PRESIDENT'S MESSAGE
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders for Federated
Tax-Free Trust, which covers the six-month period from December 1, 1995
through May 31, 1996. The report contains commentary by the portfolio
manager, followed by a complete list of the fund's investments on the last
day of the period, and the financial statements.
This money market fund continued its pursuit of current income exempt from
federal income taxes+ -- along with the additional advantages of daily
liquidity and stability of principal.* At the end of the period, the fund's
portfolio was invested in securities issued by municipalities across 30
states.
Tax-free dividends paid to shareholders during the period totaled $13.3
million, or $0.02 per share. At the end of the period, the fund's net assets
stood at $750.9 million.
Thank you for selecting Federated Tax-Free Trust as a daily cash investment.
We welcome your comments and suggestions.
Sincerely,
[Graphic]
Glen R. Johnson
President
July 15, 1996
+ Income may be subject to the federal alternative minimum tax and state and
local taxes.
* Although money market funds seek to maintain a stable net asset value of
$1.00 per share, there is no assurance that they will be able to do so. An
investment in the fund is neither insured nor guaranteed by the U.S.
government.
INVESTMENT REVIEW
Federated Tax-Free Trust invests in high quality short term tax-exempt debt
securities and seeks to maintain a constant net asset value of $1.00. For
the six-month period ended May 31, 1996, the fund paid shareholders a net
annualized total return of 1.62%. This is equivalent to a taxable money
market fund return to an investor in the highest federal tax bracket of
39.6% of 2.68%.*
The Federal Reserve Board (the "Fed") eased monetary policy twice over the
six-month reporting period ended May 1996. In December 1995, weak industrial
and retail economic data led the Fed to lower the federal funds rate by 25
basis points to 5.50%. Citing weakness in retail sales, housing, and
manufacturing sectors, the Fed continued its policy of easing in January
1996 with another 25 basis-point reduction to 5.25%. Through this period,
the short-end of the government and municipal yield curves anticipated the
policy moves from the Fed and, amid signs of a weakening economy, looked
forward to additional eases in the not too distant future.
Economic data for February and March, however, have changed the minds of
many market participants who now feel that the January cut was the last for
awhile. Strong employment growth in February and March as well as improved
housing and retail sectors indicated that the economy could be heating up.
Indeed, the market was stunned in early March by the report of a 705,000
increase in non-farm payroll jobs for February--the largest increase in 12
years. Now confronted with a more robust economy than previously
anticipated, market participants have moved expectations toward a more
neutral policy from the Fed in the near term with a possible tightening, or
increase in rates, later in 1996.
Yields on short-term government securities reflected this rather volatile
mood in the markets. The yield on the three-month Treasury bills began
December 1995 at 5.37%, declined to 4.89% by mid-February 1996, and ended
May at 6.44%. Correspondingly, the yield on one-year Treasury bills began
December at 5.35%, fell to 4.81% in mid-February, but rose to 5.70% at the
end of May. We saw similar movements in the municipal market, with the Bond
Buyer One Year Note Index starting December at 3.45%, falling to 3.08% in
mid-February, and rising to 3.73% by the end of May.
In this interest rate environment, the fund's average maturity was in a
neutral average maturity range of 40-55 days. Looking ahead to the latter
half of 1996, short-term interest rates should trade in a fairly narrow
range based on expectations of a steady monetary policy. However, an
increase in short-term rates by the Fed cannot be ruled out if economic data
indicates inflationary pressure.
* Performance quoted represents past performance and is not indicative of
future results.
