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,
1998, 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 31,1998
TABLE OF CONTENTS
Summary of Fund Expenses 1
Financial Highlights 2
General Information 3
Year 2000 Statement 3
Investment Information 3
Investment Objective 3
Investment Policies 3
Municipal Securities 5
Investment Risks 6
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 7
Investing in the Fund 8
Share Purchases 8
Minimum Investment Required 8
What Shares Cost 8
Account Activity 8
Dividends 8
Capital Gains 8
Redeeming Shares 8
By Telephone 9
By Mail 9
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> <C> Maximum Sales Charge Imposed on Purchases (as a percentage of
offering price) None Maximum Sales Chare Imposed on Reinvested Dividiends (as a
percentage of offering price) None Contingent Deferred Sales Charge (as a
percentage original or 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) 0.34%
12b-1 Fee None
Total Other Expenses 0.23%
Shareholder Services (after waiver)(2) 0.66%
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 0.82% 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,
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, $10.50 $10.41 $10.55 $10.52 $10.74 $10.31 $10.09 $ 9.84 $ 9.81 $ 9.81
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.53 0.53 0.53 0.54 0.52 0.56 0.59 0.63 0.64 0.64
Net realized and 0.19 0.09 (0.14) 0.03 (0.22) 0.43 0.22 0.25 0.03 --
unrealized gain (loss)
on investments
Total from investment 0.72 0.62 0.39 0.57 0.30 0.99 0.81 0.88 0.67 0.64
operations
LESS DISTRIBUTIONS
Distributions from net (0.53) (0.53) (0.53) (0.54) (0.52) (0.56) (0.59) (0.63) (0.64) (0.64)
investment income
NET ASSET VALUE, END OF $10.69 $10.50 $10.41 $10.55 $10.52 $10.74 $10.31 $10.09 $ 9.84 $ 9.81
PERIOD
TOTAL RETURN(A) 6.98% 6.11% 3.78% 5.67% 2.79% 9.80% 8.19% 9.22% 7.02% 6.77%
RATIOS TO AVERAGE NET
ASSETS
Expenses 0.57% 0.57% 0.57% 0.59% 0.61% 0.48% 0.47% 0.49% 0.50% 0.48%
Net investment income 4.97% 5.09% 5.05% 5.23% 4.82% 5.27% 5.73% 6.32% 6.49% 6.56%
Expense 0.25% 0.26% 0.24% 0.00% 0.01% 0.14% 0.22% 0.30% 0.38% 0.39%
waiver/reimbursement(b)
SUPPLEMENTAL DATA
Net assets, end of $224,582 $232,506 $218,398 $229,285 $302,663 $263,283 $173,702 $116,577 $95,738 $82,211
period (000 omitted)
Portfolio turnover 35% 33% 19% 11% 7% 3% 9% 43% 14% 25%
</TABLE>
(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)
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.
YEAR 2000 STATEMENT
Like other mutual funds and business organizations worldwide, the Fund's service
providers (among them, the adviser, distributor, administrator, and transfer
agent) must ensure that their computer systems are adjusted to properly process
and calculate date-related information from and after January 1, 2000. Many
software programs and, to a lesser extent, computer hardware in use today cannot
distinguish the year 2000 from the year 1900. Such a design flaw could have a
negative impact in the handling of securities trades, pricing and accounting
services. The Fund and its service providers are actively working on necessary
changes to computer systems to deal with the year 2000 issue and believe that
systems will be year 2000 compliant when required. Analysis continues regarding
the financial impact of instituting a year 2000 compliant program on the Fund's
operations.
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 four highest ratings for municipal securities by Moody's
Investors Service, Inc. ("Moody's") (Aaa, Aa, A, or Baa) or by Standard &
Poor's ("S&P") and Fitch IBCA, Inc. ("Fitch") (AAA, AA, A, or
BBB)--securities rated "Baa" by Moody's or "BBB" by S&P or Fitch have
speculative characteristics;
* 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.
Changes in economic or other circumstances are more likely to lead to weakened
capacity to make principal and interest payments than higher rated securities.
Downgraded securities will be evaluated on a case by case basis by the
investment adviser. The investment adviser will determine whether or not the
security 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 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.
INVERSE FLOATERS
The Fund may invest in securities known as "inverse floaters" which represent
interests in municipal securities. The Fund intends to purchase inverse floaters
to assist in pursuing its investment objective. These obligations pay interest
rates that vary inversely with changes in the interest rates of specified
short-term municipal securities or an index of short-term municipal securities.
The interest rates on inverse floaters will typically decline as short-term
market interest rates increase and increase as short-term market rates decline.
Inverse floaters will generally respond to changes in market interest rates more
rapidly than fixed-rate long-term securities (typically twice as fast). As a
result, the market values of inverse floaters will generally be more volatile
than the market values of fixed-rate municipal securities. Typically, the
portion of the portfolio invested in inverse floaters will be subject to
additional volatility.
FINANCIAL FUTURES
The Fund may purchase and sell interest rate and index financial futures
contracts. These financial futures contracts may be used to hedge all or a
portion of its portfolio against changes in the market value of portfolio
securities and interest rates, provide additional liquidity, and accomplish its
current strategies in a more expeditious fashion. Financial futures contracts
call for the delivery of particular debt instruments at a certain time in the
future. The seller of the contract agrees to make delivery of the type of
instrument called for in the contract and the buyer agrees to take delivery of
the instrument at the specified future time.
As a matter of investment policy, which may be changed without shareholder
approval, the Fund may not purchase or sell futures contracts if immediately
thereafter the sum of the amount of margin deposits on the Fund's existing
futures positions would exceed 5% of the market value of the Fund's total
assets. When the Fund purchases futures contracts, an amount of municipal
securities, cash or cash equivalents, equal to the underlying commodity value of
the futures contracts (less any related margin deposits), will be deposited in a
segregated account with the Fund's custodian (or the broker, if legally
permitted) to collateralize the position.
