60%), 11/15/2008 AAA 3,074,280
4,000,000 Pennsylvania State Higher Education Facilities
Authority, Refunding Revenue Bonds
(Series A), 5.50% (University of AA 4,078,600
Pennsylvania)/(Original Issue Yield: 5.55%), 1/1/2009
Total 16,959,440
RHODE ISLAND -- 0.8%
1,655,000 Providence, RI, UT GO Bonds (Series 1997A), 6.00% (FSA AAA 1,769,989
INS), 7/15/2008
SOUTH CAROLINA -- 2.3%
730,000 Columbia, SC Waterworks & Sewer System, Refunding
Revenue Bonds, 6.40%
(United States Treasury COL)/(Original Issue Yield: AAA 775,997
6.45%), 2/1/2001
4,270,000 Columbia, SC Waterworks & Sewer System, Revenue Bonds,
6.40% (Original Issue
Yield: 6.45%), 2/1/2001 AA 4,546,483
Total 5,322,480
</TABLE>
FEDERATED INTERMEDIATE MUNICIPAL TRUST
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
INTERMEDIATE-TERM MUNICIPAL SECURITIES -- CONTINUED
TENNESSEE -- 0.5%
$ 1,065,000 Metropolitan Government Nashville & Davidson County,
TN HEFA, Revenue Bonds
(Series B), 5.85% (Vanderbilt University)/(Original AA $ 1,120,348
Issue Yield: 5.90%), 10/1/2001
TEXAS -- 14.5%
200,000 Brownsville, TX Independent School, UT GO Refunding
Bonds, 6.00% (PSFG INS)/
(Original Issue Yield: 6.00%), 8/15/2000 Aaa 209,110
1,000,000 Dallas, TX Waterworks & Sewer System, Revenue
Refunding and Improvement
Bonds (Series A), 9.50%, 10/1/1998 AA 1,028,110
4,000,000 Garland, TX, LT GO Bonds, 5.80% (Original Issue Yield: AA 4,196,240
5.90%), 8/15/2001
100,000 Gulf Coast, TX Waste Disposal Authority, Revenue
Bonds, 6.10% (Monsanto Co.),
1/1/2004 A1 104,281
4,500,000 Houston, TX Independent School District, LT GO Bonds, AAA 5,012,370
8.375% (PSFG GTD), 8/15/2000
1,945,000 Northeast Hospital Authority, TX, Hospital Revenue
Refunding Bonds (Series 1997),
6.00% (Northeast Medical Center Hospital)/(FSA INS), AAA 2,071,503
5/15/2009
1,650,000 San Antonio, TX Electric & Gas, Revenue Bonds, 9.90%, AA 1,715,835
2/1/1998
2,000,000 San Antonio, TX Electric & Gas, Revenue Refunding Bonds AA 2,086,719
(Series A), 7.00%, 2/1/1999
2,395,000 San Antonio, TX Water Authority, Revenue Bonds, 6.00% AA 2,519,899
(FGIC INS), 5/15/2001
105,000 San Antonio, TX Water Authority, Revenue Bonds, 6.00%
(United States Treasury
COL)/(Original Issue Yield: 6.15%), 5/15/2001 AA 110,515
1,475,000 San Antonio, TX, UT GO General Improvement Bonds, AA 1,651,543
8.625%, 8/1/2000
6,370,000 Socorro, TX Independent School District, UT GO
Refunding Bonds (Series A), 6.25%
(PSFG GTD)/(Original Issue Yield: 6.30%), 8/15/2001 AAA 6,768,698
6,000,000 Texas Water Development Board, State Revolving Fund
Sr. Lien Revenue Bonds,
5.80% (Original Issue Yield: 5.90%), 7/15/2002 AA 6,323,640
Total 33,798,463
UTAH -- 0.9%
2,000,000 Intermountain Power Agency, UT, Power Supply Revenue
Refunding Bonds
(Series B), 7.20%, 7/1/1999 A+ 2,103,600
VIRGINIA -- 1.8%
1,995,000 Virginia Beach, VA, UT GO Bonds (Series A), 6.30%, AA 2,091,738
3/1/2000
1,995,000 Virginia Beach, VA, UT GO Bonds (Series A), 6.30%, AA 2,117,214
3/1/2001
Total 4,208,952
WASHINGTON -- 8.6%
1,805,000 San Juan County, WA School District No. 149, UT GO
Bonds, 6.00% (FSA INS),
12/1/2009 AAA 1,946,025
1,020,000 Seattle, WA, LT GO Refunding Bonds, 6.00% (Original AA+ 1,077,802
Issue Yield: 6.10%), 3/1/2002
1,100,000 Snohomish County, WA School District No. 15, UT GO
Bonds (Series 1997), 6.00%
(FGIC INS), 12/1/2008 AAA 1,184,854
</TABLE>
FEDERATED INTERMEDIATE MUNICIPAL TRUST
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
INTERMEDIATE-TERM MUNICIPAL SECURITIES -- CONTINUED
WASHINGTON -- CONTINUED
$ 1,500,000 Tacoma, WA Sewer Authority, Revenue Refunding Bonds
(Series B), 5.70% (FGIC
INS)/(Original Issue Yield: 5.85%), 12/1/2005 AAA $ 1,585,305
2,510,000 Tacoma, WA, Solid Waste Utility Revenue Refunding
Bonds (Series 1997B), 6.00%
(AMBAC INS), 12/1/2010 AAA 2,684,169
2,000,000 Tacoma, WA, Solid Waste Utility Revenue Refunding
Bonds (Series 1997B), 6.00%
(AMBAC INS), 12/1/2009 AAA 2,150,520
4,500,000 Washington Health Care Facilities Authority, Revenue
Bonds (Series 1996), 5.375%
(Kadlec Medical Center, Richland)/(AMBAC
INS)/(Original Issue Yield: 5.63%),
12/1/2010 AAA 4,421,655
5,000,000 Washington State Public Power Supply System, (Nuclear
Project No. 3) Refunding &
Revenue Bonds (Series B), 5.70% (Original Issue Yield: AA- 5,033,150
5.793%), 7/1/2010
Total 20,083,480
WISCONSIN -- 0.0%
100,000 Waukesha, WI School District, UT GO, 5.75% (Original A1 103,083
Issue Yield: 5.80%), 10/1/1999
TOTAL INTERMEDIATE-TERM MUNICIPAL SECURITIES 225,354,462
(IDENTIFIED COST $216,542,363)
SHORT-TERM MUNICIPAL SECURITIES -- 1.6%
TEXAS -- 1.6%
800,000 Harris County, TX HFDC Daily VRDNs (St. Luke's AA 800,000
Episcopal Hospital)
200,000 Harris County, TX HFDC (Series 1994) Daily VRDNs
(Methodist Hospital, Harris
County, TX) AA 200,000
2,800,000 Harris County, TX HFDC, Hospital Revenue Bonds (Series
1997) Daily VRDNs
(Methodist Hospital, Harris County, TX) A-1+ 2,800,000
TOTAL SHORT-TERM MUNICIPAL SECURITIES (AT AMORTIZED 3,800,000
COST)
TOTAL INVESTMENTS (IDENTIFIED COST $220,342,363)(A) $ 229,154,462
</TABLE>
(a) The cost of investments for federal tax purposes amounts to
$220,342,363. The net unrealized appreciation of investments on a
federal tax basis amounts to $8,812,099 which is comprised of
$8,848,850 appreciation and $36,751 depreciation at May 31, 1997.
* Please refer to the Appendix of the Statement of Additional
Information for an explanation of the credit ratings. Current credit
ratings are unaudited.
Note: The categories of investments are shown as a percentage of net assets
($232,505,795) at May 31, 1997.
The following acronyms are used throughout this portfolio:
AMBAC -- American Municipal Bond Assurance Corporation COL --
Collateralized FGIC -- Financial Guaranty Insurance Company FSA --
Financial Security Assurance GO -- General Obligation GTD -- Guaranty
HEFA -- Health and Education Facilities Authority HFDC -- Health
Facility Development Corporation IDA -- Industrial Development
Authority INS -- Insured LT -- Limited Tax MBIA -- Municipal Bond
Investors Assurance PCA -- Pollution Control Authority PCR --
Pollution Control Revenue PRF -- Prerefunded PSFG -- Permanent School
Fund Guarantee UT -- Unlimited Tax VRDNs -- Variable Rate Demand Notes
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
FEDERATED INTERMEDIATE MUNICIPAL TRUST
MAY 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost $229,154,462
$220,342,363)
Income receivable 4,034,026
Receivable for shares sold 3,104,075
Total assets 236,292,563
LIABILITIES:
Payable for investments purchased $ 2,057,382
Payable for shares redeemed 39,738
Income distribution payable 718,945
Payable to bank 939,285
Accrued expenses 31,418
Total liabilities 3,786,768
NET ASSETS for 22,152,982 shares outstanding $232,505,795
NET ASSETS CONSIST OF:
Paid in capital $229,417,851
Net unrealized appreciation of investments 8,812,099
Accumulated net realized loss on investments (5,724,155)
Total Net Assets $232,505,795
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$232,505,795 / 22,152,982 shares outstanding $10.50
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
FEDERATED INTERMEDIATE MUNICIPAL TRUST
YEAR ENDED MAY 31, 1997
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 12,345,367
EXPENSES:
Investment advisory fee $ 872,976
Administrative personnel and services fee 164,874
Custodian fees 27,225
Transfer and dividend disbursing agent fees and expenses 49,253
Directors'/Trustees' fees 5,560
Auditing fees 14,938
Legal fees 8,444
Portfolio accounting fees 72,417
Shareholder services fee 545,610
Share registration costs 15,452
Printing and postage 18,622
Insurance premiums 4,210
Taxes 6,955
Miscellaneous 8,816
Total expenses 1,815,352
Waivers --
Waiver of investment advisory fee $ (158,880)
Waiver of shareholder services fee (414,663)
Total waivers (573,543)
Net expenses 1,241,809
Net investment income 11,103,558
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 1,164,828
Net change in unrealized appreciation of investments 866,681
Net realized and unrealized gain on investments 2,031,509
Change in net assets resulting from operations $ 13,135,067
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED INTERMEDIATE MUNICIPAL TRUST
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 11,103,558 $ 11,295,121
Net realized gain (loss) on investments ($1,059,997
net gain and
$3,670,810, net loss respectively, as computed for 1,164,828 (96,242)
federal tax purposes)
Net change in unrealized appreciation/depreciation 866,681 (2,535,429)
Change in net assets resulting from operations 13,135,067 8,663,450
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income (11,103,558) (11,295,121)
SHARE TRANSACTIONS --
Proceeds from sale of shares 85,279,237 77,775,142
Net asset value of shares issued in conjunction with
acquisition of
The Starburst Municipal Income Fund 10,040,690 --
Net asset value of shares issued to shareholders in 2,403,307 2,174,227
payment of distributions declared
Cost of shares redeemed (85,642,824) (88,208,508)
Change in net assets resulting from share 12,080,410 (8,259,139)
transactions
Change in net assets 14,111,919 (10,890,810)
NET ASSETS:
Beginning of period 218,393,876 229,284,686
End of period $232,505,795 $ 218,393,876
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
FEDERATED INTERMEDIATE MUNICIPAL TRUST
MAY 31, 1997
ORGANIZATION
Intermediate Municipal Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended (the "Act") as an open-end,
management investment company. As of May 31, 1997, the Trust consists
of three portfolios. The financial statements included herein are only
those of Federated Intermediate Municipal Trust (the "Fund"), a
diversified portfolio. The financial statements of the other
portfolios are presented separately. The assets of each portfolio are
segregated and a shareholder's interest is limited to the portfolio in
which shares are held. The investment objective of the Fund is to
provide current income exempt from federal regular income tax.
On October 31, 1996, the Fund acquired all the net assets of The
Starburst Municipal Income Fund pursuant to the plan of reorganization
approved by The Starburst Municipal Income Fund's shareholders. The
acquisition was accomplished by a tax-free exchange of 955,346 shares
of the Fund (valued at $10,040,690) for the 953,506 shares of The
Starburst Municipal Income Fund outstanding on October 31, 1996. The
Starburst Municipal Income Fund's net assets at that date
($10,072,849), including $218,574 of unrealized appreciation, at that
date were combined with those of the Fund. The aggregate net assets of
the Fund and The Starburst Municipal Income Fund immediately before
acquisition were 209,160,976 and 10,072,849, respectively. Immediately
after the acquisition, the combined aggregate net assets of the Fund
were $219,201,666.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. These policies are in conformity with generally accepted
accounting principles.
INVESTMENT VALUATIONS
Municipal bonds are valued by an independent pricing service, taking
into consideration yield, liquidity, risk, credit quality, coupon,
maturity, type of issue, and any other factors or market data the
pricing service deems relevant. Short-term securities are valued at
the prices provided by an independent pricing service. However,
short-term securities with remaining maturities of sixty days or less
at the time of purchase may be valued at amortized cost, which
approximates fair market value.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and
discount, if applicable, are amortized as required by the Internal
Revenue Code, as amended (the "Code"). Distributions to shareholders
are recorded on the ex-dividend date.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly,
no provisions for federal tax are necessary.
At May 31, 1997, the Fund, for federal tax purposes, had a capital
loss carryforward of $5,891,449, which will reduce the Fund's taxable
income arising from future net realized gain on investments, if any,
to the extent permitted by the Code, and thus will reduce the amount
of the distributions to shareholders which would otherwise be
necessary to relieve the Fund of any liability for federal tax.
Pursuant to the Code, such capital loss carryforward will expire as
follows:
EXPIRATION YEAR EXPIRATION AMOUNT
2003 $2,220,639
2004 3,670,810
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions.
The Fund records when-issued securities on the trade date and
maintains security positions such that sufficient liquid assets will
be available to make payment for the securities purchased. Securities
purchased on a when-issued or delayed delivery basis are marked to
market daily and begin earning interest on the settlement date.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual
results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without
par value).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1997 1996
<S> <C> <C>
Shares sold 8,181,651 7,363,145
Shares issued in conjunction with acquisition of The Starburst 955,346 --
Municipal Income Fund
Shares issued to shareholders in payment of distributions 228,984 205,536
declared
Shares redeemed (8,183,995) (8,340,470)
Net change resulting from share transactions 1,181,986 (771,789)
</TABLE>
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Management, the Fund's investment adviser (the "Adviser"),
receives for its services an annual investment advisory fee equal to
0.40% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee. The Adviser can
modify or terminate this voluntary waiver at any time at its sole
discretion.
ADMINISTRATIVE FEE
Federated Services Company ("FServ"), under the Administrative
Services Agreement, provides the Fund with administrative personnel
and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received
during the period of the Administrative Services Agreement shall be at
least $125,000 per portfolio and $30,000 per each additional class of
shares.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated
Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25% of
average daily net assets of the Fund for the period. The fee paid to
FSS is used to finance certain services for shareholders and to
maintain shareholder accounts. FSS may voluntarily choose to waive any
portion of its fee. FSS can modify or terminate this voluntary waiver
at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ, through its subsidiary, Federated Shareholder Services Company
("FSSC") serves as transfer and dividend disbursing agent for the
Fund. The fee paid to FSSC is based on the size, type, and number of
accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Fund's accounting records for which it receives a
fee. The fee is based on the level of the Fund's average daily net
assets for the period, plus out-of-pocket expenses.
INTERFUND TRANSACTIONS
During the year ended May 31, 1997, the Fund engaged in purchase and
sale transactions with funds that have a common investment adviser (or
affiliated investment advisers), common Directors/Trustees, and/or
common Officers. These purchase and sale transactions were made at
current market value pursuant to Rule 17a-7 under the Act amounting to
$4,250,000 and $2,350,000 respectively.