FEDERATED TAX-FREE TRUST
PORTFOLIO OF INVESTMENTS
MAY 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS--99.1%
ALABAMA--2.9%
$ 2,025,000 Birmingham, AL IDA, Revenue Refunding Bonds Weekly VRDNs
(S.P. Hotel Company)/(Amsouth Bank N.A., Birmingham LOC) $ 2,025,000
2,000,000 Birmingham, AL, GO (Series 1995) Weekly VRDNs (First Alabama
Bank, Birmingham LOC) 2,000,000
2,100,000 Birmingham, AL, GO (Series 1992A) Weekly VRDNs (First Alabama
Bank, Birmingham LOC) 2,100,000
1,300,000 Bon Air, AL IDB Weekly VRDNs (Avondale Mills, Inc.)/(SunTrust
Bank, Atlanta LOC) 1,300,000
5,500,000 Chatom, AL, IDB PCR, 3.65% CP (Alabama Electric Co-op, Inc.)/
(National Rural Utilities Cooperative Finance Corp. GTD),
Mandatory Tender 7/23/1996 5,500,000
3,700,000 Jefferson County, AL, GO Warrants (Series 1996) Weekly VRDNs
(Bayerische Landesbank Girozentrale LOC) 3,700,000
4,000,000 Jefferson County, AL, Sewer Revenue Warrants (Series 1995-A)
Weekly VRDNs (Bayerische Landesbank Girozentrale LOC) 4,000,000
1,425,000 Marshall County, AL, Special Obligation School Refunding Warrant
(Series 1994) Weekly VRDNs (Marshall County, AL Board of
Education)/(First Alabama Bank, Birmingham LOC) 1,425,000
Total 22,050,000
ALASKA--0.7%
5,000,000 Anchorage, AK, 4.25% TANs, 12/13/1996 5,022,337
CALIFORNIA--12.8%
30,000,000 California PCFA, (Series 1996 C) Daily VRDNs (Pacific Gas & Electric
Co.)/(Bank of America NT and SA, San Francisco LOC) 30,000,000
2,500,000 California PCFA, (Series 1991) Weekly VRDNs (North County, CA
Recycling & Energy Recovery)/(Union Bank of Switzerland,
Zurich LOC) 2,500,000
25,000,000 California School Cash Reserve Program Authority, (Series 1995 A),
4.75% TRANs (MBIA INS), 7/3/1996 25,019,780
</TABLE>
FEDERATED TAX-FREE TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS--CONTINUED
CALIFORNIA--CONTINUED
$ 10,000,000 Kern County, CA Board of Education, 4.50% TRANs, 6/28/1996 $ 10,003,903
10,000,000 Los Angeles County, CA Unified School District, 4.50% TRANs,
7/3/1996 10,006,743
8,000,000 Los Angeles County, CA, 4.50% TRANs (Bank of America NT and SA,
San Francisco, Credit Suisse, Zurich, Morgan Guaranty Trust Co.,
New York, Swiss Bank Corp., Basle, Union Bank of Switzerland,
Zurich and Westdeutsche Landesbank Girozentrale LOCs), 7/1/1996 8,004,418
11,000,000 Santa Cruz County, CA, 4.50% TRANs, 7/11/1996 11,005,774
Total 96,540,618
COLORADO--0.8%
3,100,000 Denver, CO City & County Airport Authority, Subordinate Lien
Revenue Bonds (Series C), 6.00% Bonds (Toronto-Dominion Bank
LOC), 4/1/1997 (@100) 3,155,037
3,075,000 Loveland, CO, IDR (Series 1993S), 3.75% TOBs (Safeway, Inc.)/
(Bankers Trust Co., New York LOC), Optional Tender 6/1/1996 3,075,000
Total 6,230,037
CONNECTICUT--1.2%
4,730,000 Connecticut State Transportation Infrastructure Authority Weekly
VRDNs (Connecticut State)/(Commerzbank AG, Frankfurt LOC) 4,730,000
4,000,000 Connecticut State, Special Assessment Unemployment Compensation