RISKS
When the Fund uses financial futures, there is a risk that the prices of the
securities subject to the futures contracts may not correlate perfectly with the
prices of the securities in the Fund's portfolio. This may cause the futures
contract to react differently than the portfolio securities to market changes.
In addition, the Fund's investment adviser could be incorrect in its
expectations about the direction or extent of market factors such as interest
rate movements. In these events, the Fund may lose money on the futures
contract. It is not certain that a secondary market for positions in futures
contracts will exist at all times. Although the investment adviser will consider
liquidity before entering into futures transactions, there is no assurance that
a liquid secondary market on an exchange or otherwise will exist for any
particular futures contract at any particular time. The Fund's ability to
establish and close out futures positions depends on this secondary market.
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, Inc. All of the Class A
(voting) shares of Federated Investors, Inc. are owned by a trust, the trustees
of which are John F. Donahue, Chairman and Director of Federated Investors,
Inc., Mr. Donahue's wife, and Mr. Donahue's son, J. Christopher Donahue, who is
President and Director of Federated Investors, Inc.
Federated Management and other subsidiaries of Federated Investors, Inc. 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 $120 billion invested across more than 300 funds
under management and/or administration by its subsidiaries, as of December 31,
1997, Federated Investors, Inc. 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 approximately 4,000 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, Inc. or its predecessor 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. 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, Inc. or its predecessor 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, Inc.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES
Federated Services Company, a subsidiary of Federated Investors, Inc., 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, Inc. as
specified below:
MAXIMUM AVERAGE AGGREGATE
FEE DAILY NET ASSETS
0.150% on the first $250 million
0.125% on the next $250 million
0.100% 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, Inc., 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, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
ACCOUNT ACTIVITY
Shareholders will receive periodic statements reporting all account activity,
including dividends paid. The Fund will not issue share certificates.
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
Because interest received by the Fund may not be exempt from all state and local
income taxes, shareholders may be required to pay state and local taxes on
dividends received from the Fund. 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, 1998
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <S> <C>
(A)LONG-TERM MUNICIPALS--99.3%
ALABAMA--0.7%
$ 1,500,000 Alabama Water PCA, PCR Bonds, 6.35% (AMBAC INS), AAA $ 1,603,725
8/15/2001
ALASKA--4.4%
7,000,000 Alaska State Housing Finance Corp., General AAA 7,291,200
Mortgage Revenue Bonds (Series A), 5.65% (MBIA
INS), 12/1/2012
2,500,000 Alaska State Housing Finance Corp., Mortgage AAA 2,562,150
Revenue Bonds (Series 1997 A-1), 5.50% (Original
Issue Yield: 5.531%), 12/1/2017
TOTAL 9,853,350
ARIZONA--2.1%
1,090,000 Show Low, AZ Industrial Development Authority, A 1,103,625
Hospital Revenue Bonds, Series 1998A, 5.25%
(Navapache Regional Medical Center)/(American
Capital Access INS)/ (Original Issue Yield:
5.30%), 12/1/2010
1,170,000 Show Low, AZ Industrial Development Authority, A 1,185,795
Hospital Revenue Bonds, Series 1998A, 5.30%
(Navapache Regional Medical Center)/(American
Capital Access INS)/ (Original Issue Yield:
5.35%), 12/1/2011
1,180,000 Show Low, AZ Industrial Development Authority, A 1,196,685
Hospital Revenue Bonds, Series 1998A, 5.375%
(Navapache Regional Medical Center)/(American
Capital Access INS)/ (Original Issue Yield:
5.40%), 12/1/2012
1,240,000 Show Low, AZ Industrial Development Authority, A 1,252,189
Hospital Revenue Bonds, Series 1998A, 5.375%
(Navapache Regional Medical Center)/(American
Capital Access INS)/ (Original Issue Yield:
5.45%), 12/1/2013
TOTAL 4,738,294
CALIFORNIA--1.7%
1,700,000 California PCFA, (1996 Series C) Daily VRDNs A-1+ 1,700,000
(Pacific Gas & Electric Co.)/(Bank of America NT
and SA, San Francisco LOC)
1,875,000 Los Angeles, CA Department of Water & Power, A+ 2,135,156
Electric Plant Revenue Bonds, 2nd Issue, 9.00%,
6/1/2001
TOTAL 3,835,156
COLORADO--0.9%
1,000,000 Colorado HFA, Single Family Mortgage Revenue Aa2 1,113,130
Bonds (Series 1997C-3), 6.75%, 5/1/2017
1,000,000 Highlands Ranch Metropolitan District No. 3, CO, A 1,001,370
UT GO Refunding Bonds, Series B, 5.125%
(American Capital Access INS)/(Original Issue