GENERAL
Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities,
for the year ended May 31, 1997, were as follows:
PURCHASES $89,389,952
SALES $81,046,710
SUBSEQUENT EVENT
The Board of Trustees and Management of Intermediate Municipal Trust,
on behalf of its portfolio, Federated Ohio Intermediate Municipal
Trust, submitted a proposal to sell all of Federated Ohio Intermediate
Municipal Trust's assets to Federated Ohio Municipal Income Fund, a
portfolio of Municipal Securities Income Trust, dated May 23, 1997. A
special meeting of shareholders of Federated Ohio Intermediate Trust
was held on July 7, 1997, in which shareholders approved the proposed
agreement. The agreement provides that the Federated Ohio Municipal
Income Fund will acquire all of the assets of Federated Ohio
Intermediate Municipal Trust in exchange for Class F Shares of
Federated Ohio Municipal Income Fund to be distributed pro rata to the
holders of shares of the Federated Ohio Intermediate Municipal Trust
in complete liquidation of the Federated Ohio Intermediate Municipal
Trust on or about July 11, 1997.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of INTERMEDIATE MUNICIPAL
TRUST (Federated Intermediate Municipal Trust):
We have audited the accompanying statement of assets and liabilities
of Federated Intermediate Municipal Trust (an investment portfolio of
Intermediate Municipal Trust, a Massachusetts business trust),
including the schedule of portfolio of investments, as of May 31,
1997, the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years then
ended, and the financial highlights (see page 2 of the prospectus) for
the periods presented. These financial statements and financial
highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements
and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned at May 31, 1997, by correspondence
with the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Federated Intermediate Municipal Trust, an
investment portfolio of Intermediate Municipal Trust, as of May 31,
1997, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then
ended, and financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
July 7, 1997
[Graphic]
Federated Investors
Federated Intermediate Municipal Trust
(A Portfolio of Intermediate Municipal Trust)
PROSPECTUS
JULY 31, 1997
A Diversified Portfolio of Intermediate Municipal Trust, An Open-End
Management Investment Company
FEDERATED INTERMEDIATE MUNICIPAL TRUST
Federated Investors Tower
Pittsburgh, PA 15222-3779
DISTRIBUTOR
Federated Securities Corp.
Federated Investors
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Federated Management
Federated Investors Tower
Pittsburgh, PA 15222-3779
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
2100 One PPG Place Pittsburgh, PA 15222
Federated Securities Corp., Distributor
Federated Securities Corp., Distributor
Cusip 458810108
8061702A-IS (7/97)
[Graphic]
FEDERATED INTERMEDIATE MUNICIPAL TRUST
(A PORTFOLIO OF INTERMEDIATE MUNICIPAL TRUST)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of Federated Intermediate Municipal Trust (the "Fund"), a
portfolio of Intermediate Municipal Trust (the "Trust") dated July 31,
1997. This Statement is not a prospectus. You may request a copy of a
prospectus or a paper copy of this Statement, if you have received it
electronically, free of charge by calling 1-800-341-7400.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated July 31, 1997
[Graphic]Federated Investors
Federated Securities Corp., Distributor
Cusip 458810108
8061702B (7/97)
[Graphic]
TABLE OF CONTENTS
GENERAL INFORMATION ABOUT THE FUND 1
INVESTMENT OBJECTIVE AND POLICIES 1
Acceptable Investments 1
When-Issued and Delayed Delivery Transactions 2
Temporary Investments 2
Portfolio Turnover 2
Investment Limitations 3
INTERMEDIATE MUNICIPAL TRUST MANAGEMENT 5
Fund Ownership 8
Trustees' Compensation 9
Trustee Liability 9
INVESTMENT ADVISORY SERVICES 9
Adviser to the Fund 9
Advisory Fees 10
Other Related Services 10
OTHER SERVICES 10
Fund Administration 10
Custodian and Portfolio Accountant 10
Transfer Agent 10
Independent Public Accountants 10
SHAREHOLDER SERVICES 10
BROKERAGE TRANSACTIONS 11
PURCHASING SHARES 11
Conversion to Federal Funds 11
DETERMINING NET ASSET VALUE 11
Determining Value of Securities 11
REDEEMING SHARES 11
Redemption in Kind 12
EXCHANGING SECURITIES FOR FUND SHARES 12
Tax Consequences 12
MASSACHUSETTS PARTNERSHIP LAW 12
TAX STATUS 12
The Fund's Tax Status 12
Shareholders' Tax Status 13
TOTAL RETURN 13
YIELD 13
TAX-EQUIVALENT YIELD 13
PERFORMANCE COMPARISONS 14
Economic and Market Information 15
ABOUT FEDERATED INVESTORS 15
Mutual Fund Market 16
Institutional Clients 16
Bank Marketing 16
Broker/Dealers and Bank
Broker/Dealer Subsidiaries 16
APPENDIX 17
Standard and Poor's Ratings Group ("S&P") Municipal Bond Ratings 17
Moody's Investors Service, Inc. Municipal
Bond Ratings 17
Fitch Investors Service, Inc. Investment
Grade Bond Ratings 17
Standard and Poor's Ratings Group Municipal
Note Ratings 17
Moody's Investors Service, Inc. Short-Term
Loan Ratings 18
Standard and Poor's Ratings Group
Commercial Paper Ratings 18
Moody's Investors Service, Inc. Commercial
Paper Ratings 18
GENERAL INFORMATION ABOUT THE FUND
Intermediate Municipal Trust (the "Trust") was established as a
Massachusetts business trust under a Declaration of Trust dated May
31, 1985. On September 1, 1993, the name of the Trust was changed from
"Federated Intermediate Municipal Trust" to "Intermediate Municipal
Trust." On December 19, 1994, the name of the Fund was changed from
"Intermediate Municipal Trust" to "Federated Intermediate Municipal
Trust." INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide current income exempt
from federal regular income tax. The investment objective cannot be
changed without approval of shareholders.
ACCEPTABLE INVESTMENTS
The Fund invests at least 80% of its net assets in a diversified
portfolio of municipal securities with an average weighted maturity of
not less than three or more than ten years. The investment policy
stated above cannot be changed without the approval of shareholders.
The following investment policies may be changed without shareholder
approval.
CHARACTERISTICS
The municipal securities in which the Fund invests have the
characteristics set forth in the prospectus.
A municipal security will be determined by the Fund's adviser to
meet the quality standards established by the Trust's Board of
Trustees (the "Trustees") if it is of comparable quality to
municipal securities within the Fund's rating requirements. The
Trustees consider the creditworthiness of the issuer of a municipal
security, the issuer of a participation interest if the Fund has the
right to demand payment from the issuer of the interest, or the
guarantor of payment by either of those issuers. The Fund is not
required to sell a municipal security if the security's rating is
reduced below the required minimum subsequent to its purchase by the
Fund. The investment adviser considers this event, however, in its
determination of whether the Fund should continue to hold the
security in its portfolio. If Moody's Investors Service, Inc. or
Standard & Poor's Ratings Group ratings change because of changes in
those organizations or in their rating systems, the Fund will try to
use comparable ratings as standards in accordance with the
investment policies described in the Fund's prospectus.
TYPES OF ACCEPTABLE INVESTMENTS
Examples of municipal securities are:
* municipal notes and tax-exempt commercial paper; * serial bonds
sold with a series of maturity dates; * tax anticipation notes sold
to finance working capital needs of
municipalities in anticipation of receiving taxes;
* bond anticipation notes sold in anticipation of the issuance of
longer-term bonds;
* pre-refunded municipal bonds refundable at a later date (payment of
principal and interest on prerefunded bonds are assured through the first
call date by the deposit in escrow of U.S. government securities); or
* general obligation bonds secured by a municipality's pledge of taxation.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases
participation interests frequently provide or secure from other
financial institutions irrevocable letters of credit or guarantees
and give the Fund the right to demand payment on specified notice
(normally within thirty days) from the issuer of the letter of
credit or guarantee. These financial institutions may charge certain
fees in connection with their repurchase commitments, including a
fee equal to the excess of the interest paid on the municipal
securities over the negotiated yield at which the participation
interests were purchased by the Fund. By purchasing participation
interests, the Fund is buying a security meeting the maturity and
quality requirements of the Fund and is also receiving the tax-free
benefits of the underlying securities.
In the acquisition of participation interests, the Fund's investment
adviser will consider the following quality factors:
* a high-quality underlying municipal security (of which the Trust takes
possession);
* a high-quality issuer of the participation interest; or
* a guarantee or letter of credit from a high-quality financial institution
supporting the participation interest.
VARIABLE RATE MUNICIPAL SECURITIES
Variable interest rates generally reduce changes in the market value
of municipal securities from their original purchase prices.
Accordingly, as interest rates decrease or increase, the potential
for capital appreciation or depreciation is less for variable rate
municipal securities than for fixed income obligations.
Many municipal securities with variable interest rates purchased by
the Fund are subject to repayment of principal (usually within seven
days) on the Fund's demand. The terms of these variable rate demand
instruments require payment of principal and accrued interest from
the issuer of the municipal obligations, the issuer of the
participation interests, or a guarantor of either issuer.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. Settlement dates may be a
month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
No fees or other expenses, other than normal transaction costs, are
incurred. However, liquid assets of the Fund sufficient to make
payment for the securities to be purchased are segregated on the
Fund's records at the trade date. These assets are marked to market
daily and are maintained until the transaction has been settled. The
Fund may engage in when-issued and delayed delivery transactions to an
extent that would cause the segregation of an amount up to 20% of the
total value of its assets.
TEMPORARY INVESTMENTS
The Fund may also invest in temporary investments, from time to time,
for temporary defensive purposes. The Fund does not presently intend
to invest in taxable temporary investments in the coming year. The
Fund might invest in temporary investments:
* while waiting to invest proceeds of sales of portfolio securities,
although generally such proceeds will be invested in municipal
securities as quickly as possible;
* in anticipation of redemption requests; or
* for temporary defensive purposes, in which case the Fund may
invest more than 20% of the value of its net assets in cash or
cash items, U.S. Treasury bills or securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities, or
repurchase agreements.
The Fund will not purchase temporary investments (other than
securities of the U.S. government, its agencies or instrumentalities)
if, as a result of the purchase, 25% or more of the value of its total
assets would be invested in any one industry.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell
U.S. government or agency securities or other securities to the Fund
and agree at the time of sale to repurchase them at a mutually
agreed upon time and price within one year from the date of
acquisition. The Fund or its custodian will take possession of the
securities subject to repurchase agreements. To the extent that the
original seller does not repurchase the securities from the Fund,
the Fund could receive less than the repurchase price on any sale of
such securities. In the event that such a defaulting seller filed
for bankruptcy or became insolvent, disposition of such securities
by the Fund might be delayed pending court action. The Fund believes
that under the regular procedures normally in effect for custody of
the Fund's portfolio securities subject to repurchase agreements, a
court of competent jurisdiction would rule in favor of the Fund and
allow retention or disposition of such securities. The Fund may only
enter into repurchase agreements with banks and other recognized
financial institutions such as broker/dealers which are found by the
Fund's adviser to be creditworthy pursuant to guidelines established
by the Trustees. The Fund's adviser will also monitor the
creditworthiness of the seller.
From time to time, such as when suitable municipal securities are not
available, the Fund may invest a portion of its assets in cash. Any
portion of the Fund's assets maintained in cash will reduce the amount
of assets in municipal securities and thereby reduce the Fund's yield.
PORTFOLIO TURNOVER
The Fund will not attempt to set or meet a portfolio turnover rate
since any turnover would be incidental to transactions undertaken in
an attempt to achieve the Fund's investment objective. During the
fiscal years ended May 31, 1997 and 1996, the portfolio turnover rates
were 33% and 19%, respectively.
INVESTMENT LIMITATIONS
DIVERSIFICATION OF INVESTMENTS
With respect to 75% of the value of the Fund's total assets, the
Fund will not purchase securities of any one issuer (other than
securities issued or guaranteed by the government of the United
States or its agencies or instrumentalities) if as a result more
than 5% of the value of its total assets would be invested in the
securities of that issuer.
Under this limitation, each governmental subdivision, including
states and the District of Columbia, territories, possessions of the
United States, or their political subdivisions, agencies,
authorities, instrumentalities, or similar entities, will be
considered a separate issuer if its assets and revenues are separate
from those of the governmental body creating it and the security is
backed only by its own assets and revenues.
Industrial development bonds backed only by the assets and revenues
of a nongovernmental user are considered to be issued solely by that
user. If in the case of an industrial development bond or
government-issued security, a governmental or some other entity
guarantees the security, such guarantee would be considered a
separate security issued by the guarantor, subject to a limit on
investments in the guarantor of 10% of total assets.
ACQUIRING SECURITIES
The Fund will not acquire the voting securities of any issuer,
except as part of a merger, consolidation, reorganization, or
acquisition of assets. It will not invest in securities issued by
any other investment company or investment trust.
CONCENTRATION OF INVESTMENTS
The Fund does not intend to purchase securities (other than
pre-refunded municipal bonds prior to the termination of the escrow
arrangement, securities guaranteed by the U.S. government or its
agencies or direct obligations of the U.S. government) if, as a
result of such purchases, 25% or more of the value of its total
assets would be invested in a governmental subdivision in any one
state, territory, or possession of the United States.
This policy applies to securities which are related in such a way
that an economic, business, or political development affecting one
security would also affect the other securities (such as securities
paid from revenues from selected projects in transportation, public
works, education, or housing).
BORROWING
The Fund will not borrow money except as a temporary measure for
extraordinary or emergency purposes and then only in amounts not in
excess of 5% of the value of its total assets or in an amount up to
one-third of the value of its total assets, including the amount
borrowed, in order to meet redemption requests without immediately
selling portfolio securities. This borrowing provision is not for
investment leverage but solely to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities would be inconvenient or
disadvantageous. Interest paid on borrowed funds will serve to
reduce the Fund's income. The Fund will liquidate any such
borrowings as soon as possible and may not purchase any portfolio
securities while any borrowings are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except
to secure permitted borrowings. In those cases, it may mortgage,
pledge or hypothecate assets having a market value not exceeding 10%
of the value of total assets at the time of the borrowing.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it
may be deemed to be an underwriter under the Securities Act of 1933
in connection with the sale of securities in accordance with its
investment objective, policies, and limitations.
ISSUING SENIOR SECURITIES
The Fund will not issue senior securities except for
delayed-delivery and when-issued transactions and futures contracts,
each of which might be considered senior securities. In addition,
the Fund reserves the right to purchase municipal securities which
the Fund has the right or obligation to sell to a third party
(including the issuer of a participation interest).
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, although it may
invest in municipal securities secured by real estate or interests
in real estate.
INVESTING IN COMMODITIES AND MINERALS
The Fund will not purchase or sell commodities, commodity contracts,
or oil, gas, or other mineral exploration or development programs or
leases.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except that it may acquire
publicly or nonpublicly issued municipal securities as permitted by
its investment objective and policies.
DEALING IN PUTS AND CALLS
The Fund will not purchase or sell puts, calls, straddles, spreads,
or any combination of them, except that the Fund may purchase put
options on municipal securities in an amount up to 10% of its total
assets or may purchase municipal securities accompanied by
agreements of sellers to repurchase them at the Fund's option.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total
assets in industrial development bonds where the payment of
principal and interest are the responsibility of a company with a
record of less than three years of continuous operation, including
the operation of any predecessor.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the
Trustees without shareholder approval. Shareholders will be notified
before any material change in these limitations becomes effective.
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any
securities on margin, but may obtain such short-term credits as may
be necessary for clearance of purchases and sales of securities.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in
securities which are illiquid, including repurchase agreements
providing for settlement in more than seven days after notice, and
certain restricted securities not determined by the Trustees to be
liquid.
Except with respect to borrowing money, if a percentage limitation
is adhered to at the time of investment, a later increase or
decrease in percentage resulting from any change in value or net
assets will not result in a violation of such restriction. The Fund
has no present intent to borrow money, pledge securities, or
purchase put options during the coming year.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a
U.S. branch of a domestic bank or savings and loan having capital,
surplus, and undivided profits in excess of $100,000,000 at the time
of investment to be "cash items."
INTERMEDIATE MUNICIPAL TRUST MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates,
present positions with Intermediate Municipal Trust, and principal
occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee of the
Funds. Mr. Donahue is the father of J. Christopher Donahue, President and
Trustee of the Company.
Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Chairman of the Board, Children's Hospital of Pittsburgh; formerly,
Senior Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.;
Director, Member of Executive Committee, University of Pittsburgh;
Director or Trustee of the Funds.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; Partner or Trustee in private real
estate ventures in Southwest Florida; formerly, President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.
William J. Copeland
One PNC Plaza -- 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
formerly, Vice Chairman and Director, PNC Bank, N.A., and PNC Bank
Corp.; Director, Ryan Homes, Inc.; Director or Trustee of the Funds.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine, University of Pittsburgh; Medical Director,
University of Pittsburgh Medical Center -- Downtown; Member, Board of
Directors, University of Pittsburgh Medical Center; formerly,
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Director or Trustee of the Funds.
Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.
Glen R. Johnson*
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the
Funds; staff member, Federated Securities Corp.
Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Trustee
Consultant; Former State Representative, Commonwealth of
Massachusetts; formerly, President, State Street Bank and Trust
Company and State Street Boston Corporation; Director or Trustee of
the Funds.
Gregor F. Meyer
203 Kensington Ct.
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney, Retired Member of Miller, Ament, Henny & Kochuba; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director or Trustee
of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner,
Mollica & Murray; Director or Trustee of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics; Management Consultant; Trustee,
Carnegie Endowment for International Peace, RAND Corporation, Online
Computer Library Center, Inc., National Defense University and U.S.
Space Foundation; President Emeritus, University of Pittsburgh;
Founding Chairman, National Advisory Council for Environmental Policy
and Technology, Federal Emergency Management Advisory Board and Czech
Management Center, Prague; Director or Trustee of the Funds.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public Relations/Marketing/Conference Planning; Director or Trustee of the
Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company, and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee of the Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice
President, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., Federated Global Research Corp.
and Passport Research, Ltd.; Executive Vice President and Director,
Federated Securities Corp.; Trustee, Federated Shareholder Services
Company; Trustee or Director of some of the Funds; President,
Executive Vice President and Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President, Secretary, and Treasurer
Executive Vice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and Federated
Research; Director, Federated Research Corp. and Federated Global
Research Corp.; Trustee, Federated Shareholder Services Company;
Director, Federated Services Company; President and Trustee, Federated
Shareholder Services; Director, Federated Securities Corp.; Executive
Vice President and Secretary of the Funds; Treasurer of some of the
Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of
the Funds; Director or Trustee of some of the Funds.
* This Trustee is deemed to be an "interested person" as defined in
the Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board between
meetings of the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Arrow Funds; Automated
Government Money Trust; Blanchard Funds; Blanchard Precious Metals
Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG Investor
Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
Adjustable Rate U.S. Government Fund, Inc.; Federated American Leaders
Fund, Inc.; Federated ARMs Fund; Federated Equity Funds; Federated
Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income
Securities, Inc.; Federated Government Trust; Federated High Income
Bond Fund, Inc.; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Insurance Series; Federated
Investment Portfolios; Federated Investment Trust; Federated Master
Trust; Federated Municipal Opportunities Fund, Inc.; Federated
Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated
Short-Term Municipal Trust; Federated Short-Term U.S. Government
Trust; Federated Stock and Bond Fund, Inc.; Federated Stock Trust;
Federated Tax-Free Trust; Federated Total Return Series, Inc.;
Federated U.S. Government Bond Fund; Federated U.S. Government
Securities Fund: 1-3 Years; Federated U.S. Government Securities Fund:
2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income
Securities, Inc.; High Yield Cash Trust; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Term Trust, Inc. -- 1999; Liberty U.S.
Government Money Market Trust; Liquid Cash Trust; Managed Series
Trust; Money Market Management, Inc.; Money Market Obligations Trust;
Money Market Obligations Trust II; Money Market Trust; Municipal
Securities Income Trust; Newpoint Funds; Peachtree Funds; RIMCO
Monument Funds; Targeted Duration Trust; Tax-Free Instruments Trust;
The Planters Funds; The Starburst Funds; The Starburst Funds II; The
Virtus Funds; Trust for Financial Institutions; Trust for Government
Cash Reserves; Trust for Short-Term U.S. Government Securities; Trust
for U.S. Treasury Obligations; Wesmark Funds; and World Investment
Series, Inc.
FUND OWNERSHIP
As of July 2, 1997, Officers and Trustees of the Fund, as a group,
owned 294,548 (1.35%) of the outstanding shares of the Fund.
As of July 2, 1997, the following shareholder of record owned 5% or more of
the outstanding shares of the Fund: Edrayco, Gainesville, Georgia, owned
approximately 1,391,527 Shares (6.35%).
TRUSTEES' COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX+
<S> <C> <S>
John F. Donahue, $0 $0 for the Trust and
Chairman and Trustee 56 other investment companies in the Complex
Thomas G.Bigley, $1,211.91 $108,725 for the Trust and
Trustee 56 other investment companies in the Complex
John T. Conroy, Jr., $1,333.29 $119,615 for the Trust and
Trustee 56 other investment companies in the Complex
William J. Copeland, $1,333.29 $119,615 for the Trust and
Trustee 56 other investment companies in the Complex
James E. Dowd, $1,333.29 $119,615 for the Trust and
Trustee 56 other investment companies in the Complex
Lawrence D. Ellis, M.D., $1,211.91 $108,725 for the Trust and
Trustee 56 other investment companies in the Complex
Edward L. Flaherty, Jr., $1,333.29 $119,615 for the Trust and
Trustee 56 other investment companies in the Complex
Glen R. Johnson, $0 $0 for the Trust and
President and Trustee 8 other investment companies in the Complex
Peter E. Madden, $1,211.91 $108,725 for the Trust and
Trustee 56 other investment companies in the Complex
Gregor F. Meyer, $1,211.91 $108,725 for the Trust and
Trustee 56 other investment companies in the Complex
John E. Murray, Jr., $1,211.91 $108,725 for the Trust and
Trustee 56 other investment companies in the Complex
Wesley W. Posvar, $1,211.91 $108,725 for the Trust and
Trustee 56 other investment companies in the Complex
Marjorie P. Smuts, $1,211.91 $108,725 for the Trust and
Trustee 56 other investment companies in the Complex
</TABLE>
* Information is furnished for the fiscal year ended May 31, 1997.
# The aggregate compensation is provided for the Trust which is
comprised of three portfolios.
+ The information is provided for the last calendar year.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not
be liable for errors of judgment or mistakes of fact or law. However,
they are not protected against any liability to which they would
otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the
conduct of their office.
INVESTMENT ADVISORY SERVICES
ADVISER TO THE FUND
The Fund's investment adviser is Federated Management. It is a subsidiary of
Federated Investors. All of the voting securities of Federated Investors are
owned by a trust, the Trustees of which are John F. Donahue, his wife, and
his son, J. Christopher Donahue.
The adviser shall not be liable to the Trust, the Fund, or any
shareholder for any losses that may be sustained in the purchase,
holding, or sale of any security, or for anything done or omitted by
it, except acts or omissions involving willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties imposed upon it
by its contract with the Fund
ADVISORY FEES
For its advisory services, the adviser receives an annual investment
advisory fee as described in the prospectus. During the fiscal years
ended May 31, 1997, 1996, and 1995, the adviser earned $872,976,
$895,416, and $1,038,460, respectively, which were reduced by
$158,880, $86,923, and $6,917, respectively, because of undertakings
to limit the Fund's expenses.
OTHER RELATED SERVICES
Affiliates of the Adviser may, from time to time, provide certain
electronic equipment and software to institutional customers in order
to facilitate the purchase of shares of funds offered by Federated
Securities Corp.
OTHER SERVICES
FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee
as described in the prospectus. From March 1, 1994 to March 1, 1996,
Federated Administrative Services, a subsidiary of Federated
Investors, served as the Fund's administrator. For purposes of this
Statement of Additional Information, Federated Services Company, and
Federated Administrative Services may hereinafter collectively be
referred to as the "Administrators." For the fiscal years ended May
31, 1997, 1996, and 1995, the Administrators earned $164,874,
$169,350, and $196,539, respectively, none of which was waived.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund. Federated Services
Company, Pittsburgh, Pennsylvania, provides certain accounting and
recordkeeping services with respect to the Fund's portfolio
investments. The fee paid for this service is based upon the level of
the Fund's average net assets for the period plus out-of-pocket
expenses.
TRANSFER AGENT
Federated Services Company, through its registered transfer agent,
Federated Shareholder Services Company, maintains all necessary
shareholder records. For its services, the transfer agent receives a
fee based upon the size, type and number of accounts and transactions
made by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen
LLP, Pittsburgh, Pennsylvania.
SHAREHOLDER SERVICES
This arrangement permits the payment of fees to Federated Shareholder
Services and financial institutions to cause services to be provided
which are necessary for the maintenance of shareholder accounts and to
encourage personal services to shareholders by a representative who
has knowledge of the shareholder's particular circumstances and goals.
These activities and services may include, but are not limited to:
providing office space, equipment, telephone facilities, and various
clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and to maintain shareholder accounts and
records; processing purchase and redemption transactions and automatic
investments of client account cash balances; answering routine client
inquiries; and assisting clients in changing dividend options, account
designations, and addresses.
By adopting the Shareholder Services Agreement, the Trustees expect
that the Fund will benefit by: (1) providing personal services to
shareholders; (2) investing shareholder assets with a minimum of delay
and administrative detail; (3) enhancing shareholder recordkeeping
systems; and (4) responding promptly to shareholders' requests and
inquiries concerning their accounts.
For the fiscal year ended May 31, 1997, the Fund paid $545,610
pursuant to the Shareholder Services Agreement of which $414,663 was
waived.
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the
order at a favorable price. In working with dealers, the adviser will
generally use those who are recognized dealers in specific portfolio
instruments, except when a better price and execution of the order can
be obtained elsewhere. The adviser makes decisions on portfolio
transactions and selects brokers and dealers subject to guidelines
established by the Trustees. The adviser may select brokers and
dealers who offer brokerage and research services. These services may
be furnished directly to the Fund or to the adviser and may include:
advice as to the advisability of investing in securities; security
analysis and reports; economic studies; industry studies; receipt of
quotations for portfolio evaluations; and similar services. Research
services provided by brokers and dealers may be used by the adviser or
its affiliates in advising the Fund and other accounts. To the extent
that receipt of these services may supplant services for which the
adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses. The adviser and its affiliates exercise
reasonable business judgment in selecting brokers who offer brokerage
and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research
services provided. During the fiscal years ended May 31, 1997, 1996,
and 1995, the Fund paid no brokerage commissions.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the adviser, investments of the
type the Fund may make may also be made by those other accounts. When
the Fund and one or more other accounts managed by the adviser are
prepared to invest in, or desire to dispose of, the same security,
available investments or opportunities for sales will be allocated in
a manner believed by the adviser to be equitable to each. In some
cases, this procedure may adversely affect the price paid or received
by the Fund or the size of the position obtained or disposed of by the
Fund. In other cases, however, it is believed that coordination and
the ability to participate in volume transactions will be to the
benefit of the Fund.
PURCHASING SHARES
Shares are sold at their net asset value without a sales charge on
days the New York Stock Exchange is open for business. The procedure
for purchasing Shares is explained in the prospectus under "Investing
in the Fund."
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that
maximum interest may be earned. To this end, all payments from
shareholders must be in federal funds or be converted into federal
funds. This conversion must be made before shares are purchased. State
Street Bank and Trust Company ("State Street Bank") acts as the
shareholder's agent in depositing checks and converting them to
federal funds.
DETERMINING NET ASSET VALUE
Net asset value generally changes each day. The days on which net
asset value is calculated by the Fund are described in the prospectus.
DETERMINING VALUE OF SECURITIES
The values of the Fund's portfolio securities are determined as
follows:
* according to prices provided by independent pricing services,
which do not include market prices for the Fund's specific
portfolio securities and may be determined without exclusive
reliance on quoted prices, and which may take into account
appropriate factors such as yield, quality, coupon rate, maturity,
type of issue, trading characteristics and other market data
employed in determining valuations for such securities; or
* for short-term obligations with remaining maturities of 60 days or
less, at the time of purchase, at amortized cost unless the
Trustees determine that particular circumstances of the security
indicate otherwise.
REDEEMING SHARES
The Fund redeems shares at the next computed net asset value after the
Fund receives the redemption request. Redemption procedures are
explained in the prospectus under "Redeeming Shares." Although State
Street Bank does not charge for telephone redemptions, it reserves the
right to charge a fee for the cost of wire-transferred redemptions of
less than $5,000.
REDEMPTION IN KIND
Although the Fund intends to redeem shares in cash, it reserves the
right under certain circumstances to pay the redemption price in whole
or in part by a distribution of securities from the Fund's portfolio.
Redemption in kind will be made in conformity with applicable
Securities and Exchange Commission rules, taking such securities at
the same value employed in determining net asset value and selecting
the securities in a manner the Trustees determine to be fair and
equitable.
The Fund has elected to be governed by Rule 18f-1 of the Investment
Company Act of 1940, as amended, under which the Trust is obligated to
redeem shares for any one shareholder in cash only up to the lesser of
$250,000 or 1% of the Fund's net asset value during any 90-day period.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange municipal securities they already own for
shares or they may exchange a combination of municipal securities and
cash for shares. An investor should forward the securities in
negotiable form with a letter of transmittal and authorization to
Federated Securities Corp. The Fund will notify the investor of its
acceptance and valuation of the securities within five business days
of their receipt by State Street Bank. The Fund values securities in
the same manner as the Fund values its assets. The basis of the
exchange will depend upon the net asset value of Fund shares on the
day the securities are valued. One share of the Fund will be issued
for each equivalent amount of securities accepted.
Any interest earned on the securities prior to the exchange will be
considered in valuing the securities. All interest, dividends,
subscription, or other rights attached to the securities become the
property of the Trust, along with the securities.
TAX CONSEQUENCES
Exercise of this exchange privilege is treated as a sale for federal
income tax purposes. Depending upon the cost basis of the securities
exchanged for shares, a gain or loss may be realized by the investor.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally
liable as partners under Massachusetts law for acts or obligations of
the Trust. To protect shareholders of the Fund, the Trust has filed
legal documents with Massachusetts that expressly disclaim the
liability of its shareholders for acts or obligations of the Trust.
These documents require notice of this disclaimer to be given in each
agreement, obligation, or instrument that the Trust or its Trustees
enter into or sign on behalf of the Fund.
In the unlikely event a shareholder is held personally liable for the
Trust's obligations, the Trust is required to use its property to
protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for
any act or obligation of the Trust on behalf of the Fund. Therefore,
financial loss resulting from liability as a shareholder of the Fund
will occur only if the Trust itself cannot meet its obligations to
indemnify shareholders and pay judgments against them from the assets
of the Fund.
TAX STATUS
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code of 1986, as
amended, applicable to regulated investment companies and to receive
the special tax treatment afforded to such companies. To qualify for
this treatment, the Fund must, among other requirements:
* derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
* derive less than 30% of its gross income from the sale of
securities held less than three months;
* invest in securities within certain statutory limits; and *
distribute to its shareholders at least 90% of its net income earned
during the year.
SHAREHOLDERS' TAX STATUS
CAPITAL GAINS
Capital gains or losses may be realized by the Fund on the sale of
portfolio securities and as a result of discounts from par value on
securities held to maturity. Sales would generally be made because
of:
* the availability of higher relative yields; * differentials in
market values; * new investment opportunities; * changes in
creditworthiness of an issuer; or * an attempt to preserve gains or
limit losses.
Distributions of long-term capital gains are taxed as such, whether
they are taken in cash or reinvested, and regardless of the length
of time the shareholder has owned the shares. Any loss by a
shareholder on Fund shares held for less than six months and sold
after a capital gains distribution will be treated as a long-term
capital loss to the extent of the capital gains distribution.
TOTAL RETURN
The Fund's average annual total returns for the Fund, and its
predecessor, Institutional Shares of the Fund (when the Fund was
offered with separate classes of shares) for the one-year, five-year
and ten-year periods ended May 31, 1997, were 6.11%, 5.60%, and 6.55%,
respectively.
The average annual total return for the Fund is the average compounded
rate of return for a given period that would equate a $1,000 initial
investment to the ending redeemable value of that investment. The
ending redeemable value is computed by multiplying the number of
shares owned at the end of the period by the net asset value per share
at the end of the period. The number of shares owned at the end of the
period is based on the number of shares purchased at the beginning of
the period with $1,000, adjusted over the period by any additional
shares, assuming the monthly reinvestment of all dividends and
distributions.
YIELD
The Fund's yield for the thirty-day period ended May 31, 1997, was
4.34%.
The yield for shares of the Fund is determined by dividing the net
investment income per share (as defined by the Securities and Exchange
Commission) earned by the Fund over a thirty-day period by the maximum
offering price per share on the last day of the period. This value is
then annualized using semi-annual compounding. This means that the
amount of income generated during the thirty-day period is assumed to
be generated each month over a twelve-month period and is reinvested
every six months. The yield does not necessarily reflect income
actually earned by the Fund because of certain adjustments required by
the Securities and Exchange Commission and, therefore, may not
correlate to the dividends or other distributions paid to
shareholders.