Advance Fund, Revenue Bonds (Series 1993C), 3.90% TOBs
(FGIC INS)/(FGIC Securities Purchase, Inc. LIQ), Mandatory
Tender 7/1/1996 4,000,000
Total 8,730,000
FLORIDA--5.9%
9,940,000 Broward County, FL School District, (Series 1996A and 1996 B),
4.25% RANs, 4/24/1997 9,991,524
2,385,000 Florida HFA, Multi Family Housing Revenue Bonds (Series 1985TT)
Weekly VRDNs (River Oaks Project)/(Citibank NA, New York LOC) 2,385,000
8,235,000 Fort Lauderdale, FL Performing Arts Center Authority Weekly
VRDNs (SunTrust Bank, Central Florida LOC) 8,235,000
</TABLE>
FEDERATED TAX-FREE TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS--CONTINUED
FLORIDA--CONTINUED
$ 1,000,000 Orange County, FL HFA, Multifamily Housing Revenue Bonds Weekly
VRDNs (Sutton Place. Ltd. Project)/(Nationsbank of Maryland,
N.A. LOC) $ 1,000,000
4,232,000 Orange County, FL, 3.70% CP (Nationsbank of Florida, N.A. LOC),
Mandatory Tender 7/19/1996 4,232,000
2,500,000 Orange County, FL, Health Facilities Authority Weekly VRDNs
(Mayflower Retirement Community)/(Rabobank Nederland,
Utrecht LOC) 2,500,000
7,260,000 Pinellas County, FL Health Facility Authority, (Series 1987) Weekly
VRDNs (St. Mark Village Project)/(Nationsbank of Florida,
N.A. LOC) 7,260,000
8,550,000 Putnam County, FL Development Authority, PCR Bonds
(Series 1984H) Weekly VRDNs (Seminole Electric Cooperative,
Inc (FL))/(National Rural Utilities Cooperative Finance Corp. LOC) 8,550,000
Total 44,153,524
GEORGIA--2.9%
2,885,000 Fulco, GA Hospital Authority Weekly VRDNs (Piedmont Hospital)/
(SunTrust Bank, Atlanta LOC) 2,885,000
10,000,000 Fulton County, GA Housing Authority, Multifamily Housing Revenue
Refunding Bonds (Series 1994) Weekly VRDNs (Spring Creek
Crossing Project)/(Wachovia Bank of Georgia NA, Atlanta LOC) 10,000,000
4,000,000 Municipal Electric Authority of Georgia, (Series B), 4.25% TOBs,
Optional Tender 6/1/1996 4,000,000
5,200,000 Rockdale County, GA Hospital Authority, Revenue Anticipation
Certificates (Series 1994) Weekly VRDNs (Rockdale Hospital)/
(SunTrust Bank, Atlanta LOC) 5,200,000
Total 22,085,000
ILLINOIS--7.5%
7,695,000 Chicago, IL, (Series B), 3.65% TOBs (Morgan Guaranty Trust Co.,
New York LOC), Mandatory Tender 10/31/1996 7,695,000
13,100,000 Chicago, IL, GO (Series 1996), 3.10% TOBs (Landesbank Hessen-
Thueringen, Frankfurt LOC), Mandatory Tender 2/4/1997 13,100,000
</TABLE>
FEDERATED TAX-FREE TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS--CONTINUED
ILLINOIS--CONTINUED
$ 7,800,000 Illinois Development Finance Authority, (Series 1993A) Weekly
VRDNs (Loyola Academy)/(Northern Trust Co., Chicago, IL LOC) $ 7,800,000
17,900,000 Illinois Health Facilities Authority Weekly VRDNs (OSF Health Care
Systems) 17,900,000
7,500,000 Illinois Health Facilities Authority, Revenue Bonds (Series 1994)
Weekly VRDNs (South Suburban Hospital)/(Harris Trust & Savings
Bank, Chicago LOC) 7,500,000
2,670,000 Rockford, IL, EDRB, 4.40% TOBs (Independence Village of Rockford)/