Yield: 5.235%), 12/1/2012
TOTAL 2,114,500
FLORIDA--2.9%
2,000,000 Florida State Board of Education Administration, AA+ 2,129,740
UT GO Capital Outlay Bonds (Series C), 6.25%
(Florida State), 6/1/2001
</TABLE>
FEDERATED INTERMEDIATE MUNICIPAL TRUST
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <S> <C>
(A)LONG-TERM MUNICIPALS--CONTINUED
FLORIDA--CONTINUED
$ 3,000,000 Florida State Board of Education Administration, AA+ $ 3,174,420
UT GO Capital Outlay Bonds, 6.00% (Florida
State), 6/1/2001
1,000,000 Lee County, FL HFA, Single Family Mortgage Aaa 1,106,040
Revenue Bonds (Series 1998A-2), 6.30% (GNMA
Collateralized Home Mortgage Program COL),
3/1/2029
TOTAL 6,410,200
GEORGIA--3.8%
2,000,000 Georgia Municipal Electric Authority, Revenue A 2,077,400
Bonds (Series U), 6.50%, 1/1/2000
1,000,000 Georgia Municipal Electric Authority, Revenue A 1,062,030
Bonds (Series U), 6.60%, 1/1/2001
5,000,000 Georgia State, UT GO Bonds (Series A), 7.70%, AAA 5,468,400
2/1/2001
TOTAL 8,607,830
HAWAII--4.3%
5,000,000 Hawaii State, UT GO Bonds (Series BT), 8.00%, A+ 5,480,000
2/1/2001
1,000,000 Hawaii State, UT GO Bonds (Series BU), 5.85% A+ 1,054,660
(Original Issue Yield: 5.95%), 11/1/2001
3,000,000 Honolulu, HI City & County, UT GO Bonds (Series AA 3,201,330
A), 6.30% (Original Issue Yield: 6.40%),
8/1/2001
TOTAL 9,735,990
IDAHO--0.8%
1,100,000 Idaho Housing Agency, SFM Revenue Bonds, Series AA 1,107,436
D-2 Mezzanine Bonds, 5.50%, 7/1/2018
775,000 Idaho Housing Agency, SFM Revenue Bonds, Series A+ 785,044
D-2 Subordinate Bonds, 5.25%, 7/1/2011
TOTAL 1,892,480
ILLINOIS--6.6%
3,000,000 Du Page, IL Water Commission, UT GO Bonds, AA+ 3,200,400
6.05%, 3/1/2002
2,290,000 Illinois Health Facilities Authority, Revenue A- 2,394,493
Bonds (Series 1998), 5.50% (Centegra Health
System), 9/1/2009
3,800,000 Illinois Health Facilities Authority, Revenue AA 4,026,860
Refunding Bonds (Series A), 5.70% (Advocate
Health Care Network)/(Original Issue Yield:
5.75%), 8/15/2011
3,000,000 Illinois Municipal Electric Agency, Power Supply AAA 3,166,110
System Revenue Bonds (Series A), 6.20% (AMBAC
INS), 2/1/2001
2,000,000 University of Illinois, Auxiliary Facilities AA- 2,126,380
Revenue Bonds, 6.40% (Original Issue Yield:
6.45%), 4/1/2001
TOTAL 14,914,243
INDIANA--2.9%
1,400,000 Indiana Health Facilty Financing Authority, A 1,391,390
Hospital Revenue Refunding Bonds, 5.25% (Floyd
Memorial Hospital, IN)/(Original Issue Yield:
5.45%), 2/15/2018
</TABLE>
FEDERATED INTERMEDIATE MUNICIPAL TRUST
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <S> <C>
(A)LONG-TERM MUNICIPALS--CONTINUED
INDIANA--CONTINUED
$ 4,800,000 Indiana Health Facilty Financing Authority, AA $ 5,055,840
Hospital Revenue Bonds (Series 1996A), 5.50%
(Clarian Health Partners, Inc.)/(Original Issue
Yield: 5.65%), 2/15/2010
TOTAL 6,447,230
IOWA--0.9%
2,000,000 Iowa Finance Authority, Hospital Facilities AAA 2,020,580
Revenue Bonds (Series 1998A), 5.125% (Iowa
Health System)/(MBIA INS)/(Original Issue Yield:
5.15%), 7/1/2013
KANSAS--1.5%
2,000,000 Sedgwick & Shawnee Counties, KS, Single Family Aaa 2,248,000
Mortgage Revenue Bonds (Series 1997A-2), 5.50%
(GNMA Collateralized Home Mortgage Program COL),
6/1/2029
1,000,000 Sedgwick County, KS, Single Family Mortgage Aaa 1,081,220
Revenue Bonds (Series 1997A-2), 6.50% (GNMA
Collateralized Home Mortgage Program COL),
12/1/2016
TOTAL 3,329,220
LOUISIANA--0.9%
2,100,000 Louisiana HFA, Single Family Mortgage Revenue Aaa 2,119,446
Bonds (Series 1998A), 5.65% (GNMA Collateralized
Home Mortgage Program COL), 12/1/2029
MAINE--1.4%
3,000,000 Maine Municipal Bond Bank, Revenue Bonds (Series AAA 3,073,590
1997D), 5.35% (AMBAC INS), 11/1/2017
MICHIGAN--7.3%
1,785,000 Kent County, MI, Airport Revenue Bonds (Series AAA 1,741,410
1998), 4.90% (Kent County International
Airport)/(MBIA INS)/(Original Issue Yield:
4.93%), 1/1/2014
2,000,000 Michigan State Building Authority, Revenue Bonds AAA 2,103,060
(Series II), 6.25% (AMBAC INS)/ (Original Issue
Yield: 6.35%), 10/1/2000
1,825,000 Michigan State Hospital Finance Authority, A3 1,829,234
Hospital Revenue & Refunding Bonds (Series
1998A), 5.30% (Hackley Hospital Obligated
Group), 5/1/2013
3,705,000 Michigan State Housing Development Authority, AAA 3,949,789
(Series B) Rental Housing Revenue Bonds, 5.65%
(MBIA INS), 10/1/2007
3,605,000 Michigan State Housing Development Authority, AAA 3,839,397
(Series B) Rental Housing Revenue Bonds, 5.65%
(MBIA INS), 4/1/2007
2,000,000 Petoskey, MI Hospital Finance Authority, Limited AAA 1,952,400
Obligation Revenue & Refunding Bonds, 5.00%
(Northern Michigan Hospital Obligated
Group)/(MBIA INS)/(Original Issue Yield: 5.22%),
11/15/2018
1,000,000 Royal Oak, MI Hospital Finance Authority, AAA 1,057,240
Revenue Refunding Bonds, 7.40% (William Beaumont
Hospital, MI), 1/1/2000
TOTAL 16,472,530
MISSISSIPPI--0.8%
1,700,000 Jackson County, MS Port Facility Daily VRDNs P-1 1,700,000
(Chevron U.S.A., Inc.)