To the extent that financial institutions and brokers/dealers charge
fees in connection with services provided in conjunction with an
investment in the Fund, performance will be reduced for those
shareholders paying those fees.
TAX-EQUIVALENT YIELD
The Fund's tax-equivalent yield for the thirty-day period ended May
31, 1997, was 7.18%.
The tax-equivalent yield of the Fund is calculated similarly to the
yield, but is adjusted to reflect the taxable yield that the Fund
would have had to earn to equal its actual yield, assuming a 39.6% tax
rate and assuming that income is 100% tax-exempt.
TAX-EQUIVALENCY TABLE
The Fund may also use a tax-equivalency table in advertising and
sales literature. The interest earned by the municipal bonds in the
Fund's portfolio generally remains free from federal regular income
tax,* and is often free from state and local taxes as well. As the
table below indicates, a "tax-free" investment is an attractive
choice for investors, particularly in times of narrow spreads
between tax-free and taxable yields.
<TABLE>
<CAPTION>
TAXABLE YIELD EQUIVALENT FOR 1997
MULTISTATE MUNICIPAL FUNDS
FEDERAL INCOME TAX BRACKET:
<S> <C> <C> <C> <C> <C>
15.00% 28.00% 31.00% 36.00% 39.60%
JOINT $1- $41,201- $99,601- $151,751- OVER
RETURN 41,200 99,600 151,750 271,050 $271,050
SINGLE $1- $24,651- $59,751- $124,651- OVER
RETURN 24,650 59,750 124,650 271,050 $271,050
<CAPTION>
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
<C> <C> <C> <C> <C> <C>
1.00% 1.18% 1.39% 1.45% 1.56% 1.66%
1.50% 1.76% 2.08% 2.17% 2.34% 2.48%
2.00% 2.35% 2.78% 2.90% 3.13% 3.31%
2.50% 2.94% 3.47% 3.62% 3.91% 4.14%
3.00% 3.53% 4.17% 4.35% 4.69% 4.97%
3.50% 4.12% 4.86% 5.07% 5.47% 5.79%
4.00% 4.71% 5.56% 5.80% 6.25% 6.62%
4.50% 5.29% 6.25% 6.52% 7.03% 7.45%
5.00% 5.88% 6.94% 7.25% 7.81% 8.28%
5.50% 6.47% 7.64% 7.97% 8.59% 9.11%
6.00% 7.06% 8.33% 8.70% 9.38% 9.93%
6.50% 7.65% 9.03% 9.42% 10.16% 10.76%
7.00% 8.24% 9.72% 10.14% 10.94% 11.59%
7.50% 8.82% 10.42% 10.87% 11.72% 12.42%
8.00% 9.41% 11.11% 11.59% 12.50% 13.25%
</TABLE>
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional
state and local taxes paid on comparable taxable investments were not
used to increase federal deductions.
The chart above is for illustrative purposes only. It is not an
indicator of past or future performance of Fund shares.
* Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.
PERFORMANCE COMPARISONS
The performance of the Fund depends on such variables as:
* portfolio quality;
* average portfolio maturity;
* type of instruments in which the portfolio is invested; * changes
in interest rates and market value of portfolio securities; *
changes in the Fund's expenses ; and * various other factors.
The Fund's performance fluctuates on a daily basis largely because net
earnings and offering price per share fluctuate daily. Both net
earnings and offering price per share are factors in the computation
of yield and total return.
Investors may use financial publications and/or indices to obtain a
more complete view of the Fund's performance. When comparing
performance, investors should consider all relevant factors such as
the composition of any index used, prevailing market conditions,
portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may
include:
* LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any
change in offering price over a specific period of time. From time
to time, the Fund will quote its Lipper ranking in the
intermediate municipal bond funds category in advertising and
sales literature.
* MORNINGSTAR INC., an independent rating service, is the publisher
of the bi-weekly Mutual Fund Values. Mutual Fund Values rates more
than 1,000 NASDAQ - listed mutual funds of all types, according to
their risk-adjusted returns. The maximum rating is five stars, and
ratings are effective for two weeks.
* LEHMAN BROTHERS FIVE-YEAR STATE GENERAL OBLIGATION BONDS is an
index comprised of all state general obligation debt issues with
maturities between four and six years. These bonds are rated A or
better and represent a variety of coupon ranges. Index figures are
total returns calculated for one-, three-, and twelve-month
periods as well as year-to-date. Total returns are also calculated
as of the index inception, December 31, 1979.
* LEHMAN BROTHERS TEN-YEAR STATE GENERAL OBLIGATION BONDS is an
index comprised of the same issues noted above except that the
maturities range between nine and eleven years. Index figures are
total returns calculated for the same periods as listed above.
Advertisements and other sales literature for the Fund may quote total
returns which are calculated on non-standardized base periods. These
total returns represent the historic change in the value of an
investment in the Fund based on monthly reinvestment of dividends over
a specified period of time.
Advertising and other promotional literature may include charts,
graphs and other illustrations using the Fund's returns in general,
that demonstrate basic investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment. In
addition, the Fund can compare its performance, or performance for the
types of securities in which it invests, to a variety of other
investments, such as bank savings accounts, certificates of deposit,
and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Fund may include discussions
of economic, financial and political developments and their effect on
the securities market. Such discussions may take the form of
commentary on these developments by Fund portfolio managers and their
views and analysis on how such developments could affect the Fund. In
addition, advertising and sales literature may quote statistics and
give general information about the mutual fund industry, including the
growth of the industry, from sources such as the Investment Company
Institute.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is
reflected in its investment decision making -- structured,
straightforward, and consistent. This has resulted in a history of
competitive performance with a range of competitive investment
products that have gained the confidence of thousands of clients and
their customers.
The company's disciplined security selection process is firmly rooted
in sound methodologies backed by fundamental and technical research.
Investment decisions are made and executed by teams of portfolio
managers, analysts, and traders dedicated to specific market sectors.
These traders handle trillions of dollars in annual trading volume.
In the municipal sector, as of December 31, 1996, Federated Investors
managed 12 bond funds with approximately $2.0 billion in assets and 21
money market funds with approximately $9.5 billion in total assets. In
1976, Federated introduced one of the first municipal bond mutual
funds in the industry and is now one of the largest institutional
buyers of municipal securities. The Fund may quote statistics from
organizations including The Tax Foundation and the National Taxpayers
Union regarding the tax obligations of Americans.
J. Thomas Madden, Executive Vice President, oversees Federated
Investors' equity and high-yield corporate bond management while
William D. Dawson, Executive Vice President, oversees Federated
Investors' domestic fixed income management. Henry A. Frantzen,
Executive Vice President, oversees the management of Federated
Investor's international and global portfolios.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their
financial goals through mutual funds. These investors, as well as
businesses and institutions, have entrusted over $3.5 trillion to the
more than 6,000 funds available.*
Federated Investors, through its subsidiaries, distributes mutual
funds for a variety of investment applications. Specific markets
include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional
clients nationwide by managing and servicing separate accounts and
mutual funds for a variety of applications, including defined benefit
and defined contribution programs, cash management, and
asset/liability management. Institutional clients include
corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and
financial advisors. The marketing effort to these institutional
clients is headed by John B. Fisher, President, Institutional Sales
Division.
BANK MARKETING
Other institutional clients include close relationships with more than
1,600 banks and trust organizations. Virtually all of the trust
divisions of the top 100 bank holding companies use Federated funds in
their clients' portfolios. The marketing effort to trust clients is
headed by Timothy C. Pillion, Senior Vice President, Bank Marketing &
Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage
firms nationwide -- we have over 2,200 broker/dealer and bank
broker/dealer relationships across the country -- supported by more
wholesalers than any other mutual fund distributor. Federated's
service to financial professionals and institutions has earned it high
ratings in several surveys performed by DALBAR, Inc. DALBAR is
recognized as the industry benchmark for service quality measurement.
The marketing effort to these firms is headed by James F. Getz,
President, Federated Securities Corp.
* Source: Investment Company Institute
APPENDIX
STANDARD AND POOR'S RATINGS GROUP ("S&P") MUNICIPAL BOND RATINGS
AAA -- Debt rated "AAA" has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA -- Debt rated "AA" has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only in small
degree.
A -- Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
NR -- Indicates that no public rating has been requested, that there
is insufficient information on which to base a rating, or that S&P
does not rate a particular type of obligation as a matter of policy.
Plus (+) or minus (-): The ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing
within the major rating categories.
MOODY'S INVESTORS SERVICE, INC. MUNICIPAL BOND RATINGS
AAA -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future.
NR -- Not rated by Moody's.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate or municipal bond
rating system. The modifier 1 indicates that the security ranks in the
higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the issue ranks
in the lower end of its generic rating category.
FITCH INVESTORS SERVICE, INC. INVESTMENT GRADE BOND RATINGS
AAA -- Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA -- Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA."
Because bonds rated in the "AAA" and "AA" categories are not
significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated "F-1+."
A -- Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
NR -- NR indicates that Fitch does not rate the specific issue.
Plus (+) or Minus (-): Plus and minus signs are used with a rating
symbol to indicate the relative position of a credit within the rating
category. Plus and minus signs, however, are not used in the "AAA"
category.
STANDARD AND POOR'S RATINGS GROUP MUNICIPAL NOTE RATINGS
SP-1 -- Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics
will be given a plus sign (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
MOODY'S INVESTORS SERVICE, INC. SHORT-TERM LOAN RATINGS
MIG1/VMIG1 -- This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity
support or demonstrated broad based access to the market for
refinancing.
MIG2/VMIG2 -- This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.
STANDARD AND POOR'S RATINGS GROUP COMMERCIAL PAPER RATINGS
A-1 -- This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign
(+) designation.
A-2 -- Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high
for issues designated A-1.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS
PRIME-1 -- Issuers rated PRIME-1 (or related supporting institutions)
have a superior capacity for repayment of short-term promissory
obligations. PRIME-1 repayment capacity will normally be evidenced by
the following characteristics:
* leading market positions in well-established industries; * high
rates of return on funds employed; * conservative capitalization
structure with moderate reliance on debt and
ample asset protection;
* broad margins in earning coverage of fixed financial charges and high
internal cash generation; and
* well-established access to a range of financial markets and
assured sources of alternative liquidity.
PRIME-2 -- Issuers rated PRIME-2 (or related supporting institutions)
have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the
characteristics cited above, but to a lesser degree. Earnings trends
and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is
maintained.
Federated Pennsylvania Intermediate Municipal Trust
Annual Report For Fiscal Year Ended May 31, 1997
MANAGEMENT DISCUSSION AND ANALYSIS
The Treasury and municipal yield curves flattened considerably during
the twelve-month reporting period ended May 31, 1997. The spread in
the one- to ten-year portion of the municipal yield curve experienced
a flattening of 29 basis points compared to the Treasury curve which
flattened 20 basis points. The spread between one-year and ten-year
maturities on the municipal yield curve is 100 basis points as of May
31, 1997, which is considerably flatter than the average spread of 124
basis points over the reporting period. The shape of the short end of
the yield curve (five years and less) will continue to be dictated by
the actions of the Federal Reserve Board (the "Fed"), especially
during this period of relative uncertainty concerning the Fed's
intentions. The long end of the yield curve will be driven, as always,
by market expectations concerning inflation and the real growth rate
of the U.S. economy. The ten-year Treasury bond yield decreased by 18
basis points to 6.66% over the reporting period while the ten-year
AAA-rated municipal bond yield decreased by 23 basis points to 4.90%.
Pennsylvania's economy continued to lag its mid-atlantic neighbors in
job creation and economic development. This has translated into
overall lower credit quality among its local general obligation
issuers. Pennsylvania paper generally trades at wider spreads relative
to Ohio or Michigan bonds and is currently trading ten basis points
cheaper to both states.
Federated Pennsylvania Intermediate Municipal Trust's performance over
the past twelve months reflected the fund's intermediate maturity and
neutral duration position relative to the fund's peer group. The
fund's total return was 6.63% for the period June 1, 1996, to May 31,
1997.* The concentration of high coupon premium bonds in the portfolio
helped to dampen net asset value volatility over the reporting period.
However, the fund is managed predominately for tax-exempt income and
posted a 30-day distribution rate of 4.91%* as of May 31, 1997, which
is comparable to a yield of 8.30% on a taxable equivalent basis,
assuming a top marginal tax rate of 39.60%+. As of May 31, 1997, the
fund had a 30-day SEC yield of 4.70%.*
Portfolio strategy continues to emphasize credit quality. The yield
spread between a "AAA" rated insured municipal bond and an "A" rated
revenue bond is currently approximately 10 basis points which is less
than the average spread (25 basis points) over the last twelve months.
Credit spreads will widen from their historical lows when the economy
slows and the typical flight to quality begins. As a result, lower
quality credits will be severely impacted as spreads widen and prices
decline.
The credit curve is currently inverted with the widest credit spreads
available in the five- to ten-year maturity range. As a result, any
purchases of lower quality credits should be done in the shorter
maturities.
Because of the considerable supply constraints which exist in the
market, duration management and yield curve positioning have been a
more suitable way to add performance than individual security
selection. Duration has been kept at the peer group average, currently
5.6 years, which is considered a neutral duration position.
Intermediate maturity municipal bonds (five to ten years in maturity)
performed well on a price basis over the fiscal year as investors
shortened their position on the yield curve as a result of concerns
over Fed policy and the future direction of interest rates.
Institutional buying (property and casualty insurance companies and
commercial banks) has been strong in the intermediate part of the
yield curve which has resulted in making intermediate maturity
municipal bonds expensive relative to longer maturity municipal bonds.
The ratio of municipal bond yields to Treasury bond yields for
ten-year maturities ended the reporting period at 73.70% which is
below the twelve-month average of 74.80% and very close to the low for
the reporting period of 73.00%. This ratio indicates that municipal
bonds are trading at expensive levels relative to their Treasury
counterparts and reflects the relative out-performance of intermediate
municipal bonds over the year.
* Performance quoted represents past performance and is not indicative
of future results. Investment return and principal value will
fluctuate, so that an investor's shares, when redeemed, may be worth
more or less than their original cost.
+ Income may be subject to the federal alternative minimum tax.
Federated Pennsylvania Intermediate Municipal Trust
GROWTH OF $25,000 INVESTED IN FEDERATED PENNSYLVANIA INTERMEDIATE MUNICIPAL
TRUST
The graph below illustrates the hypothetical investment of $25,000 in
Federated Pennsylvania Intermediate Municipal Trust (the "Fund") from
December 6, 1993 (start of performance) to May 31, 1997, compared to
the Lehman Brothers 10-Year General Obligation Municipal Bond Index
(LB10YRGOMBI)+ and the Lipper Intermediate Municipal Debt Funds
Average
(LIMDFA).++
[Graphic]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
This report must be preceded or accompanied by the Fund's prospectus
dated July 31, 1997, and, together with financial statements contained
therein, constitutes the Fund's annual report.
* The Fund's performance assumes the reinvestment of all dividends
and distributions. The LB10YRGOMBI and the LIMDFA have been
adjusted to reflect reinvestment of dividends on securities in the
index and average.
+ The LB10YRGOMBI is not adjusted to reflect sales charges, expenses,
or other fees that the SEC requires to be reflected in the Fund's
performance.
This index is unmanaged.
++ The LIMDFA represents the average of the total returns reported by
all of the mutual funds designated by Lipper Analytical Services,
Inc. as falling into the category, and is not adjusted to reflect
any sales charges. However, these total returns are reported net of
expenses or other fees that the SEC requires to be reflected in a
fund's performance.
[Graphic]
Federated Investors
Federated Securities Corp., Distributor
Cusip 458810306
G00967-02(7/97)
[Graphic]
Federated Intermediate Municipal Trust
(A Portfolio of Intermediate Municipal Trust)
PROSPECTUS
The shares of Federated Intermediate Municipal Trust (the "Fund")
offered by this prospectus represent interests in a diversified
portfolio of securities of Intermediate Municipal Trust (the "Trust"),
an open-end management investment company (a mutual fund).