(Banque Paribas, Paris LOC), Optional Tender 12/1/1996 2,670,000
Total 56,665,000
INDIANA--1.8%
4,865,000 Indiana Bond Bank, Advance Funding Program Notes
(Series 1996 A-1), 4.25% BANs, 7/8/1996 4,869,172
5,000,000 Indiana Bond Bank, Advance Funding Program Notes
(Series 1996 A-2), 4.25% BANs, 1/9/1997 5,022,038
3,500,000 Indianapolis, IN Local Public Improvement, Bond Bank Notes
(Series 1995 F), 4.50% BANs, 7/11/1996 3,503,000
Total 13,394,210
IOWA--1.1%
6,145,000 Indianola, IA Health Care Facility, Refunding Revenue Bonds
(Series 1992) Weekly VRDNs (The Village Project)/(Norwest Bank
Minnesota, Minneapolis LOC) 6,145,000
2,500,000 Iowa Higher Education Loan Authority, Revenue Bonds Weekly
VRDNs (MBIA INS)/(Dai-Ichi Kangyo Bank Ltd., Tokyo LIQ) 2,500,000
Total 8,645,000
KENTUCKY--0.6%
4,200,000 Kentucky Development Finance Authority Health Care System
Weekly VRDNs (Appalachian Regional Healthcare System)/(Societe
Generale, Paris LOC) 4,200,000
MARYLAND--1.4%
800,000 Baltimore County, MD, (Series 1992) Weekly VRDNs (Sheppard &
Enoch Pratt Hospital Facility)/(Societe Generale, Paris LOC) 800,000
</TABLE>
FEDERATED TAX-FREE TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS--CONTINUED
MARYLAND--CONTINUED
$ 2,000,000 Baltimore, MD PCR Weekly VRDNs (SCM Plants, Inc.)/(Barclays
Bank PLC, London LOC) $ 2,000,000
2,475,000 Montgomery County, MD EDA Weekly VRDNs (Howard Hughes
Medical Center) 2,475,000
750,000 Montgomery County, MD, Unlimited GO's, 9.20% Bonds, 6/1/1996 750,000
2,845,000 Queen Annes County, MD Economic Development Revenue,
(Series 1994), 3.75% TOBs (Safeway, Inc.)/(Bankers Trust Co.,
New York LOC), Optional Tender 6/1/1996 2,845,000
1,500,000 University of Maryland, Revolving Equipment Loan Program
(Series A) Weekly VRDNs (Student Loan Marketing Association LIQ) 1,500,000
Total 10,370,000
MICHIGAN--4.9%
3,000,000 Bruce Township, MI Hospital Finance Authority, Tender Securities
(ARTS) Weekly VRDNs (Sisters of Charity Health Care System)/
(MBIA INS)/(Morgan Guaranty Trust Co., New York LIQ) 3,000,000
800,000 Detroit, MI Water Supply System, Water Supply System Revenue and
Revenue Refunding Bonds (Series 1993) Weekly VRDNs (FGIC INS)/
(FGIC Securities Purchase, Inc. LIQ) 800,000
8,900,000 Michigan State Hospital Finance Authority, (Series A) Weekly VRDNs
(OSF Health Care Systems) 8,900,000
7,300,000 Michigan State Housing Development Authority, Rental Housing
Revenue Bonds (1994 Series C) Weekly VRDNs (Credit Suisse,
Zurich LOC) 7,300,000
15,000,000 Michigan State, GO UT Notes, 4.00% TRANs, 9/30/1996 15,048,834
1,485,000 Sterling Heights, MI Economy Development Corp., Limited
Obligation Revenue Refunding Bonds Weekly VRDNs (Sterling
Shopping Center Associates Project)/(NBD Bank, Michigan LOC) 1,485,000
Total 36,533,834
MINNESOTA--9.1%
5,500,000 Becker, MN, PCR (Series 1992A), 3.75% CP (Northern States Power
Co.), Mandatory Tender 7/12/1996 5,500,000
14,000,000 Hennepin Co. MN, (Series 1995C) Weekly VRDNs (Hennepin Co.