</TABLE>
FEDERATED INTERMEDIATE MUNICIPAL TRUST
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <S> <C>
(A)LONG-TERM MUNICIPALS--CONTINUED
MISSOURI--5.6%
$ 5,000,000 Missouri State HEFA, Health Facilities Revenue AA $ 5,479,800
Bonds (Series A), 6.00% (BJC Health System,
MO)/(Original Issue Yield: 6.05%), 5/15/2005
5,000,000 Missouri State HEFA, Health Facilities Revenue AA 5,475,650
Bonds (Series A), 6.10% (BJC Health System,
MO)/(Original Issue Yield: 6.15%), 5/15/2006
1,500,000 Missouri State Housing Development Commission, AAA 1,507,245
Single Family Mortgage Loan Revenue Bonds
(Series 1998B), 5.20%, 9/1/2012
TOTAL 12,462,695
NEVADA--1.4%
1,000,000 Clark County, NV School District, LT GO Bonds AAA 1,109,090
(Series A), 9.75% (MBIA INS), 6/1/2000
2,000,000 Reno, NV, Hospital Revenue Bonds (Series 1998A), AAA 1,945,800
5.00% (St. Mary's Regional Medical Center)/(MBIA
INS)/(Original Issue Yield: 5.24%), 5/15/2018
TOTAL 3,054,890
NEW HAMPSHIRE--2.9%
2,805,000 New Hampshire Higher Educational & Health A 2,779,839
Facilities Authority, Revenue Bonds (Series
1998), 5.125% (Franklin Pierce
College)/(American Capital Access INS)/
(Original Issue Yield: 5.25%), 10/1/2013
1,000,000 New Hampshire Higher Educational & Health A 998,690
Facilities Authority, Revenue Bonds (Series
1998), 5.25% (Franklin Pierce College)/(American
Capital Access INS)/ (Original Issue Yield:
5.42%), 10/1/2018
2,555,000 New Hampshire State, UT GO Bonds (Series A), AA+ 2,730,580
6.40%, 6/15/2001
TOTAL 6,509,109
NEW YORK--5.0%
3,000,000 New York City, NY, UT GO Bonds (Series E), 5.30% AAA 3,164,880
(FGIC INS)/(Original Issue Yield: 5.40%),
8/1/2009
2,500,000 New York State Environmental Facilities Corp., A- 2,752,200
State Water Pollution Control Bonds (Series
1994E), 6.15% (Original Issue Yield: 6.25%),
6/15/2004
4,000,000 New York State Thruway Authority, Highway & AAA 4,303,520
Bridge Fund Revenue Bonds (Series B), 5.625%
(FGIC INS)/(Original Issue Yield: 5.75%),
4/1/2005
1,000,000 Triborough Bridge & Tunnel Authority, NY, A+ 1,064,410
Revenue Bonds (Series S), 6.625% (Original Issue
Yield: 6.70%), 1/1/2001
TOTAL 11,285,010
NORTH CAROLINA--6.0%
2,080,000 Charlotte-Mecklenburg Hospital Authority, NC, AA 2,205,112
Refunding Revenue Bonds, 5.90% (Original Issue
Yield: 5.95%), 1/1/2002
1,275,000 Charlotte-Mecklenburg Hospital Authority, NC, AA 1,351,908
Refunding Revenue Bonds, 5.90% (Original Issue
Yield: 5.95%), 1/1/2002
2,000,000 North Carolina Municipal Power Agency No. 1, A- 2,147,720
Catawba Electric Revenue Refunding Bonds, 6.00%
(Original Issue Yield: 6.05%), 1/1/2004
</TABLE>
FEDERATED INTERMEDIATE MUNICIPAL TRUST
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <S> <C>
(A)LONG-TERM MUNICIPALS--CONTINUED
NORTH CAROLINA--CONTINUED
$ 2,000,000 North Carolina Municipal Power Agency No. 1, A- $ 2,345,320
Catawba Electric Revenue Refunding Bonds, 7.25%,
1/1/2007
5,400,000 Person County, NC Industrial Facilities & P-1 5,400,000
Pollution Control Financing Authority Daily
VRDNs (Carolina Power & Light Co.)/(SunTrust
Bank, Atlanta LOC)
TOTAL 13,450,060
NORTH DAKOTA--0.5%
1,100,000 Grand Forks, ND, Health Care System Revenue AAA 1,146,827
Bonds (Series 1997), 5.40% (Altru Health System
Obligated Group)/(MBIA INS)/(Original Issue
Yield: 5.50%), 8/15/2011
OHIO--3.6%
3,195,000 Lucas County, OH, Hospital Revenue Refunding AAA 3,464,754
Bonds (Series 1996), 5.50% (ProMedica Healthcare
Obligated Group)/(MBIA INS)/(Original Issue
Yield: 5.75%), 11/15/2008
2,840,000 Lucas County, OH, Hospital Revenue Refunding AAA 3,179,181
Bonds (Series 1996), 6.00% (ProMedica Healthcare
Obligated Group)/(MBIA INS), 11/15/2007
1,400,000 Montgomery County, OH Health Facilities AAA 1,484,854
Authority, Revenue Bonds (Series A), 6.20%
(Sisters of Charity Health Care System)/(MBIA
INS)/(Original Issue Yield: 6.30%), 5/15/2001
TOTAL 8,128,789
PENNSYLVANIA--6.6%
800,000 New Castle, PA Area Hospital Authority, (Series AAA 800,000