The objective of the Fund is to provide current income exempt from
federal regular income tax. The Fund pursues this investment objective
by investing in a portfolio of municipal securities with a
dollar-weighted average portfolio maturity of not less than three or
more than ten years.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS
OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
This prospectus contains the information you should read and know
before you invest in the Fund. Keep this prospectus for future
reference.
The Fund has also filed a Statement of Additional Information dated
July 31, 1997, with the Securities and Exchange Commission (the
"SEC"). The information contained in the Statement of Additional
Information is incorporated by reference into this prospectus. You may
request a copy of the Statement of Additional Information or a paper
copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-341-7400. To obtain
other information or to make inquiries about the Fund, contact the
Fund at the address listed in the back of this prospectus. The
Statement of Additional Information, material incorporated by
reference into this document, and other information regarding the Fund
is maintained electronically with the SEC at Internet Web site
(http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated July 31,1997
TABLE OF CONTENTS
Summary of Fund Expenses 1
Financial Highlights 2
General Information 3
Investment Information 3
Investment Objective 3
Investment Policies 3
Municipal Securities 4
Investment Risks 5
Investment Limitations 5
Intermediate Municipal Trust Information 5
Management of the Trust 5
Distribution of Fund Shares 6
Administration of the Fund 6
Net Asset Value 7
Investing in the Fund 7
Share Purchases 7
Minimum Investment Required 7
What Shares Cost 7
Exchanging Securities for Fund Shares 7
Certificates and Confirmations 8
Dividends 8
Capital Gains 8
Redeeming Shares 8
By Telephone 8
By Mail 8
Accounts with Low Balances 9
Shareholder Information 9
Voting Rights 9
Tax Information 9
Federal Income Tax 9
State and Local Taxes 10
Performance Information 10
Financial Statements 11
Report of Independent Public Accountants 24
SUMMARY OF FUND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> Maximum Sales Charge Imposed on Purchases (as a percentage of
offering price) None Maximum Sales Charge Imposed on Reinvested
Dividends (as a percentage of offering price) None Contingent
Deferred Sales Charge (as a percentage of original purchase price or
redemption
proceeds, as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
<CAPTION>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee (after waiver)(1) 0.33%
12b-1 Fee None
Shareholder Services Fee (after waiver)(2) 0.06%
Total Other Expenses 0.24%
Total Operating Expenses(3) 0.57%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary
waiver of a portion of the management fee. The adviser can
terminate this voluntary waiver at any time at its sole
discretion. The maximum management fee is 0.40%.
(2) The shareholder services fee has been reduced to reflect the
voluntary waiver of a portion of the shareholder services fee. The
shareholder service provider can terminate this voluntary waiver
at any time at its sole discretion. The maximum shareholder
services fee is 0.25%.
(3) The total operating expenses would have been 0.83% absent the
voluntary waivers of portions of the management fee and the
shareholder services fee.
The purpose of this table is to assist an investor in understanding
the various costs and expenses that a shareholder of the Fund will
bear, either directly or indirectly. For more complete descriptions of
the various costs and expenses, see "Investing in the Fund" and
"Intermediate Municipal Trust Information." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of period.
1 Year $ 6
3 Years $18
5 Years $32
10 Years $71
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS*
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 24.
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989
1988
<S> <C> <C> <C> <C> <C> <C> <C>
<C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $10.41 $10.55 $10.52 $10.74 $10.31 $10.09 $ 9.84 $
9.81 $ 9.81 $ 9.83
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.53 0.53 0.54 0.52 0.56 0.59 0.63
0.64 0.64 0.62
Net realized and
unrealized gain
(loss) on investments 0.09 (0.14) 0.03 (0.22) 0.43 0.22 0.25
0.03 -- (0.02)
Total from investment 0.62 0.39 0.57 0.30 0.99 0.81 0.88
0.67 0.64 0.60
operations
LESS DISTRIBUTIONS
Distributions from net
investment income (0.53) (0.53) (0.54) (0.52) (0.56) (0.59) (0.63)
(0.64) (0.64) (0.62)
NET ASSET VALUE, END OF $10.50 $10.41 $10.55 $10.52 $10.74 $10.31 $10.09 $
9.84 $ 9.81 $ 9.81
PERIOD
TOTAL RETURN(A) 6.11% 3.78% 5.67% 2.79% 9.80% 8.19% 9.22%
7.02% 6.77% 6.34%
RATIOS TO AVERAGE
NET ASSETS
Expenses 0.57% 0.57% 0.59% 0.61% 0.48% 0.47% 0.49%
0.50% 0.48% 0.49%
Net investment income 5.09% 5.05% 5.23% 4.82% 5.27% 5.73% 6.32%
6.49% 6.56% 6.25%
Expense 0.26% 0.24% 0.00% 0.01% 0.14% 0.22% 0.30%
0.38% 0.39% 0.31%
waiver/reimbursement(b)
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $232,506 $218,398 $229,285 $302,663 $263,283 $173,702 $116,577
$95,738 $82,211 $91,195
Portfolio turnover 33% 19% 11% 7% 3% 9% 43%
14% 25% 119%
</TABLE>
* During the period from September 6, 1993, to December 21, 1994, the
Fund offered two classes of shares, Institutional Shares and
Institutional Service Shares. As of December 21, 1994, Institutional
Service Shares ceased operations and the class designation for
Institutional Shares was eliminated. The table above does not
reflect Institutional Service Shares.
(a) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense
and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE
FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED MAY 31, 1997, WHICH CAN
BE OBTAINED FREE OF CHARGE.
GENERAL INFORMATION
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated May 31, 1985. The Declaration of Trust
permits the Trust to offer separate series of shares of beneficial
interest representing interests in separate portfolios of securities.
The shares in any one portfolio may be offered in separate classes.
Shares of the Fund are sold primarily to retail and private banking
customers of financial institutions and to accounts for which
financial institutions act in a fiduciary, advisory, agency,
custodial, or similar capacity as a convenient means of accumulating
an interest in a professionally managed, diversified portfolio of
municipal securities. Shares are also designed for funds held by
savings and other institutions, corporations, trusts, brokers,
investment counselors and insurance companies. A minimum initial
investment of $25,000 over a 90-day period is required. The Fund may
not be a suitable investment for retirement plans since it invests in
municipal securities.
Shares are currently sold and redeemed at net asset value without a
sales charge imposed by the Fund.
INVESTMENT INFORMATION
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income
exempt from federal regular income tax. Interest income of the Fund
that is exempt from federal income tax retains its tax-free status
when distributed to the Fund's shareholders. The Fund pursues this
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. While there is no assurance that the Fund will achieve its
investment objective, it endeavors to do so by following the
investment policies described in this prospectus. The investment
objective and the policy stated above cannot be changed without
approval of shareholders.
INVESTMENT POLICIES
The investment policies described below may be changed by the Board of
Trustees (the "Trustees") without shareholder approval. Shareholders
will be notified before any material change in these policies becomes
effective.
ACCEPTABLE INVESTMENTS
The municipal securities in which the Fund invests are:
* 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
* participation interests, as described below, in any of the above
obligations, the interest from which is, in the opinion of bond
counsel for the issuers or in the opinion of officers of the Fund
and/or the investment adviser to the Fund, exempt from federal
regular income tax.
The prices of fixed income securities fluctuate inversely to the
direction of interest rates.
AVERAGE MATURITY
The dollar-weighted average portfolio maturity of the Fund's portfolio
of municipal securities will not be less than three years or more than
ten years. For purposes of determining the dollar-weighted average
portfolio maturity of the Fund's portfolio, the maturity of a
municipal security will be its ultimate maturity, unless it is
probable that the issuer of the security will take advantage of
maturity-shortening devices such as a call, refunding, or redemption
provision, in which case the maturity date will be the date on which
it is probable that the security will be called, refunded, or
redeemed. If the municipal security includes the right to demand
payment, the maturity of the security for purposes of determining the
Fund's dollar-weighted average portfolio maturity will be the period
remaining until the principal amount of the security can be recovered
by exercising the right to demand payment.
CHARACTERISTICS
The municipal securities in which the Fund invests are:
* rated within the three highest ratings for municipal securities by Moody's
Investors Service, Inc. ("Moody's") (Aaa, Aa, or A) or by Standard & Poor's
Ratings Group ("S&P") (AAA, AA, or A);
* guaranteed at the time of purchase by the U.S. government as to the
payment of principal and interest;
* fully collateralized by an escrow of U.S. government securities or other
securities acceptable to the Fund's investment adviser;
* rated at the time of purchase within Moody's highest short-term
municipal obligation rating (MIG1/VMIG1) or Moody's highest
municipal commercial paper rating (PRIME-1) or S&P's highest
municipal commercial paper rating (SP-1);
* unrated if, at the time of purchase, other municipal securities of
that issuer are rated A or better by Moody's 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.
A description of the rating categories is contained in the Appendix to
the Statement of Additional Information.
PARTICIPATION INTERESTS
The Fund may purchase participation interests from financial
institutions such as commercial banks, savings associations, and
insurance companies. These participation interests give the Fund an
undivided interest in one or more underlying municipal securities. The
financial institutions from which the Fund purchases participation
interests frequently provide or obtain irrevocable letters of credit
or guarantees to attempt to assure that the participation interests
are of high quality. The Trustees of the Fund will determine whether
participation interests meet the prescribed quality standards for the
Fund.
VARIABLE RATE MUNICIPAL SECURITIES
Some of the municipal securities which the Fund purchases may have
variable interest rates. Variable interest rates are ordinarily stated
as a percentage of a published interest rate, interest rate index, or
some similar standard, such as the 91-day U.S. Treasury bill rate.
Variable interest rates are adjusted on a periodic basis, e.g., every
30 days. The Fund will consider this adjustment period to be the
maturity of the security for purposes of determining the weighted
average maturity of the portfolio.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may purchase and sell municipal securities on a when-issued
or delayed delivery basis. These transactions are arrangements in
which the Fund purchases securities with payment and delivery
scheduled for a future time. The seller's failure to complete these
transactions may cause the Fund to miss a price or yield considered to
be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the
securities purchased may vary from the purchase prices.
The Fund may dispose of a commitment prior to settlement if the
investment adviser deems it appropriate to do so. In addition, the
Fund may enter into transactions to sell its purchase commitments to
third parties at current market values and simultaneously acquire
other commitments to purchase similar securities at later dates. The
Fund may realize short-term profits or losses upon the sale of such
commitments.
TEMPORARY INVESTMENT
From time to time on a temporary basis, or when the investment adviser
determines that market conditions call for a temporary defensive
posture, the Fund may invest in short-term temporary investments which
may or may not be exempt from federal income tax. Temporary
investments include: tax-exempt variable and floating rate demand
notes; tax-free commercial paper; other temporary municipal
securities; obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities; other debt securities; commercial
paper; certificates of deposit of domestic branches of U.S. banks; and
repurchase agreements (arrangements in which the organization selling
the Fund a security agrees at the time of sale to repurchase it at a
mutually agreed upon time and price).
There are no rating requirements applicable to temporary investments
with the exception of temporary municipal securities which are subject
to the same rating requirements as all other municipal securities in
which the Fund invests. However, the investment adviser will limit
temporary investments to those it considers to be of comparable
quality to the acceptable investments of the Fund.
Although the Fund is permitted to make taxable, temporary investments,
there is no current intention of generating income subject to federal
regular income tax.
MUNICIPAL SECURITIES
Municipal securities are generally issued to finance public works,
such as airports, bridges, highways, housing, hospitals, mass
transportation projects, schools, streets, and water and sewer works.
They are also issued to repay outstanding obligations, to raise funds
for general operating expenses, and to make loans to other public
institutions and facilities.
Municipal securities include industrial development bonds issued by or
on behalf of public authorities to provide financing aid to acquire
sites or construct and equip facilities for privately or publicly
owned corporations. The availability of this financing encourages
these corporations to locate within the sponsoring communities and
thereby increases local employment.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of its full faith and credit and taxing power
for the payment of principal and interest. Interest on and principal
of revenue bonds, however, are payable only from the revenue generated
by the facility financed by the bond or other specified sources of
revenue. Revenue bonds do not represent a pledge of credit or create
any debt of or charge against the general revenues of a municipality
or public authority. Industrial development bonds are typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on municipal securities depend on a variety of factors,
including: the general conditions of the municipal note market and of
the municipal bond market; the size of the particular offering; the
maturity of the obligations; and the rating of the issue. The ability
of the Fund to achieve its investment objective also depends on 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 interest and principal when due.
INVESTMENT LIMITATIONS
The Fund will not:
* borrow money or pledge securities except, under certain
circumstances, the Fund may borrow up to one-third of the value of
its total assets and pledge up to 10% of the value of those assets
to secure such borrowings;
* invest more than 5% of its total assets in purchases of industrial
development bonds, the principal and interest of which are paid by a
company which has an operating history of less than three years; or
* with respect to securities comprising 75% of its assets, invest more
than 5% of its total assets in securities of one issuer (except cash
and cash items, and U.S. government obligations).
The above investment limitations cannot be changed without shareholder
approval. The following limitation, however, may be changed by the
Trustees without shareholder approval. Shareholders will be notified
before any material change in this limitation becomes effective.
The Fund will not:
* invest more than 15% of its net assets in securities which are
illiquid, including repurchase agreements providing for settlement
in more than seven days after notice, and restricted securities
determined by the Trustees to be illiquid.
INTERMEDIATE MUNICIPAL TRUST INFORMATION
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The Trust is managed by a Board of Trustees. The Trustees are
responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the
shareholders. The Executive Committee of the Board of Trustees handles
the Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER
Investment decisions for the Fund are made by Federated Management,
the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision
for the Fund and is responsible for the purchase and sale of portfolio
instruments, for which it receives an annual fee from the Fund.
ADVISORY FEES
The adviser receives an annual investment advisory fee equal to
0.40% of the Fund's average daily net assets. Also, the adviser may
voluntarily choose to waive a portion of its fee or reimburse other
expenses of the Fund, but reserves the right to terminate such
waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND
Federated Management, a Delaware business trust organized on April
11, 1989, is a registered investment adviser under the Investment
Advisers Act of 1940, as amended. It is a subsidiary of Federated
Investors. All of the Class A (voting) shares of Federated Investors
are owned by a trust, the trustees of which are John F. Donahue,
Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue, who is President and
Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors
serve as investment advisers to a number of investment companies and
private accounts. Certain other subsidiaries also provide
administrative services to a number of investment companies. With
over $110 billion invested across more than 300 funds under
management and/or administration by its subsidiaries, as of December
31, 1996, Federated Investors is one of the largest mutual fund
investment managers in the United States. With more than 2,000
employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work
in and through 4,500 financial institutions nationwide.
Both the Trust and the adviser have adopted strict codes of ethics
governing the conduct of all employees who manage the Fund and its
portfolio securities. These codes recognize that such persons owe a
fiduciary duty to the Fund's shareholders and must place the interests
of shareholders ahead of the employees' own interests. Among other
things, the codes: require preclearance and periodic reporting of
personal securities transactions; prohibit personal transactions in
securities being purchased or sold, or being considered for purchase
or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less
than sixty days. Violations of the codes are subject to review by the
Trustees and could result in severe penalties.
PORTFOLIO MANAGER'S BACKGROUND
J. Scott Albrecht has been the Fund's portfolio manager since July 1995. Mr.
Albrecht joined Federated Investors in 1989 and has been a Vice President of
the Fund's investment adviser since 1994. From 1992 to 1994, Mr. Albrecht
served as an Assistant Vice President of the Fund's investment adviser. In
1991, Mr. Albrecht acted as an investment analyst. Mr. Albrecht is a
Chartered Financial Analyst and received his M.S. in Public Management from
Carnegie Mellon University.
Mary Jo Ochson has been the Fund's portfolio manager since July 1997. Ms.
Ochson joined Federated Investors in 1982 and has been a Senior Vice
President of the Fund's investment adviser since January 1996. From 1988
through 1995, Ms. Ochson served as a Vice President of the Fund's investment
adviser. Ms. Ochson is a Chartered Financial Analyst and received her M.B.A.
in Finance from the University of Pittsburgh.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the principal distributor for shares of the
Fund. It is a Pennsylvania corporation organized on November 14, 1969, and
is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES
Federated Services Company, a subsidiary of Federated Investors,
provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Fund.