MN GTD) 14,000,000
</TABLE>
FEDERATED TAX-FREE TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS--CONTINUED
MINNESOTA--CONTINUED
$19,500,000 Rochester, MN Health Care Facility Authority Weekly VRDNs
(Mayo Foundation) $ 19,500,000
6,500,000 Rochester, MN Health Care Facility Authority Weekly VRDNs
(Mayo Foundation) 6,500,000
16,500,000 Rosemount, MN, PCR (Series 1984) Weekly VRDNs (Koch
Refining Co.) 16,500,000
940,000 St. Louis Park Hennepin County, MN Weekly VRDNs 940,000
725,000 St. Louis Park Hennepin County, MN, (Series A) Weekly VRDNs 725,000
4,600,000 St. Paul, MN Port Authority, (Series 1991) Weekly VRDNs (West
Gate Office)/(First Bank NA, Minneapolis LOC) 4,600,000
Total 68,265,000
MISSOURI--3.7%
5,800,000 Missouri State Environmental Improvement & Energy Authority,
(Series 1993M) Weekly VRDNs (Associated Electric Cooperative, Inc.)/
(National Rural Utilities Cooperative Finance Corp. GTD) 5,800,000
13,370,000 Missouri State Environmental Improvement & Energy Authority,
PCR (Series 1985 B), 3.65% CP (Union Electric Co.)/
(Westdeutsche Landesbank Girozentrale LOC), Mandatory
Tender 8/20/1996 13,370,000
3,000,000 Missouri State HEFA, Health Facilities Revenue Bonds (Series 1989 A)
Weekly VRDNs (Sisters of Mercy Health System)/(ABN AMRO Bank
N.V., Amsterdam, Credit Suisse, Zurich and Rabobank Nederland,
Utrecht LIQs) 3,000,000
5,400,000 Missouri State HEFA, Health Facilities Revenue Bonds (Series 1989 B)
Weekly VRDNs (Sisters of Mercy Health System)/(ABN AMRO Bank
N.V., Amsterdam LIQ) 5,400,000
Total 27,570,000
NEW YORK--2.0%
5,000,000 Nassau County, NY, (Series 1996A), 4.00% RANs, 3/5/1997 5,023,109
</TABLE>
FEDERATED TAX-FREE TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS--CONTINUED
NEW YORK--CONTINUED
$10,000,000 New York City, NY, (Series B), 4.75% RANs (Bank of Nova Scotia,
Toronto, Canadian Imperial Bank of Commerce, Toronto,
Chemical Bank, New York, Citibank NA, New York,
Commerzbank AG, Frankfurt, Morgan Guaranty Trust Co.,
New York and Union Bank of Switzerland, Zurich LOCs),
6/28/1996 $ 10,008,296
Total 15,031,405
NORTH CAROLINA--5.8%
20,000,000 Martin County, NC IFA, (Series 1993) Weekly VRDNs
(Weyerhaeuser Co.) 20,000,000
23,715,000 NCNB Pooled Tax-Exempt Trust, (Series 1990A) Weekly VRDNs
(NCNB Tax Exempt Trust 1990a)/(Nationsbank, N.A.
(North Carolina) LOC) 23,715,000
Total 43,715,000
OHIO--7.7%
800,000 Akron, OH, Sanitary Sewer System Revenue Bonds Weekly VRDNs
(Credit Suisse, Zurich LOC) 800,000
6,500,000 (a)Cleveland, OH City School District, Energy Conservation
Improvement Bonds (Series 1994) Weekly VRDNs (Internationale
Nederlanden Bank N.V. LIQ)/(Internationale Nederlanden Bank
N.V. LOC) 6,500,000
3,000,000 Cleveland-Cuyahoga County, OH Port Authority, (Series 1993) Weekly
VRDNs (Rock & Roll Hall of Fame Museum)/(Credit Local
de France LOC) 3,000,000
3,885,000 Franklin County, OH Hospital Facility Authority, (Series 1992) Weekly
VRDNs (Wesley Glenn, Inc.)/(Fifth Third Bank, Cincinnati LOC) 3,885,000
5,800,000 Hamilton County, OH Health System Weekly VRDNs (West Park
Community)/(Fifth Third Bank, Cincinnati LOC) 5,800,000
2,735,000 Marion County, OH Hospital Authority, (Series 1991) Weekly VRDNs
(Marion County, OH Pooled Hospital Program)/(Bank One,
Columbus, N.A. LOC) 2,735,000
18,500,000 Montgomery County, OH Health Facilities Authority, (Series 1995)
Weekly VRDNs (Sisters of Charity Health Care System)/(Toronto-
Dominion Bank LIQ) 18,500,000
</TABLE>
FEDERATED TAX-FREE TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS--CONTINUED
OHIO--CONTINUED
$ 1,000,000 Ohio State Air Quality Development Authority Weekly VRDNs