1996) Weekly VRDNs (Jameson Memorial
Hospital)/(FSA INS)/(PNC Bank, N.A. LIQ)
1,500,000 Pennsylvania Infrastructure Investment AA+ 1,591,770
Authority, Revenue Bonds, 6.15% (Pennvest),
9/1/2001
3,000,000 Pennsylvania State Higher Education Facilities AAA 3,214,410
Authority, Health Services Revenue Bonds (Series
A), 5.50% (Allegheny Delaware Valley Obligated
Group)/(MBIA INS)/ (Original Issue Yield:
5.60%), 11/15/2008
4,000,000 Pennsylvania State Higher Education Facilities AA 4,261,840
Authority, Refunding Revenue Bonds (Series A),
5.50% (University of Pennsylvania)/(Original
Issue Yield: 5.55%), 1/1/2009
5,000,000 Philadelphia, PA Hospitals & Higher Education AA- 5,011,050
Facilities Authority, Health System Revenue
Bonds (Series 1997A), 5.00% (Jefferson Health
System)/(Original Issue Yield: 5.40%), 5/15/2012
TOTAL 14,879,070
PUERTO RICO--0.5%
1,100,000 Government Development Bank for Puerto Rico AA 1,100,000
(GDB) Weekly VRDNs (MBIA INS)/ (Credit Suisse
First Boston LIQ)
SOUTH CAROLINA--2.0%
4,270,000 Columbia, SC Waterworks & Sewer System, Revenue AA 4,529,232
Bonds, 6.40% (Original Issue Yield: 6.45%),
2/1/2001
</TABLE>
FEDERATED INTERMEDIATE MUNICIPAL TRUST
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <S> <C>
(A)LONG-TERM MUNICIPALS--CONTINUED
TEXAS--14.6%
$ 4,000,000 Garland, TX, LT GO Bonds, 5.80% (Original Issue AA $ 4,217,160
Yield: 5.90%), 8/15/2001
2,000,000 Harris County, TX HFDC, Hospital Revenue Bonds A-1+ 2,000,000
(Series 1997) Daily VRDNs (Methodist Hospital,
Harris County, TX)
2,850,000 Harrison County, TX Health Facilities A 2,886,423
Development Corp., Hospital Revenue Bonds
(Series 1998), 5.50% (Marshall Regional Medical
Center)/(American Capital Access INS)/(Original
Issue Yield: 5.52%), 1/1/2018
4,500,000 Houston, TX Independent School District, LT GO AAA 4,914,225
Bonds, 8.375% (PSFG GTD), 8/15/2000
1,475,000 San Antonio, TX, UT GO General Improvement AA 1,617,190
Bonds, 8.625%, 8/1/2000
6,370,000 Socorro, TX Independent School District, UT GO Aaa 6,783,604
Refunding Bonds (Series A), 6.25% (PSFG
GTD)/(Original Issue Yield: 6.30%), 8/15/2001
3,760,000 Texas State Department of Housing & Community AAA 3,854,489
Affairs, Single Family Mortgage Revenue Bonds
(Series B), 5.45% (MBIA INS), 3/1/2019
6,000,000 Texas Water Development Board, State Revolving AAA 6,388,080
Fund Sr. Lien Revenue Bonds, 5.80% (Original
Issue Yield: 5.90%), 7/15/2002
TOTAL 32,661,171
WASHINGTON--6.7%
1,020,000 Seattle, WA, LT GO Refunding Bonds, 6.00% AA+ 1,086,749
(Original Issue Yield: 6.10%), 3/1/2002
1,500,000 Tacoma, WA Sewer Authority, Revenue Refunding AAA 1,627,665
Bonds (Series B), 5.70% (FGIC INS)/(Original
Issue Yield: 5.85%), 12/1/2005
4,500,000 Washington Health Care Facilities Authority, AAA 4,730,490
Revenue Bonds (Series 1996), 5.375% (Kadlec
Medical Center, Richland)/(AMBAC INS)/(Original
Issue Yield: 5.63%), 12/1/2010
2,335,000 Washington Health Care Facilities Authority, AA 2,342,122
Revenue Bonds, 5.25% (Highline Community
Hospital)/(Asset Guaranty INS)/(Original Issue
Yield: 5.30%), 8/15/2017
5,000,000 Washington State Public Power Supply System, AA- 5,252,450
(Nuclear Project No. 3) Refunding & Revenue
Bonds (Series B), 5.70% (Original Issue Yield:
5.793%), 7/1/2010
TOTAL 15,039,476
TOTAL INVESTMENTS (IDENTIFIED COST
$212,436,467)(B) $ 223,114,693
</TABLE>
* Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings. Current credit ratings are unaudited.
(a) At May 31, 1998, 6.1% of the total investments at market value were subject
to alternative minimum tax.
(b) The cost of investments for federal tax purposes amounts to $212,436,467.
The net unrealized appreciation of investments on a federal tax basis
amounts to $10,678,226 which is comprised of $10,715,952 appreciation and
$37,726 depreciation at May 31, 1998.
Note: The categories of investments are shown as a percentage of net assets
($224,582,193) at May 31, 1998.