Federated Services Company provides these at an annual rate which
relates to the average aggregate daily net assets of all funds advised
by subsidiaries of Federated Investors as specified below:
MAXIMUM AVERAGE AGGREGATE
FEE DAILY NET ASSETS
0.15% on the first $250 million
0.125% on the next $250 million
0.10% on the next $250 million
0.075% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at
least $125,000 per portfolio and $30,000 per each additional class of
shares. Federated Services Company may choose voluntarily to waive a
portion of its fee.
SHAREHOLDER SERVICES
The Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors,
under which the Fund may make payments up to 0.25% of the average
daily net asset value of the Fund shares, computed at an annual rate,
to obtain certain personal services for shareholders and to maintain
shareholder accounts. From time to time and for such periods as deemed
appropriate, the amount stated above may be reduced voluntarily. 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
the Fund and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS
In addition to payments made pursuant to the Shareholder Services
Agreement, Federated Securities Corp. and Federated Shareholder
Services, from their own assets, may pay financial institutions
supplemental fees for the performance of substantial sales services,
distribution-related support services, or shareholder services. The
support may include sponsoring sales, educational and training
seminars for their employees, providing sales literature, and
engineering computer software programs that emphasize the attributes
of the Fund. Such assistance will be predicated upon the amount of
shares the financial institution sells or may sell, and/or upon the
type and nature of sales or marketing support furnished by the
financial institution. Any payments made by the distributor may be
reimbursed by the Fund's investment adviser or its affiliates.
NET ASSET VALUE
The Fund's net asset value per share fluctuates. It is determined by
dividing the sum of all securities and other assets, less liabilities,
by the number of shares outstanding.
INVESTING IN THE FUND
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open
for business. Shares may be purchased either by wire or mail.
To purchase shares, open an account by calling Federated Securities
Corp. and obtain a master account number. Information needed to
establish the account will be taken over the telephone. The Fund
reserves the right to reject any purchase request.
BY WIRE
To purchase shares by Federal Reserve wire, call the Fund before 1:00
p.m. (Eastern time) to place an order. The order is considered
received immediately. Payment by federal funds must be received before
3:00 p.m. (Eastern time) that day. Federal funds should be wired as
follows: Federated Shareholder Services Company, c/o State Street Bank
and Trust Company, Boston, Massachusetts; Attention: EDGEWIRE; For
Credit to: Federated Intermediate Municipal Trust; Fund Number (this
number can be found on the account statement or by contacting the
Fund); Group Number or Wire Order Number; Nominee or Institution Name;
and ABA 011000028. Shares cannot be purchased by wire on holidays when
wire transfers are restricted. Questions on wire purchases should be
directed to your shareholder services representative at the telephone
number listed on your account statement.
BY MAIL
To purchase shares by mail, send a check made payable to Federated
Intermediate Municipal Trust to: Federated Shareholder Services
Company, P.O. Box 8600, Boston, Massachusetts 02266-8600. Orders by
mail are considered received when payment by check is converted by
State Street Bank and Trust Company ("State Street Bank") into federal
funds. This is normally the next business day after State Street Bank
receives the check.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $25,000, plus any
financial intermediary fee, if applicable. However, an account may be
opened with a smaller amount as long as the $25,000 minimum is reached
within 90 days. The minimum investment for an institutional investor
will be calculated by combining all accounts it maintains with the
Fund. Accounts established through a financial intermediary may be
subject to a smaller minimum investment.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an
order is received. There is no sales charge imposed by the Fund.
Investors who purchase shares through a financial intermediary may be
charged a service fee by that financial intermediary.
The net asset value is determined as of the close of trading (normally
4:00 p.m., Eastern time) on the New York Stock Exchange, Monday
through Friday, except on: (i) days on which there are not sufficient
changes in the value of the Fund's portfolio securities that its net
asset value might be materially affected; (ii) days during which no
shares are tendered for redemption and no orders to purchase shares
are received; or (iii) the following holidays: New Year's Day, Martin
Luther King Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange certain municipal securities or a combination
of securities and cash for Fund shares. The securities and any cash
must have a market value of at least $25,000. The Fund reserves the
right to determine the acceptability of securities to be exchanged.
Securities accepted by the Fund are valued in the same manner as the
Fund values its assets. Shareholders wishing to exchange securities
should first contact Federated Securities Corp.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Shareholder Services Company
maintains a share account for each shareholder of record. Share
certificates are not issued unless requested by contacting the Fund.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid
during the month.
DIVIDENDS
Dividends are declared daily and paid monthly to all shareholders
invested in the Fund on the record date. Dividends are declared just
prior to determining net asset value. Shares purchased by wire begin
earning dividends on the business day after the order is received.
Shares purchased by check begin earning dividends on the business day
after the check is converted, upon instruction of the transfer agent,
into federal funds. Dividends are automatically reinvested on payment
dates at the ex-dividend date net asset value in additional shares of
the Fund unless cash payments are requested by contacting the Fund.
CAPITAL GAINS
Distributions of net realized long-term capital gains realized by the
Fund, if any, will be made at least once every twelve months.
REDEEMING SHARES
The Fund redeems shares at their net asset value next determined after
the Fund receives the redemption request. Redemptions will be made on
days on which the Fund computes its net asset value. Investors who
redeem shares through a financial intermediary may be charged a
service fee by that financial intermediary. Redemption requests must
be received in proper form and can be made by telephone request or by
written request.
BY TELEPHONE
Shareholders may redeem their shares by telephoning the Fund before
4:00 p.m. (Eastern time). The proceeds will normally be wired the
following business day, but in no event more than seven days, to the
shareholder's account at a domestic commercial bank that is a member
of the Federal Reserve System. Proceeds from redemption requests
received on holidays when wire transfers are restricted will be wired
the following business day. Questions about telephone redemptions on
days when wire transfers are restricted should be directed to your
shareholder services representative at the telephone number listed on
your account statement. If at any time, the Fund shall determine it
necessary to terminate or modify this method of redemption,
shareholders would be promptly notified.
An authorization form permitting the Fund to accept telephone requests
must first be completed. It is recommended that investors request this
privilege at the time of their initial application. If not completed
at the time of initial application, authorization forms and
information on this service can be obtained through Federated
Securities Corp. Telephone redemption instructions may be recorded. If
reasonable procedures are not followed by the Fund, it may be liable
for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If such a case should
occur, another method of redemption, such as "By Mail," should be
considered.
BY MAIL
Shares may be redeemed in any amount by mailing a written request to:
Federated Shareholder Services Company, P.O. Box 8600, Boston,
Massachusetts 02266-8600. If share certificates have been issued, they
should be sent unendorsed with the written request by registered or
certified mail to the address noted above.
The written request should state: Federated Intermediate Municipal
Trust; the account name as registered with the Fund; the account
number; and the number of shares to be redeemed or the dollar amount
requested. All owners of the account must sign the request exactly as
the shares are registered. Normally, a check for the proceeds is
mailed within one business day, but in no event more than seven days,
after the receipt of a proper written redemption request. Dividends
are paid up to and including the day that a redemption request is
processed.
Shareholders requesting a redemption of any amount to be sent to an
address other than that on record with the Fund, or a redemption
payable other than to the shareholder of record must have their
signatures guaranteed by a commercial or savings bank, trust company
or savings association whose deposits are insured by an organization
which is administered by the Federal Deposit Insurance Corporation; a
member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of
1934. The Fund does not accept signatures guaranteed by a notary
public.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the
Fund may redeem shares in any account and pay the proceeds to the
shareholder of record if the account balance falls below a required
minimum value of $25,000 due to shareholder redemptions. This
requirement does not apply, however, if the balance falls below
$25,000 because of changes in the Fund's net asset value. Before
shares are redeemed to close an account, the shareholder is notified
in writing and allowed 30 days to purchase additional shares to meet
the minimum requirement.
SHAREHOLDER INFORMATION
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee
elections and other matters submitted to shareholders for vote. All
shares of each portfolio in the Trust have equal voting rights except
that, in matters affecting only a particular Fund, only shares of that
Fund are entitled to vote. As a Massachusetts business trust, the
Trust is not required to hold annual shareholder meetings. Shareholder
approval will be sought only for certain changes in the Trust's or the
Fund's operation and for the election of Trustees under certain
circumstances.
Trustees may be removed by the Trustees or by shareholders at a
special meeting. A special meeting of the Trust shall be called by the
Trustees upon the written request of shareholders owning at least 10%
of the outstanding shares of the Trust entitled to vote.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements of the Internal Revenue Code of 1986, as amended (the
"Code"), applicable to regulated investment companies and to receive
the special tax treatment afforded to such companies. The Fund will be
treated as a single, separate entity for federal income tax purposes
so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with
those realized by the Fund.
Shareholders are not required to pay the federal regular income tax on
any dividends received from the Fund that represent net interest on
tax-exempt municipal bonds. However, dividends representing net
interest earned on some municipal bonds are included in calculating
the federal individual alternative minimum tax or the federal
alternative minimum tax for corporations.
The alternative minimum tax, up to 28% of alternative minimum taxable
income for individuals and 20% for corporations, applies when it
exceeds the regular tax for the taxable year. Alternative minimum
taxable income is equal to the regular taxable income of the taxpayer
increased by certain "tax preference" items not included in regular
taxable income and reduced by only a portion of the deductions allowed
in the calculation of the regular tax.
Interest on certain "private activity" bonds issued after August 7,
1986, is treated as a tax preference item for both individuals and
corporations. Unlike traditional governmental purpose municipal bonds,
which finance roads, schools, libraries, prisons and other public
facilities, private activity bonds provide benefits to private
parties. The Fund may purchase all types of municipal bonds, including
private activity bonds. Thus, while the Fund has no present intention
of purchasing any private activity bonds, should it purchase any such
bonds, a portion of the Fund's dividends may be treated as a tax
preference item.
In addition, in the case of a corporate shareholder, dividends of the
Fund which represent interest on municipal bonds may be subject to the
20% corporate alternative minimum tax because the dividends are
included in a corporation's "adjusted current earnings." The corporate
alternative minimum tax treats 75% of the excess of a taxpayer's
pre-tax "adjusted current earnings" over the taxpayer's alternative
minimum taxable income as a tax preference item. "Adjusted current
earnings" is based upon the concept of a corporation's "earnings and
profits." Since "earnings and profits" generally includes the full
amount of any Fund dividend, and alternative minimum taxable income
does not include the portion of the Fund's dividend attributable to
municipal bonds which are not private activity bonds, the difference
will be included in the calculation of the corporation's alternative
minimum tax.
Dividends of the Fund representing net interest income earned on some
temporary investments and any realized net short-term gains are taxed
as ordinary income.
These tax consequences apply whether dividends are received in cash or
as additional shares. Information on the tax status of dividends and
distributions is provided annually.
STATE AND LOCAL TAXES
Distributions representing net interest received on tax-exempt
municipal securities are not necessarily free from income taxes of any
state or local taxing authority. Shareholders are urged to consult
their own tax advisers regarding the status of their accounts under
state and local tax laws.
PERFORMANCE INFORMATION
From time to time, the Fund advertises its total return, yield, and
tax-equivalent yield.
Total return represents the change, over a specific period of time, in
the value of an investment in the Fund after reinvesting all income
and capital gains distributions. It is calculated by dividing that
change by the initial investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment
income per share (as defined by the SEC) earned by the Fund over a
thirty-day period by the maximum offering price per share of the Fund
on the last day of the period. This number is then annualized using
semi-annual compounding. The tax-equivalent yield of the Fund is
calculated similarly to the yield, but is adjusted to reflect the
taxable yield that the Fund would have had to earn to equal its actual
yield, assuming a specific tax rate. The yield and the tax-equivalent
yield do not necessarily reflect income actually earned by the Fund
and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
From time to time, advertisements for the Fund may refer to ratings,
rankings and other information in certain financial publications
and/or compare the Fund's performance to certain indices.