(Timken Co.)/(Credit Suisse, Zurich LOC) $ 1,000,000
2,500,000 Ohio State Water Development Authority, Multimodal Water
Development (Series 1993) Weekly VRDNs (Timken Co.)/(Wachovia
Bank of Georgia NA, Atlanta LOC) 2,500,000
7,700,000 Rickenbacker, OH Port Authority, (Series 1992) Weekly VRDNs
(Rickenbacker Holdings, Inc.)/(Bank One, Columbus, N.A. LOC) 7,700,000
5,500,000 University of Cincinnati, OH, General Receipts (Series N), 3.75%
BANs, 3/20/1997 5,519,148
Total 57,939,148
OKLAHOMA--2.1%
2,740,000 Muskogee, OK Industrial Trust, (Series 1985) Weekly VRDNs
(Muskogee Mall Limited Partnership)/(Boatmen's National Bank of
St. Louis LOC) 2,740,000
3,810,000 Muskogee, OK Industrial Trust, (Series 1985) Weekly VRDNs
(Warmack Musskogee Limited Partnership)/(Boatmen's National
Bank of St. Louis LOC) 3,810,000
9,000,000 Oklahoma State Industrial Authority, Health System Revenue Bonds
(Series 1995A) Weekly VRDNs (Baptist Medical Center, OK)/(Credit
Suisse, Zurich and Morgan Guaranty Trust Co., New York LIQs) 9,000,000
Total 15,550,000
OREGON--0.9%
7,000,000 Oregon State, Veteran's Welfare Bonds (Series 73G and H) Weekly
VRDNs (Morgan Guaranty Trust Co., New York LOC) 7,000,000
PENNSYLVANIA--1.4%
8,000,000 Commonwealth of Pennsylvania, (First Series of 1995-1996), 4.50%
TANs, 6/28/1996 8,004,206
2,000,000 Erie County, PA Hospital Authority Weekly VRDNs (St. Vincent
Health System)/(Mellon Bank NA, Pittsburgh LOC) 2,000,000
600,000 Sayre, PA, Health Care Facilities Authority Weekly VRDNs (VHA of
Pennsylvania)/(AMBAC INS)/(First National Bank of Chicago LIQ) 600,000
Total 10,604,206
</TABLE>
FEDERATED TAX-FREE TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS--CONTINUED
RHODE ISLAND--0.3%
$ 2,200,000 Rhode Island Housing & Mortgage Finance Corp, (Series 19-C), 3.45%
TOBs (Societe Generale, Paris GIC), Mandatory Tender 1/30/1997 $ 2,200,000
TENNESSEE--3.1%
15,000,000 Chattanooga, TN HEFA Weekly VRDNs (Mccallie School)/(SunTrust
Bank, Atlanta LOC) 15,000,000
2,305,000 Metropolitan Government Nashville & Davidson County, TN HEFA,
(Series 1985B), 3.70% TOBs (Vanderbilt University), Optional Tender
5/1/1997 2,305,000
6,000,000 Shelby County, TN Health Education & Housing Facilities Board,
(Series C), 3.90% TOBs (Methodist Health System, Inc.)/(MBIA INS),
Optional Tender 8/1/1996 6,000,000
Total 23,305,000
TEXAS--10.0%
4,325,000 Dallas, TX, (Series C), 3.90% TOBs, Optional Tender 6/17/1996 4,325,000
12,500,000 Harris County, TX HFDC Daily VRDNs (St. Luke's Episcopal
Hospital) 12,500,000
23,400,000 Harris County, TX HFDC, (Series 1994) Daily VRDNs (Methodist
Hospital, Houston, TX) 23,400,000
23,000,000 Texas State, (Series 1995A), 4.75% TRANs, 8/30/1996 23,070,217
12,000,000 Texas State, (Series 1995B), 3.65% CP, Mandatory Tender 8/20/1996 12,000,000
Total 75,295,217
UTAH--0.7%
5,000,000 Intermountain Power Agency, UT, (Series F), 3.80% TOBs, Optional
Tender 6/15/1996 5,000,000
VERMONT--1.1%
8,000,000 Vermont IDA Weekly VRDNs (Wallace Computer, Inc.)/(Wachovia
Bank of NC, NA, Winston-Salem LOC) 8,000,000
VIRGINIA--2.6%
7,600,000 Arlington County, VA Weekly VRDNs (Ballston Public Parking)/
(Citibank NA, New York LOC) 7,600,000
</TABLE>
FEDERATED TAX-FREE TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM MUNICIPALS--CONTINUED
VIRGINIA--CONTINUED
$12,000,000 Roanoke, VA IDA, Hospital Revenue Bonds (Series 1995C) Weekly
VRDNs (Carilion Health System)/(Morgan Guaranty Trust Co.,
New York LIQ) $ 12,000,000
Total 19,600,000
WEST VIRGINIA--0.6%
4,740,000 West Virginia University Board of Regents, 3.50% TOBs (Morgan