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 GTD
- --Guaranty HEFA --Health and Education Facilities Authority HFA --Housing
Finance Authority HFDC --Health Facility Development Corporation INS --Insured
LIQ --Liquidity Agreement LOC --Letter of Credit LT --Limited Tax MBIA
- --Municipal Bond Investors Assurance PCA --Pollution Control Authority PCR
- --Pollution Control Revenue PCFA --Pollution Control Finance Authority PSFG
- --Permanent School Fund Guarantee SFM --Single Family Mortgage 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, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost $ 223,114,693
$212,436,467)
Income receivable 3,523,154
Receivable for shares sold 1,002,289
Total assets 227,640,136
LIABILITIES:
Payable for investments purchased $ 1,831,986
Payable for shares redeemed 412,497
Income distribution payable 635,101
Payable to Bank 140,272
Accrued expenses 38,087
Total liabilities 3,057,943
Net Assets for 21,014,703 shares outstanding $ 224,582,193
NET ASSETS CONSIST OF:
Paid in capital $ 217,339,519
Net unrealized appreciation of investments 10,678,226
Accumulated net realized loss on investments (3,435,552)
Total Net Assets $ 224,582,193
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$224,582,193 / 21,014,703 shares outstanding $10.69
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
FEDERATED INTERMEDIATE MUNICIPAL TRUST
YEAR ENDED MAY 31, 1998
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 12,156,662
EXPENSES:
Investment advisory fee $ 878,186
Administrative personnel and services fee 165,651
Custodian fees 18,184
Transfer and dividend disbursing agent fees and expenses 38,312
Directors'/Trustees' fees 8,719
Auditing fees 14,798
Legal fees 2,930
Portfolio accounting fees 72,945
Shareholder services fee 548,866
Share registration costs 18,646
Printing and postage 19,929
Insurance premiums 3,547
Taxes 11,375
Miscellaneous 3,771
Total expenses 1,805,859
Waivers and reimbursements--
Waiver of investment advisory fee $ (139,532)
Waiver of shareholder services fee (417,139)
Total waivers (556,671)
Net expenses 1,249,188
Net investment income 10,907,474
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 2,288,603
Net change in unrealized appreciation of investments 1,866,127
Net realized and unrealized gain on investments 4,154,730
Change in net assets resulting from operations $ 15,062,204
</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,
1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 10,907,474 $ 11,103,558
Net realized gain (loss) on investments ($2,288,603 net gain and 2,288,603 1,164,828
$1,059,997 net gain, respectively, as computed for federal tax
purposes)
Net change in unrealized appreciation 1,866,127 866,681
Change in net assets resulting from operations 15,062,204 13,135,067
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (10,907,474) (11,103,558)
SHARE TRANSACTIONS--
Proceeds from sale of shares 142,380,191 85,279,237
Net asset value of shares issued in conjunction with acquisition -- 10,040,690
of The Starburst Municipal Income Fund
Net asset value of shares issued to shareholders in payment of 2,674,464 2,403,307
distributions declared
Cost of shares redeemed (157,132,987) (85,642,824)
Change in net assets resulting from share transactions (12,078,332) 12,080,410
Change in net assets (7,923,602) 14,111,919
NET ASSETS:
Beginning of period 232,505,795 218,393,876
End of period $ 224,582,193 $ 232,505,795
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
FEDERATED INTERMEDIATE MUNICIPAL TRUST
MAY 31, 1998
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. The Trust consists of one portfolio. The financial
statements included herein are only those of Federated Intermediate Municipal
Trust (the "Fund"), a diversified portfolio. The investment objective of the
Fund is to provide current income exempt from federal regular income tax.
On October 31, 1996, the Trust 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 Trust. The aggregate net assets of the Trust 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 Trust were $219,201,666.
SIGNIFICANT
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, 1998, the Fund, for federal tax purposes, had a capital loss
carryforward of $3,602,846, 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
2004 $3,602,846
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 Board of Trustees (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,
1998 1997
<S> <C> <C>
Shares sold 13,361,560 8,181,651
Shares issued in conjunction with acquisition of The Starburst -- 955,346
Municipal Income Fund
Shares issued to shareholders in payment of distributions declared 250,950 228,984
Shares redeemed (14,750,789) (8,183,995)
Net change resulting from share transactions (1,138,279) 1,181,986
</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, Inc. 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 shares for the period. The fee paid to FSS is used to finance
certain services for shareholders and to maintain shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ Company ("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 Company 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 period ended May 31, 1998, 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 $128,580,000 and $109,480,000,
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, 1998, were as follows:
PURCHASES $75,466,856
SALES $94,132,320
YEAR 2000
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
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, 1998, 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,
1998, by correspondence with the custodian and brokers. As to confirmation
replies not received, we carried out alternative auditing procedures. 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, 1998, 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, 1998
[Graphic]
Federated Intermediate Municipal Trust
(A Portfolio of Intermediate Municipal Trust)
PROSPECTUS
JULY 31, 1998
A Diversified Portfolio of Intermediate Municipal Trust, an Open-End
Management Investment Company
FEDERATED INTERMEDIATE MUNICIPAL TRUST
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Federated Management
Federated Investors Tower
1001 Liberty Avenue
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
1-800-341-7400
www.federatedinvestors.com
Cusip 458810108
8061702A-IS (7/98)
[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, 1998. 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 Intermediate Municipal Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
Statement dated July 31, 1998
Cusip 458810108
8061702B(7/98)
<PAGE>
Table of Contents
General Information About the Fund 1
Investment Objective and Policies 1
Acceptable Investments 1
When-Issued and Delayed
Delivery Transactions 2
Futures Transactions 2
Temporary Investments 2
Portfolio Turnover 3
Investment Limitations 3
Intermediate Municipal Trust Management 6
Fund Ownership 10
Trustees' Compensation 11
Trustee Liability 11
Investment Advisory Services 11
Adviser to the Fund 11
Advisory Fees 1
Other Services 12
Fund Administration 12
Custodian and Portfolio Accountant 12
Transfer Agent 12
Independent Public Accountants 12
Shareholder Services 12
Brokerage Transactions 13
Purchasing Shares 13
Conversion to Federal Funds 13
Determining Net Asset Value 13
Determining Value of Securities 13
Redeeming Shares 13
Redemption in Kind 14
Exchanging Securities for Fund Shares 14
Tax Consequences 14
Massachusetts Partnership Law 14
Tax Status 14
The Fund's Tax Status 14
Shareholders' Tax Status 15
Total Return 15
Yield 15
Tax-Equivalent Yield 15
Performance Comparisons 16
Economic and Market Information 17
About Federated Investors, Inc. 17
Appendix 19
<PAGE>
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., Standard & Poor's or
Fitch IBCA, 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 municipal securities are:
o municipal notes and tax-exempt commercial paper;
o serial bonds sold with a series of maturity dates;
o tax anticipation notes sold to finance working capital needs of
municipalities in anticipation of receiving taxes;
o bond anticipation notes sold in anticipation of the issuance of
longer-term bonds;
o 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
o 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.