PORTFOLIO OF INVESTMENTS
FEDERATED INTERMEDIATE MUNICIPAL TRUST
MAY 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
INTERMEDIATE-TERM MUNICIPAL SECURITIES -- 96.9%
ALABAMA -- 0.7%
$ 1,500,000 Alabama Water PCA, PCR Bonds, 6.35% (AMBAC INS), AAA $ 1,601,340
8/15/2001
ALASKA -- 3.0%
7,000,000 Alaska State Housing Finance Corp., General Mortgage
Revenue Bonds (Series A),
5.65% (MBIA INS), 12/1/2012 AAA 7,012,110
ARIZONA -- 2.9%
1,500,000 Phoenix, AZ, UT GO Refunding Bonds (Series A), 7.40%, AA 1,627,560
7/1/2000
5,000,000 Salt River Project, AZ Agricultural Improvement &
Power District, Electric System
Revenue Bonds (Series A), 7.10%, 1/1/2000 AA 5,188,150
Total 6,815,710
CALIFORNIA -- 2.9%
2,250,000 California State, UT GO Bonds, (Series AV), 7.80%, AA 2,487,555
10/1/2000
1,800,000 Los Angeles, CA Department of Water & Power, Electric
Plant Revenue Bonds,
2nd Issue, 9.00%, 6/1/2000 AA 2,027,412
1,875,000 Los Angeles, CA Department of Water & Power, Electric
Plant Revenue Bonds,
2nd Issue, 9.00%, 6/1/2001 AA 2,177,944
Total 6,692,911
FLORIDA -- 2.4%
185,000 Dade County, FL, UT GO Public Imps., 6.70% (MBIA INS), AAA 188,965
6/1/2003
2,000,000 Florida State Board of Education Administration, UT GO
Capital Outlay Bonds
(Series C), 6.25% (Florida State), 6/1/2001 AA 2,127,280
3,000,000 Florida State Board of Education Administration, UT GO
Capital Outlay Bonds,
6.00% (Florida State), 6/1/2001 AA 3,163,710
Total 5,479,955
GEORGIA -- 3.7%
2,000,000 Georgia Municipal Electric Authority, Revenue Bonds AA- 2,096,780
(Series U), 6.50%, 1/1/2000
1,000,000 Georgia Municipal Electric Authority, Revenue Bonds AA- 1,065,890
(Series U), 6.60%, 1/1/2001
5,000,000 Georgia State, UT GO Bonds (Series A), 7.70%, 2/1/2001 AA+ 5,534,650
Total 8,697,320
HAWAII -- 4.2%
5,000,000 Hawaii State, UT GO Bonds (Series BT), 8.00%, 2/1/2001 AA 5,566,600
1,000,000 Hawaii State, UT GO Bonds (Series BU), 5.85% (Original AA 1,051,270
Issue Yield: 5.95%), 11/1/2001
3,000,000 Honolulu, HI City & County, UT GO Bonds (Series
A), 6.30% (Original Issue
Yield: 6.40%), 8/1/2001 AA 3,197,700
Total 9,815,570
</TABLE>
FEDERATED INTERMEDIATE MUNICIPAL TRUST
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
INTERMEDIATE-TERM MUNICIPAL SECURITIES -- CONTINUED
ILLINOIS -- 6.8%
$ 3,100,000 Cook County, IL, GO Capital Improvement Bonds (Series
1996), 5.50% (FGIC INS),
11/15/2008 AAA $ 3,210,608
50,000 Du Page, IL Water Commission, UT GO Bonds, 5.95%, AA+ 52,342
3/1/2001
3,000,000 Du Page, IL Water Commission, UT GO Bonds, 6.05%, AA+ 3,173,730
3/1/2002
90,000 Illinois Health Facilities Authority, Revenue Bonds,
6.40% (Northwestern Memorial
Hospital), 8/15/1999 AA 93,722
3,800,000 Illinois Health Facilities Authority, Revenue
Refunding Bonds (Series A), 5.70%
(Advocate Health Care Network)/(Original Issue Yield: AA 3,802,926
5.75%), 8/15/2011
3,000,000 Illinois Municipal Electric Agency, Power Supply
System Revenue Bonds (Series A),
6.20% (AMBAC INS), 2/1/2001 AAA 3,156,000
100,000 Illinois State, UT GO Bonds, 6.75%, 6/1/1997 AA- 100,008
2,000,000 University of Illinois, Auxiliary Facilities Revenue
Bonds, 6.40% (Original Issue Yield:
6.45%), 4/1/2001 AA 2,126,940
Total 15,716,276
INDIANA -- 2.1%
4,800,000 Indiana Health Facility Financing Authority, Hospital
Revenue Bonds (Series 1996A),
5.50% (Clarian Health Partners, Inc.)/(Original Issue AA 4,811,904
Yield: 5.65%), 2/15/2010
MARYLAND -- 0.9%
1,000,000 University of Maryland, Auxiliary Facility & Tuition
Revenue Bonds (Series A), 5.80%
(Original Issue Yield: 5.85%), 2/1/2002 AA+ 1,048,770
1,000,000 Washington Suburban Sanitation District, MD, UT GO
Revenue Bonds (Second
Series), 6.90% (United States Treasury PRF), 6/1/2009 AA 1,102,790
(@102)
Total 2,151,560
MICHIGAN -- 4.6%
2,000,000 Michigan State Building Authority, Revenue Bonds
(Series II), 6.25% (AMBAC INS)/
(Original Issue Yield: 6.35%), 10/1/2000 AAA 2,108,420
3,705,000 Michigan State Housing Development Authority, (Series
B) Rental Housing Revenue
Bonds, 5.65% (MBIA INS), 10/1/2007 AAA 3,751,016
3,605,000 Michigan State Housing Development Authority, (Series
B) Rental Housing Revenue
Bonds, 5.65% (MBIA INS), 4/1/2007 AAA 3,648,909
1,000,000 Royal Oak, MI Hospital Finance Authority, Revenue
Refunding Bonds, 7.40% (William
Beaumont Hospital, MI), 1/1/2000 AA 1,071,390
Total 10,579,735
</TABLE>
FEDERATED INTERMEDIATE MUNICIPAL TRUST
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
INTERMEDIATE-TERM MUNICIPAL SECURITIES -- CONTINUED
MISSOURI -- 4.6%
$ 5,000,000 Missouri State HEFA, Health Facilities Revenue Bonds
(Series A), 6.00% (BJC Health
System, MO)/(Original Issue Yield: 6.05%), 5/15/2005 AA $ 5,372,350
5,000,000 Missouri State HEFA, Health Facilities Revenue Bonds
(Series A), 6.10% (BJC Health
System, MO)/(Original Issue Yield: 6.15%), 5/15/2006 AA 5,359,550
Total 10,731,900
NEVADA -- 0.5%
1,000,000 Clark County, NV School District, LT GO Bonds (Series AAA 1,142,280
A), 9.75% (MBIA INS), 6/1/2000
NEW HAMPSHIRE -- 1.2%
2,555,000 New Hampshire State, UT GO Bonds (Series A), 6.40%, AA 2,731,040
6/15/2001
NEW JERSEY -- 0.0%
100,000 New Jersey State Transportation Trust Fund Agency,
Revenue Bonds, 5.90%,
6/15/1999 A+ 103,202
NEW YORK -- 8.1%
3,500,000 Hempstead, NY IDA, Resource Recovery Revenue Bonds
(Series 1997), 5.00%
(American Ref-Fuel Company)/(MBIA INS)/(Original Issue AAA 3,408,020
Yield: 5.18%), 12/1/2009
1,500,000 Municipal Assistance Corp. of New York, Revenue Bonds
(Series 62), 6.60% (United
States Treasury PRF), 7/1/2000 (@102) AA- 1,533,525
6,000,000 New York City, NY, UT GO Bonds (Series E), 5.30% (FGIC
INS)/(Original Issue Yield:
5.40%), 8/1/2009 AAA 6,012,600
2,500,000 New York State Environmental Facilities Corp., State
Water Pollution Control Bonds
(Series 1994E), 6.15% (Original Issue Yield: 6.25%), A- 2,703,450
6/15/2004
4,000,000 New York State Thruway Authority, Highway & Bridge
Fund Revenue Bonds
(Series B), 5.625% (FGIC INS)/(Original Issue Yield: AAA 4,195,840
5.75%), 4/1/2005
1,000,000 Triborough Bridge & Tunnel Authority, NY, Revenue
Bonds (Series S), 6.625%
(Original Issue Yield: 6.70%), 1/1/2001 A+ 1,069,430
Total 18,922,865
NORTH CAROLINA -- 6.1%
2,720,000 Charlotte-Mecklenburg Hospital Authority, NC, Health
Care Revenue Bonds
(Series 1996A), 5.50% (Charlotte-Mecklenburg Hospital,
NC)/(Original Issue
Yield: 5.60%), 1/15/2008 AA 2,825,182
3,355,000 Charlotte-Mecklenburg Hospital Authority, NC, Health
Care System Revenue Bonds,
5.90% (Original Issue Yield: 5.95%), 1/1/2002 AA 3,519,194
5,350,000 North Carolina Municipal Power Agency No. 1, Catawba
Electric Revenue Refunding
Bonds, 6.00% (Original Issue Yield: 6.05%), 1/1/2004 A 5,588,878
2,000,000 North Carolina Municipal Power Agency No. 1, Catawba
Electric Revenue Refunding
Bonds, 7.25%, 1/1/2007 A 2,280,040
Total 14,213,294
</TABLE>
FEDERATED INTERMEDIATE MUNICIPAL TRUST
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
INTERMEDIATE-TERM MUNICIPAL SECURITIES -- CONTINUED
OHIO -- 4.6%
$ 100,000 Columbus, OH, UT GO Refunding Bonds, 5.80%, 1/1/2000 AAA $ 103,568
2,500,000 Hamilton County, OH Sewer System, Improvement &
Revenue Refunding Bonds
(Series A), 6.20%, 12/1/2000 AA- 2,633,500
3,195,000 Lucas County, OH, Hospital Revenue Refunding Bonds
(Series 1996), 5.50%
(ProMedica Healthcare Obligated Group)/(MBIA
INS)/(Original Issue Yield: 5.75%),
11/15/2008 AAA 3,294,972
2,840,000 Lucas County, OH, Hospital Revenue Refunding Bonds
(Series 1996), 6.00%
(ProMedica Healthcare Obligated Group)/(MBIA INS), AAA 3,065,439
11/15/2007
1,400,000 Montgomery County, OH Health Facilities Authority,
Revenue Bonds (Series A),
6.20% (Sisters of Charity Health Care System)/(MBIA
INS)/(Original Issue Yield:
6.30%), 5/15/2001 AAA 1,482,516
Total 10,579,995
OKLAHOMA -- 0.9%
2,000,000 Oklahoma State Industrial Authority, Health System
Revenue Bonds (Series C),
5.70% (Baptist Medical Center, OK)/(AMBAC
INS)/(Original Issue Yield: 5.80%),
8/15/2002 AAA 2,085,660
PENNSYLVANIA -- 7.3%
4,570,000 Harrisburg, PA Authority, Revenue Bonds (Pooled Bond
Program) (Series I of
1996), 5.35% (MBIA INS)/(Original Issue Yield: 5.50%), AAA 4,658,155
4/1/2008
1,500,000 Pennsylvania Infrastructure Investment Authority,
Revenue Bonds, 6.15%
(Pennvest), 9/1/2001 AA 1,586,385
3,500,000 Pennsylvania Intergovernmental Coop Authority, Special
Tax Revenue Bonds,
5.45% (FGIC INS)/(Original Issue Yield: 5.55%), AAA 3,562,020
6/15/2008
3,000,000 Pennsylvania State Higher Education Facilities
Authority, Health Services Revenue
Bonds (Series A), 5.50% (Allegheny Delaware Valley
Obligated Group)/(MBIA INS)/
(Original Issue Yield: 5.60%), 11/15/2008 AAA 3,074,280
4,000,000 Pennsylvania State Higher Education Facilities
Authority, Refunding Revenue Bonds
(Series A), 5.50% (University of AA 4,078,600
Pennsylvania)/(Original Issue Yield: 5.55%), 1/1/2009
Total 16,959,440
RHODE ISLAND -- 0.8%
1,655,000 Providence, RI, UT GO Bonds (Series 1997A), 6.00% (FSA AAA 1,769,989
INS), 7/15/2008
SOUTH CAROLINA -- 2.3%
730,000 Columbia, SC Waterworks & Sewer System, Refunding
Revenue Bonds, 6.40%
(United States Treasury COL)/(Original Issue Yield: AAA 775,997
6.45%), 2/1/2001
4,270,000 Columbia, SC Waterworks & Sewer System, Revenue Bonds,
6.40% (Original Issue
Yield: 6.45%), 2/1/2001 AA 4,546,483
Total 5,322,480
</TABLE>
FEDERATED INTERMEDIATE MUNICIPAL TRUST
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
INTERMEDIATE-TERM MUNICIPAL SECURITIES -- CONTINUED
TENNESSEE -- 0.5%
$ 1,065,000 Metropolitan Government Nashville & Davidson County,
TN HEFA, Revenue Bonds
(Series B), 5.85% (Vanderbilt University)/(Original AA $ 1,120,348
Issue Yield: 5.90%), 10/1/2001
TEXAS -- 14.5%
200,000 Brownsville, TX Independent School, UT GO Refunding
Bonds, 6.00% (PSFG INS)/
(Original Issue Yield: 6.00%), 8/15/2000 Aaa 209,110
1,000,000 Dallas, TX Waterworks & Sewer System, Revenue
Refunding and Improvement
Bonds (Series A), 9.50%, 10/1/1998 AA 1,028,110
4,000,000 Garland, TX, LT GO Bonds, 5.80% (Original Issue Yield: AA 4,196,240
5.90%), 8/15/2001
100,000 Gulf Coast, TX Waste Disposal Authority, Revenue
Bonds, 6.10% (Monsanto Co.),
1/1/2004 A1 104,281
4,500,000 Houston, TX Independent School District, LT GO Bonds, AAA 5,012,370
8.375% (PSFG GTD), 8/15/2000
1,945,000 Northeast Hospital Authority, TX, Hospital Revenue
Refunding Bonds (Series 1997),
6.00% (Northeast Medical Center Hospital)/(FSA INS), AAA 2,071,503
5/15/2009
1,650,000 San Antonio, TX Electric & Gas, Revenue Bonds, 9.90%, AA 1,715,835
2/1/1998
2,000,000 San Antonio, TX Electric & Gas, Revenue Refunding Bonds AA 2,086,719
(Series A), 7.00%, 2/1/1999
2,395,000 San Antonio, TX Water Authority, Revenue Bonds, 6.00% AA 2,519,899
(FGIC INS), 5/15/2001
105,000 San Antonio, TX Water Authority, Revenue Bonds, 6.00%
(United States Treasury
COL)/(Original Issue Yield: 6.15%), 5/15/2001 AA 110,515
1,475,000 San Antonio, TX, UT GO General Improvement Bonds, AA 1,651,543
8.625%, 8/1/2000
6,370,000 Socorro, TX Independent School District, UT GO
Refunding Bonds (Series A), 6.25%
(PSFG GTD)/(Original Issue Yield: 6.30%), 8/15/2001 AAA 6,768,698
6,000,000 Texas Water Development Board, State Revolving Fund
Sr. Lien Revenue Bonds,
5.80% (Original Issue Yield: 5.90%), 7/15/2002 AA 6,323,640
Total 33,798,463
UTAH -- 0.9%
2,000,000 Intermountain Power Agency, UT, Power Supply Revenue
Refunding Bonds
(Series B), 7.20%, 7/1/1999 A+ 2,103,600
VIRGINIA -- 1.8%
1,995,000 Virginia Beach, VA, UT GO Bonds (Series A), 6.30%, AA 2,091,738
3/1/2000
1,995,000 Virginia Beach, VA, UT GO Bonds (Series A), 6.30%, AA 2,117,214
3/1/2001
Total 4,208,952
WASHINGTON -- 8.6%
1,805,000 San Juan County, WA School District No. 149, UT GO
Bonds, 6.00% (FSA INS),
12/1/2009 AAA 1,946,025
1,020,000 Seattle, WA, LT GO Refunding Bonds, 6.00% (Original AA+ 1,077,802
Issue Yield: 6.10%), 3/1/2002
1,100,000 Snohomish County, WA School District No. 15, UT GO
Bonds (Series 1997), 6.00%
(FGIC INS), 12/1/2008 AAA 1,184,854
</TABLE>
FEDERATED INTERMEDIATE MUNICIPAL TRUST
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
INTERMEDIATE-TERM MUNICIPAL SECURITIES -- CONTINUED
WASHINGTON -- CONTINUED
$ 1,500,000 Tacoma, WA Sewer Authority, Revenue Refunding Bonds
(Series B), 5.70% (FGIC
INS)/(Original Issue Yield: 5.85%), 12/1/2005 AAA $ 1,585,305
2,510,000 Tacoma, WA, Solid Waste Utility Revenue Refunding
Bonds (Series 1997B), 6.00%
(AMBAC INS), 12/1/2010 AAA 2,684,169
2,000,000 Tacoma, WA, Solid Waste Utility Revenue Refunding
Bonds (Series 1997B), 6.00%
(AMBAC INS), 12/1/2009 AAA 2,150,520
4,500,000 Washington Health Care Facilities Authority, Revenue
Bonds (Series 1996), 5.375%
(Kadlec Medical Center, Richland)/(AMBAC
INS)/(Original Issue Yield: 5.63%),
12/1/2010 AAA 4,421,655
5,000,000 Washington State Public Power Supply System, (Nuclear
Project No. 3) Refunding &
Revenue Bonds (Series B), 5.70% (Original Issue Yield: AA- 5,033,150
5.793%), 7/1/2010
Total 20,083,480
WISCONSIN -- 0.0%
100,000 Waukesha, WI School District, UT GO, 5.75% (Original A1 103,083
Issue Yield: 5.80%), 10/1/1999
TOTAL INTERMEDIATE-TERM MUNICIPAL SECURITIES 225,354,462
(IDENTIFIED COST $216,542,363)
SHORT-TERM MUNICIPAL SECURITIES -- 1.6%
TEXAS -- 1.6%
800,000 Harris County, TX HFDC Daily VRDNs (St. Luke's AA 800,000
Episcopal Hospital)
200,000 Harris County, TX HFDC (Series 1994) Daily VRDNs
(Methodist Hospital, Harris
County, TX) AA 200,000
2,800,000 Harris County, TX HFDC, Hospital Revenue Bonds (Series
1997) Daily VRDNs
(Methodist Hospital, Harris County, TX) A-1+ 2,800,000
TOTAL SHORT-TERM MUNICIPAL SECURITIES (AT AMORTIZED 3,800,000
COST)
TOTAL INVESTMENTS (IDENTIFIED COST $220,342,363)(A) $ 229,154,462
</TABLE>
(a) The cost of investments for federal tax purposes amounts to
$220,342,363. The net unrealized appreciation of investments on a
federal tax basis amounts to $8,812,099 which is comprised of
$8,848,850 appreciation and $36,751 depreciation at May 31, 1997.
* Please refer to the Appendix of the Statement of Additional
Information for an explanation of the credit ratings. Current credit
ratings are unaudited.
Note: The categories of investments are shown as a percentage of net assets
($232,505,795) at May 31, 1997.