Guaranty Trust Co., New York LOC), Optional Tender 2/1/1997 4,740,000
WISCONSIN--1.9%
6,000,000 Milwaukee, WI, (Series 1996-A), 3.50% RANs, 2/27/1997 6,021,562
8,000,000 Wisconsin HEFA, Revenue Bonds (Series 1994) Weekly VRDNs
(Felician Health Care, Inc. Project)/(Lasalle National Bank,
Chicago LOC) 8,000,000
Total 14,021,562
WYOMING--0.7%
5,170,000 Wyoming Community Development Authority, (Series 1986C), 3.70%
TOBs (First National Bank of Chicago LIQ), Optional Tender
6/1/1996 5,170,000
OTHER--0.9%
6,566,605 (a)LaSalle National Bank Leasetops Trust, Series 1995A Leasetops
Certificates Weekly VRDNs (Lasalle National Bank, Chicago LOC) 6,566,605
TOTAL INVESTMENTS, (AT AMORTIZED COST)(B) $ 744,192,703
</TABLE>
(a) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. These securities have been determined to be
liquid under criteria established by the Board of Trustees. At the end of
the period, these securities amounted to ($13,066,605) which represents 1.7%
of net assets.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($750,972,995) at May 31, 1996.
FEDERATED TAX-FREE TRUST
The following acronym(s) are used throughout this portfolio:
AMBAC -- American Municipal Bond Assurance Corporation
ARTS -- Adjustable Rate Tender Security
BANs -- Bond Anticipation Notes
CP -- Commercial Paper
EDA -- Economic Development Authority
EDRB -- Economic Development Revenue Bonds
FGIC -- Financial Guaranty Insurance Company
GIC -- Guaranteed Investment Contract
GO -- General Obligation
GTD -- Guaranty
HEFA -- Health and Education Facilities Authority
HFA -- Housing Finance Authority
HFDC -- Health Facility Development Corporation
IDA -- Industrial Development Authority
IDB -- Industrial Development Bond
IDR -- Industrial Development Revenue
IFA -- Industrial Finance Authority
INS -- Insured
LIQ -- Liquidity Agreement
LOCs -- Letter(s) of Credit
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance
PCR -- Pollution Control Revenue
PCFA -- Pollution Control Finance Authority
RANs -- Revenue Anticipation Notes
SA -- Support Agreement
TANs -- Tax Anticipation Notes
TOBs -- Tender Option Bonds
TRANs -- Tax and Revenue Anticipation Notes
UT -- Unlimited Tax
VHA -- Veterans Housing Administration
VRDNs -- Variable Rate Demand Notes
(See Notes which are an integral part of the Financial Statements)
FEDERATED TAX-FREE TRUST
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at amortized cost and value $ 744,192,703
Cash 1,033,857
Income receivable 7,974,535
Total assets 753,201,095
LIABILITIES:
Income distribution payable $ 2,134,903
Accrued expenses 93,197
Total liabilities 2,228,100
Net Assets for 750,984,157 shares outstanding $ 750,972,995
NET ASSETS CONSIST OF:
Paid in capital $ 750,984,157
Accumulated net realized loss on investments (11,162)
Total Net Assets $ 750,972,995
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$750,972,995 / 750,984,157 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED TAX-FREE TRUST
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 15,145,193
EXPENSES:
Investment advisory fee $ 1,653,710
Administrative personnel and services fee 312,551
Custodian fees 54,894
Transfer and dividend disbursing agent fees and expenses 35,205
Directors'/Trustees' fees 7,475
Auditing fees 8,204
Legal fees 9,575
Portfolio accounting fees 59,708
Shareholder services fee 1,033,569
Share registration costs 10,369
Printing and postage 7,931
Insurance premiums 7,503
Taxes 8,588
Miscellaneous 6,225
Total expenses 3,215,507
Waivers
Waiver of investment advisory fee $ (509,454)
Waiver of shareholder services fee (826,855)
Total waivers (1,336,309)
Net expenses 1,879,198