<PAGE>
In the acquisition of participation interests, the Fund's investment
adviser will consider the following quality factors:
o a high-quality underlying municipal security (of which the Trust takes
possession); o a high-quality issuer of the participation interest; or
o 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.
Futures Transactions
A futures contract is a firm commitment by two parties: the seller who agrees to
make delivery of the specific type of security called for in the contract
("going short") and the buyer who agrees to take delivery of the security
("going long") at a certain time in the future. In the fixed income securities
market, price moves inversely to interest rates. A rise in rates means a drop in
price. Conversely, a drop in rates means a rise in price. In order to hedge its
holdings of fixed income securities against a rise in market interest rates, the
Fund could enter into contracts to deliver securities at a predetermined price
(i.e., "go short") to protect itself against the possibility that the prices of
its fixed income securities may decline during the Fund's anticipated holding
period. The Fund would agree to purchase securities in the future at a
predetermined price (i.e., "go long") to hedge against a decline in market
interest rates.
"MARGIN" IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, the Fund does not pay or
receive money upon the purchase or sale of a futures contract. Rather, the
Fund is required to deposit an amount of "initial margin" in liquid
securities with its custodian (or the broker, if legally permitted). The
nature of initial margin in futures transactions is different from that of
margin in securities transactions in that futures contract initial margin
does not involve the borrowing of funds by the Fund to finance the
transactions. Initial margin is in the nature of a performance bond or
good faith deposit on the contract which is returned to the Fund upon
termination of the futures contract, assuming all contractual obligations
have been satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund
pays or receives cash, called "variation margin," equal to the daily
change in value of the futures contract. This process is known as "marking
to market." Variation margin does not represent a borrowing or loan by the
Fund but is instead settlement between the Fund and the broker of the
amount one would owe the other if the futures contract expired. In
computing its daily net asset value ("NAV"), the Fund will mark-to-market
its open futures positions.
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:
o while waiting to invest proceeds of sales of portfolio securities, although
generally such proceeds will be invested in municipal securities as quickly
as possible;
<PAGE>
o in anticipation of redemption requests; or
o 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, 1998 and
1997, the portfolio turnover rates were 35% and 33%, 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.
<PAGE>
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.
<PAGE>
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."
<PAGE>
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
Chief Executive Officer and Director or Trustee of the Funds; Chairman and
Director, Federated Investors, Inc.; Chairman and Trustee, Federated Advisers,
Federated Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport Research,
Ltd. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Company.
Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Director or Trustee of the Funds; Director, Member of Executive Committee,
Children's Hospital of Pittsburgh; formerly, Senior Partner, Ernst & Young LLP;
Director, MED 3000 Group, Inc.; Director, Member of Executive Committee,
University of Pittsburgh.
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
Director or Trustee of the Funds; 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.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director or Trustee of the Funds; 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, United Refinery;
Chairman, Pittsburgh Foundation; Director, Forbes Fund; Chairman, Pittsburgh
Civic Light Opera.
<PAGE>
James E. Dowd, Esq.
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Director or Trustee of the Funds; Attorney-at-law; Director, The Emerging
Germany Fund, Inc.; formerly, President, Boston Stock Exchange, Inc.; Regional
Administrator, United States Securities and Exchange Commission.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Director or Trustee of the Funds; Professor of Medicine, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center -
Downtown; Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; formerly, Member, National Board of Trustees, Leukemia Society of
America.
Edward L. Flaherty, Jr., Esq.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Director or Trustee of the Funds; Attorney Of Counsel, Miller, Ament, Henny &
Kochuba; Director, Eat'N Park Restaurants, Inc.; formerly, Counsel, Horizon
Financial, F.A., Western Region; Partner, Meyer and Flaherty.
Glen R. Johnson*
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
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
Director or Trustee of the Funds; formerly, Representative, Commonwealth of
Massachusetts General Court; President, State Street Bank and Trust Company and
State Street Corporation; Director, VISA USA International; Chairman and
Director, Massachusetts Banker Association; Director, Depository Trust
Corporation.
<PAGE>
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
Director or Trustee of the Funds; President, Law Professor, Duquesne University;
Consulting Partner, Mollica & Murray; formerly, Dean and Professor of Law,
University of Pittsburgh School of Law; Dean and Professor of Law, Villanova
University School of Law.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Director or Trustee of the Funds; President, World Society for Ekistics, Athens;
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; formerly, Professor, United States
Military Academy; Professor, United States Air Force Academy.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Director or Trustee of the Funds; Public relations/Marketing/Conference
Planning; formerly, National Spokesperson, Aluminum Company of America; business
owner.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President or Executive Vice President of the Funds; President and Director,
Federated Investors, Inc.; President and Trustee, 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; Director or Trustee of some of
the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and Trustee of
the Trust.
<PAGE>
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Trustee or Director of some of the Funds; President, Executive Vice President
and Treasurer of some of the Funds; Vice Chairman, Federated Investors, Inc.;
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.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President , Secretary and Treasurer
Executive Vice President and Secretary of the Funds; Treasurer of some of the
Funds; Executive Vice President, Secretary, and Director, Federated Investors,
Inc.; 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.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
President or Vice President of some of the Funds; Director or Trustee of some of
the Funds; Executive Vice President, Federated Investors, Inc.; Chairman and
Director, Federated Securities Corp.
* 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.
<PAGE>
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran 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 Core
Trust; 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; RIMCO Monument
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; The Planters Funds;
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; WCT Funds; and World Investment Series,
Inc.
Fund Ownership
As of July 7, 1998, Officers and Trustees of the Fund, as a group, owned 377,792
(1.81%) of the outstanding shares of the Fund.
As of July 7, 1998, the following shareholder of record owned 5% or more of the
outstanding shares of the Fund: Hubco, Birmingham, Alabama, owned approximately
1,688,766 (8.09%).