The following acronyms are used throughout this portfolio:
AMBAC -- American Municipal Bond Assurance Corporation COL --
Collateralized FGIC -- Financial Guaranty Insurance Company FSA --
Financial Security Assurance GO -- General Obligation GTD -- Guaranty
HEFA -- Health and Education Facilities Authority HFDC -- Health
Facility Development Corporation IDA -- Industrial Development
Authority INS -- Insured LT -- Limited Tax MBIA -- Municipal Bond
Investors Assurance PCA -- Pollution Control Authority PCR --
Pollution Control Revenue PRF -- Prerefunded PSFG -- Permanent School
Fund Guarantee UT -- Unlimited Tax VRDNs -- Variable Rate Demand Notes
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
FEDERATED INTERMEDIATE MUNICIPAL TRUST
MAY 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost $229,154,462
$220,342,363)
Income receivable 4,034,026
Receivable for shares sold 3,104,075
Total assets 236,292,563
LIABILITIES:
Payable for investments purchased $ 2,057,382
Payable for shares redeemed 39,738
Income distribution payable 718,945
Payable to bank 939,285
Accrued expenses 31,418
Total liabilities 3,786,768
NET ASSETS for 22,152,982 shares outstanding $232,505,795
NET ASSETS CONSIST OF:
Paid in capital $229,417,851
Net unrealized appreciation of investments 8,812,099
Accumulated net realized loss on investments (5,724,155)
Total Net Assets $232,505,795
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$232,505,795 / 22,152,982 shares outstanding $10.50
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
FEDERATED INTERMEDIATE MUNICIPAL TRUST
YEAR ENDED MAY 31, 1997
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 12,345,367
EXPENSES:
Investment advisory fee $ 872,976
Administrative personnel and services fee 164,874
Custodian fees 27,225
Transfer and dividend disbursing agent fees and expenses 49,253
Directors'/Trustees' fees 5,560
Auditing fees 14,938
Legal fees 8,444
Portfolio accounting fees 72,417
Shareholder services fee 545,610
Share registration costs 15,452
Printing and postage 18,622
Insurance premiums 4,210
Taxes 6,955
Miscellaneous 8,816
Total expenses 1,815,352
Waivers --
Waiver of investment advisory fee $ (158,880)
Waiver of shareholder services fee (414,663)
Total waivers (573,543)
Net expenses 1,241,809
Net investment income 11,103,558
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 1,164,828
Net change in unrealized appreciation of investments 866,681
Net realized and unrealized gain on investments 2,031,509
Change in net assets resulting from operations $ 13,135,067
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED INTERMEDIATE MUNICIPAL TRUST
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 11,103,558 $ 11,295,121
Net realized gain (loss) on investments ($1,059,997
net gain and
$3,670,810, net loss respectively, as computed for 1,164,828 (96,242)
federal tax purposes)
Net change in unrealized appreciation/depreciation 866,681 (2,535,429)
Change in net assets resulting from operations 13,135,067 8,663,450
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income (11,103,558) (11,295,121)
SHARE TRANSACTIONS --
Proceeds from sale of shares 85,279,237 77,775,142
Net asset value of shares issued in conjunction with
acquisition of
The Starburst Municipal Income Fund 10,040,690 --
Net asset value of shares issued to shareholders in 2,403,307 2,174,227
payment of distributions declared
Cost of shares redeemed (85,642,824) (88,208,508)
Change in net assets resulting from share 12,080,410 (8,259,139)
transactions
Change in net assets 14,111,919 (10,890,810)
NET ASSETS:
Beginning of period 218,393,876 229,284,686
End of period $232,505,795 $ 218,393,876
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
FEDERATED INTERMEDIATE MUNICIPAL TRUST
MAY 31, 1997
ORGANIZATION
Intermediate Municipal Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended (the "Act") as an open-end,
management investment company. As of May 31, 1997, the Trust consists
of three portfolios. The financial statements included herein are only
those of Federated Intermediate Municipal Trust (the "Fund"), a
diversified portfolio. The financial statements of the other
portfolios are presented separately. The assets of each portfolio are
segregated and a shareholder's interest is limited to the portfolio in
which shares are held. The investment objective of the Fund is to
provide current income exempt from federal regular income tax.
On October 31, 1996, the Fund acquired all the net assets of The
Starburst Municipal Income Fund pursuant to the plan of reorganization
approved by The Starburst Municipal Income Fund's shareholders. The
acquisition was accomplished by a tax-free exchange of 955,346 shares
of the Fund (valued at $10,040,690) for the 953,506 shares of The
Starburst Municipal Income Fund outstanding on October 31, 1996. The
Starburst Municipal Income Fund's net assets at that date
($10,072,849), including $218,574 of unrealized appreciation, at that
date were combined with those of the Fund. The aggregate net assets of
the Fund and The Starburst Municipal Income Fund immediately before
acquisition were 209,160,976 and 10,072,849, respectively. Immediately
after the acquisition, the combined aggregate net assets of the Fund
were $219,201,666.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. These policies are in conformity with generally accepted
accounting principles.
INVESTMENT VALUATIONS
Municipal bonds are valued by an independent pricing service, taking
into consideration yield, liquidity, risk, credit quality, coupon,
maturity, type of issue, and any other factors or market data the
pricing service deems relevant. Short-term securities are valued at
the prices provided by an independent pricing service. However,
short-term securities with remaining maturities of sixty days or less
at the time of purchase may be valued at amortized cost, which
approximates fair market value.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and
discount, if applicable, are amortized as required by the Internal
Revenue Code, as amended (the "Code"). Distributions to shareholders
are recorded on the ex-dividend date.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly,
no provisions for federal tax are necessary.
At May 31, 1997, the Fund, for federal tax purposes, had a capital
loss carryforward of $5,891,449, which will reduce the Fund's taxable
income arising from future net realized gain on investments, if any,
to the extent permitted by the Code, and thus will reduce the amount
of the distributions to shareholders which would otherwise be
necessary to relieve the Fund of any liability for federal tax.
Pursuant to the Code, such capital loss carryforward will expire as
follows:
EXPIRATION YEAR EXPIRATION AMOUNT
2003 $2,220,639
2004 3,670,810
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions.
The Fund records when-issued securities on the trade date and
maintains security positions such that sufficient liquid assets will
be available to make payment for the securities purchased. Securities
purchased on a when-issued or delayed delivery basis are marked to
market daily and begin earning interest on the settlement date.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual
results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without
par value).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1997 1996
<S> <C> <C>
Shares sold 8,181,651 7,363,145
Shares issued in conjunction with acquisition of The Starburst 955,346 --
Municipal Income Fund
Shares issued to shareholders in payment of distributions 228,984 205,536
declared
Shares redeemed (8,183,995) (8,340,470)
Net change resulting from share transactions 1,181,986 (771,789)
</TABLE>
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Management, the Fund's investment adviser (the "Adviser"),
receives for its services an annual investment advisory fee equal to
0.40% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee. The Adviser can
modify or terminate this voluntary waiver at any time at its sole
discretion.
ADMINISTRATIVE FEE
Federated Services Company ("FServ"), under the Administrative
Services Agreement, provides the Fund with administrative personnel
and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received
during the period of the Administrative Services Agreement shall be at
least $125,000 per portfolio and $30,000 per each additional class of
shares.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated
Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25% of
average daily net assets of the Fund for the period. The fee paid to
FSS is used to finance certain services for shareholders and to
maintain shareholder accounts. FSS may voluntarily choose to waive any
portion of its fee. FSS can modify or terminate this voluntary waiver
at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ, through its subsidiary, Federated Shareholder Services Company
("FSSC") serves as transfer and dividend disbursing agent for the
Fund. The fee paid to FSSC is based on the size, type, and number of
accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Fund's accounting records for which it receives a
fee. The fee is based on the level of the Fund's average daily net
assets for the period, plus out-of-pocket expenses.
INTERFUND TRANSACTIONS
During the year ended May 31, 1997, the Fund engaged in purchase and
sale transactions with funds that have a common investment adviser (or
affiliated investment advisers), common Directors/Trustees, and/or
common Officers. These purchase and sale transactions were made at
current market value pursuant to Rule 17a-7 under the Act amounting to
$4,250,000 and $2,350,000 respectively.
GENERAL
Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities,
for the year ended May 31, 1997, were as follows:
PURCHASES $89,389,952
SALES $81,046,710
SUBSEQUENT EVENT
The Board of Trustees and Management of Intermediate Municipal Trust,
on behalf of its portfolio, Federated Ohio Intermediate Municipal
Trust, submitted a proposal to sell all of Federated Ohio Intermediate
Municipal Trust's assets to Federated Ohio Municipal Income Fund, a
portfolio of Municipal Securities Income Trust, dated May 23, 1997. A
special meeting of shareholders of Federated Ohio Intermediate Trust
was held on July 7, 1997, in which shareholders approved the proposed
agreement. The agreement provides that the Federated Ohio Municipal
Income Fund will acquire all of the assets of Federated Ohio
Intermediate Municipal Trust in exchange for Class F Shares of
Federated Ohio Municipal Income Fund to be distributed pro rata to the
holders of shares of the Federated Ohio Intermediate Municipal Trust
in complete liquidation of the Federated Ohio Intermediate Municipal
Trust on or about July 11, 1997.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of INTERMEDIATE MUNICIPAL
TRUST (Federated Intermediate Municipal Trust):
We have audited the accompanying statement of assets and liabilities
of Federated Intermediate Municipal Trust (an investment portfolio of
Intermediate Municipal Trust, a Massachusetts business trust),
including the schedule of portfolio of investments, as of May 31,
1997, the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years then
ended, and the financial highlights (see page 2 of the prospectus) for
the periods presented. These financial statements and financial
highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements
and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned at May 31, 1997, by correspondence
with the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Federated Intermediate Municipal Trust, an
investment portfolio of Intermediate Municipal Trust, as of May 31,
1997, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then
ended, and financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
July 7, 1997
[Graphic]
Federated Investors
Federated Intermediate Municipal Trust
(A Portfolio of Intermediate Municipal Trust)
PROSPECTUS
JULY 31, 1997
A Diversified Portfolio of Intermediate Municipal Trust, An Open-End
Management Investment Company
FEDERATED INTERMEDIATE MUNICIPAL TRUST
Federated Investors Tower
Pittsburgh, PA 15222-3779
DISTRIBUTOR
Federated Securities Corp.
Federated Investors
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Federated Management
Federated Investors Tower
Pittsburgh, PA 15222-3779
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
2100 One PPG Place Pittsburgh, PA 15222
Federated Securities Corp., Distributor
Federated Securities Corp., Distributor
Cusip 458810108
8061702A-IS (7/97)
[Graphic]
Federated Intermediate Municipal Trust
Annual Report For Fiscal Year Ended May 31, 1997
MANAGEMENT DISCUSSION AND ANALYSIS
The Treasury and municipal yield curves flattened considerably during
the twelve-month reporting period ended May 31, 1997. The spread in
the one- to ten-year portion of the municipal yield curve experienced
a flattening of 29 basis points compared to the Treasury curve which
flattened 20 basis points. The spread between one-year and ten-year
maturities on the municipal yield curve was 100 basis points as of May
31, 1997, which is considerably flatter than the average spread of 124
basis point over the reporting period. The shape of the short end of
the yield curve (five years and less) will continue to be dictated by
the actions of the Federal Reserve Board (the "Fed"), especially
during this period of relative uncertainty concerning the Fed's
intentions. The long end of the yield curve will be driven, as always,
by market expectations concerning inflation and the real growth rate
of the U.S. economy. The ten-year Treasury bond yield decreased by 18
basis points to 6.66% over the reporting period while the ten-year
AAA-rated municipal bond yield decreased by 23 basis points to 4.90%.
Federated Intermediate Municipal Trust's performance over the past
twelve months reflected the fund's intermediate maturity and neutral
duration position relative to the fund's peer group. The fund's total
return was 6.11% for the period June 1, 1996, to May 31, 1997.* The
concentration of high coupon premium bonds in the portfolio helped to
dampen net asset value volatility over the reporting period. However,
the fund is managed predominately for tax-exempt income and posted a
30-day distribution rate of 5.05%* as of May 31, 1997, which is
comparable to a yield of 8.38% on a taxable equivalent basis, assuming
a top marginal tax rate of 39.60%.+ As of May 31, 1997, the fund had a
30-day SEC yield of 4.34%.*
Portfolio strategy continues to emphasize credit quality. The yield
spread between a "AAA" rated insured municipal bond and an "A" rated
revenue bond is currently approximately 10 basis points which is less
than the average spread (25 basis points) over the last twelve months.
Credit spreads will widen from their historical lows when the economy
slows and the typical flight to quality begins. As a result, lower
quality credits will be severely impacted as spreads widen and prices
decline.
The credit curve is currently inverted with the widest credit spreads
available in the five- to ten-year maturity range. As a result, any
purchases of lower quality credits should be done in the shorter
maturities.
Because of the considerable supply constraints which exist in the
market, duration management and yield curve positioning have been a
more suitable way to add performance than individual security
selection. Duration has been kept at the peer group average, currently
5.4 years, which is considered a neutral duration position.
Intermediate maturity municipal bonds (five to ten years in maturity)
performed well on a price basis over the fiscal year as investors
shortened their position on the yield curve as a result of concerns
over Fed policy and the future direction of interest rates.
Institutional buying (property and casualty insurance companies and
commercial banks) has been strong in the intermediate part of the
yield curve which has resulted in making intermediate maturity
municipal bonds expensive relative to longer maturity municipal bonds.
The ratio of municipal bond yields to Treasury bond yields for
ten-year maturities ended the reporting period at 73.70% which is
below the twelve-month average of 74.80% and very close to the low for
the reporting period of 73.00%. This ratio indicates that municipal
bonds are trading at expensive levels relative to their Treasury
counterparts and reflects the relative out-performance of intermediate
municipal bonds over the year.
* Performance quoted represents past performance and is not indicative
of future results. Investment return and principle value will
fluctuate, so that an investor's shares, when redeemed, may be worth
more or less than their original cost.
+ Income may be subject to the federal alternative minimum tax and state and
local taxes.
Federated Intermediate Municipal Trust
GROWTH OF $25,000 INVESTED IN FEDERATED INTERMEDIATE MUNICIPAL TRUST
The graph below illustrates the hypothetical investment of $25,000 in
Federated Intermediate Municipal Trust (the "Fund") from May 31, 1987,
to May 31, 1997, compared to the Lehman Brothers Seven-Year General
Obligation Municipal Bond Index (LB7YRGOMBI)+ and the Lipper
Intermediate Municipal
Debt Funds Average (LIMDFA).++
[Graphic]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
This report must be preceded or accompanied by the Fund's prospectus
dated July 31, 1997, and, together with financial statements contained
therein, constitutes the Fund's annual report.
* The Fund's performance assumes the reinvestment of all dividends and
distributions. The LB7YRGOMBI and the LIMDFA have been adjusted to
reflect reinvestment of dividends on securities in the index and
average.
+ The LB7YRGOMBI is not adjusted to reflect sales charges, expenses,
or other fees that the SEC requires to be reflected in the Fund's
performance.
This index is unmanaged.
++The LIMDFA represents the average of the total returns reported by
all of the mutual funds designated by Lipper Analytical Services,
Inc. as falling into the category, and is not adjusted to reflect
any sales charges. However, these total returns are reported net of
expenses or other fees that the SEC requires to be reflected in a
fund's performance.
[Graphic] Federated Investors
Federated Securities Corp., Distributor
Cusip 458810108
G00289-01 (7/97)
[Graphic]
APPENDIX
A. The graphic presentation here displayed consists of a boxed legend
in the upper left indicating the components of the corresponding line
graph. Federated Pennsylvania Intermediate Municipal Trust (the
"Fund") is represented by a solid line. The Lehman Brothers 10-Year
General Obligation Municipal Bond Index (the "LB10YRGOMBI") is
represented by a dotted line and the Lipper Intermediate Municipal
Debt FUNDS Average (the "LIMDFA") is represented by a broken line. The
line graph is a visual representation of a comparison of change in
value of a hypothetical $25,000 purchase in the Fund, the LB10YRGOMBI,
and the LIMDFA. The "y" axis reflects the cost of the investment. The
"x" axis reflects computation periods from the Fund's start of
business, 12/6/93, through 5/31/97. The right margin reflects the
ending value of the hypothetical investment in the Fund as compared to
the LB10YRGOMBI and the LIMDFA. The ending values were $30,066,
$30,338, and $29,181, respectively. There is also a legend in the
bottom center of the graphic presentation which indicates the Fund's
Average Annual Total Return for the one- year period ended 5/31/97,
and from the start of performance of the Fund (12/6/93) to 5/31/97.
The total returns were 6.63% and 5.44% respectively.
APPENDIX
A. The graphic presentation here displayed consists of a boxed legend
in the upper left indicating the components of the corresponding line
graph. Federated Intermediate Municipal Trust (the "Fund") is
represented by a solid line. The Lehman Brothers Seven-Year General
Obligation Municipal Bond Index (the "LB7YRGOMBI") is represented by a
dotted line and the Lipper Intermediate Municipal Debt Funds Average
(THE "LIMDFA") is represented by a broken line. The line graph is a
visual representation of a comparison of change in value of a
hypothetical $25,000 purchase in the Fund, the LB7YRGOMBI, and the
LIMDFA. The "y" axis reflects the cost of the investment. The "x" axis
reflects computation periods from 5/31/87, through 5/31/97. The right
margin reflects the ending value of the hypothetical investment in the
Fund as compared to the LB7YRGOMBI and the LIMDFA. The ending values
were $47,143, $50,803, and $48,825, respectively. There is also a
legend in the bottom center of the graphic presentation which
indicates the Fund's Average Annual Total Returns for the one-year,
five-year and ten-year periods ended 5/31/97, and from the Fund's
start of performance (12/26/85) to 5/31/97. The total returns were
6.11%, 5.60%, 6.55%, and 6.33%, respectively.