<TABLE>
<CAPTION>
Trustees' Compensation
AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX
<S> <C> <C>
John F. Donahue, $0 $0 for the Trust and
Chairman and Trustee 56 other investment companies in the Complex
Thomas G.Bigley, $702.67 $111,222 for the Trust and
Trustee 56 other investment companies in the Complex
John T. Conroy, Jr., $773.07 $122,362 for the Trust and
Trustee 56 other investment companies in the Complex
William J. Copeland, $773.07 $122,362 for the Trust and
Trustee 56 other investment companies in the Complex
James E. Dowd, $773.07 $122,362 for the Trust and
Trustee 56 other investment companies in the Complex
Lawrence D. Ellis, M.D., $702.67 $111,222 for the Trust and
Trustee 56 other investment companies in the Complex
Edward L. Flaherty, Jr., $773.07 $122,362 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, $702.67 $111,222 for the Trust and
Trustee 56 other investment companies in the Complex
John E. Murray, Jr., $702.67 $111,222 for the Trust and
Trustee 56 other investment companies in the Complex
Wesley W. Posvar, $702.67 $111,222 for the Trust and
Trustee 56 other investment companies in the Complex
Marjorie P. Smuts, $702.67 $111,222 for the Trust and
Trustee 56 other investment companies in the Complex
</TABLE>
* Information is furnished for the fiscal year ended May 31, 1998.
# The aggregate compensation is provided for the Trust which is comprised of
one portfolio.
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, Inc.. All of the voting securities of Federated
Investors, Inc. 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
<PAGE>
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, 1998,
1997, and 1996, the adviser earned $878,186, $872,976, and $895,416,
respectively, which were reduced by $139,532, $158,880, and $86,923,
respectively, because of undertakings to limit the Fund's expenses.
Other Services
Fund Administration
Federated Services Company, a subsidiary of Federated Investors, Inc., 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, Inc., 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, 1998, 1997, and 1996, the Administrators earned $165,651,
$164,874, and $169,350, respectively, none of which was waived.
Custodian and Portfolio Accountant
State Street Bank and Trust Company ("State Street Bank"), 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, 1998, the Fund paid $548,866 pursuant to the
Shareholder Services Agreement of which $417,139 was waived.
<PAGE>
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, 1998, 1997, and 1996, 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 NAV 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 acts as the shareholder's agent
in depositing checks and converting them to federal funds.
Determining Net Asset Value
NAV generally changes each day. The days on which NAV 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:
o 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
o 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 NAV 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.
<PAGE>
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 ("SEC") rules, taking such securities at the same value
employed in determining NAV 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 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 NAV
during any 90-day period.
Exchanging Securities for Fund Shares
Investors may exchange certain securities or a combination of securities and
cash for shares. The securities and any cash must have a market value of at
least $25,000. Any securities to be exchanged must meet the investment objective
and policies of the Fund, must have a readily ascertainable market value, and
must not be subject to restrictions on resale. 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.
Investors wishing to exchange securities should first contact Federated
Securities Corp. Share purchased by exchange of U.S. government securities
cannot be redeemed by telephone for fifteen business days to allow time for the
transfer to settle.
An investor should forward the securities in negotiable form with an authorized
letter of transmittal 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 basis of the exchange will depend upon the NAV of 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, dividend, subscription, conversion, or
other rights attached to the securities become the property of the Fund, along
with the securities. 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.
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:
o derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
<PAGE>
o invest in securities within certain statutory limits; and
o 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:
o the availability of higher relative yields;
o differentials in market values;
o new investment opportunities;
o changes in creditworthiness of an issuer; or
o 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, 1998, were 6.98%, 5.05%, and 6.61%, 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 NAV 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, 1998, was 4.16%.
The yield for shares of the Fund is determined 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 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 SEC 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, 1998,
was 6.89%.
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.
<PAGE>
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.
TAXABLE YIELD EQUIVALENT FOR 1998
MULTISTATE MUNICIPAL FUND
FEDERAL INCOME TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%
JOINT $1- $42,351- $102,301- $155,951- OVER
RETURN 42,350 102,300 155,950 278,450 $278,450
SINGLE $1- $25,351- $61,401- $128,101- OVER
RETURN 25,350 61,400 128,100 278,450 $278,450
Tax-Exempt
Yield Taxable Yield Equivalent
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%
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:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in the Fund's expenses ; and
o various other factors.
<PAGE>
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:
o 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.
o 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.
o 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.
o 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, Inc.
Federated Investors, Inc. 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, 1997, Federated Investors, Inc.
managed 11 bond funds with approximately $2.1 billion in assets and 22 money
market funds with approximately $10.9 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 Funds may quote statistics from organizations including The Tax
Foundation and the National Taxpayers Union regarding the tax obligations of
Americans.
<PAGE>
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated Investors, Inc. are: U.S. equity and high
yield - J. Thomas Madden; U.S. fixed income - William D. Dawson, III; and
International - Henry A. Frantzen. The Chief Investment Officers are Executive
Vice Presidents of the Federated advisory companies.
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 $4.4 trillion to the more than 6,700 funds available.*
Federated Investors, Inc., through its subsidiaries, distributes mutual funds
for a variety of investment applications. Specific markets include:
Institutional Clients
Federated Investors, Inc. meets the needs of approximately 900 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
<PAGE>
Appendix
Standard and Poor's ("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.
BBB--Debt rated "BBB" is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than 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. ("Moody's") 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.
Baa--Bonds which are rated Baa are considered as medium grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
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 IBCA, 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.
BBB--Bonds considered to be investment grade and of satisfactory credit quality.
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 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 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:
o leading market positions in well-established industries;
o high rates of return on funds employed;
o conservative capitalization structure with moderate reliance on debt and
ample asset protection;
o broad margins in earning coverage of fixed financial charges and high
internal cash generation; and
o 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.