Net investment income 13,265,995
Net realized loss on investments (1,043)
Change in net assets resulting from operations $ 13,264,952
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED TAX-FREE TRUST
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
(UNAUDITED) NOVEMBER 30,
MAY 31, 1996 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 13,265,995 $ 36,296,822
Net realized gain (loss) on investments (1,043) 9,580
Change in net assets resulting from operations 13,264,952 36,306,403
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (13,265,995) (36,296,822)
SHARE TRANSACTIONS--
Proceeds from sale of shares 1,365,756,872 3,371,354,462
Net asset value of shares issued to shareholders in payment of
distributions declared 1,070,776 2,688,363
Cost of shares redeemed (1,423,223,026) (3,782,230,461)
Change in net assets resulting from share transactions (56,395,378) (408,187,636)
Change in net assets (56,396,421) (408,178,056)
NET ASSETS:
Beginning of period 807,369,416 1,215,547,472
End of period $ 750,972,995 $ 807,369,416
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
(UNAUDITED)
MAY 31, YEAR ENDED NOVEMBER 30
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING
OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income 0.02 0.04 0.02 0.02 0.03 0.04 0.06 0.06 0.05 0.04
LESS DISTRIBUTIONS
Distributions
from net
investment income (0.02) (0.04) (0.02) (0.02) (0.03) (0.04) (0.06) (0.06) (0.05) (0.04)
NET ASSET VALUE,
END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(A) 1.62% 3.57% 2.43% 2.18% 2.88% 4.49% 5.68% 6.03% 4.87% 4.11%
RATIOS TO AVERAGE
NET ASSETS
Expenses 0.46%* 0.45% 0.45% 0.46% 0.46% 0.46% 0.45% 0.45% 0.45% 0.44%*
Net investment
income 3.23%* 3.51% 2.38% 2.16% 2.84% 4.40% 5.54% 5.86% 4.74% 4.01%*
SUPPLEMENTAL DATA
Net assets,
end of
period
(000 omitted) $750,973 $807,369 $1,215,547 $1,346,791 $1,523,588 $1,720,730 $1,887,467 $2,140,368 $2,618,595 $2,997,042
</TABLE>
* Computed on an annualized basis.
(a) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(See Notes which are an integral part of the Financial Statements)
FEDERATED TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996 (UNAUDITED)
(1) ORGANIZATION
Federated Tax-Free Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as a diversified, open-end
management investment company. The investment objective of the Trust is
dividend income exempt from federal regular income tax while seeking
relative stability of principal.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS -- The Trust's use of the amortized cost method to
value its portfolio securities is in accordance with Rule 2a-7 under the
Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS -- Interest income and
expenses are accrued daily. Bond premium and discount, if applicable, are
amortized as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES -- It is the Trust's policy to comply with the provisions of
the Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
At November 30, 1995, the Trust, for federal tax purposes, had a capital
loss carryforward of $10,119, which will reduce the Trust's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Trust of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire as follows:
<TABLE>
<CAPTION>
EXPIRATION YEAR EXPIRATION AMOUNT
<C> <C>
2002 $10,119
</TABLE>
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The Trust may engage in
when-issued or delayed delivery transactions. The Trust records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
FEDERATED TAX-FREE TRUST
RESTRICTED SECURITIES -- Restricted securities are securities that may only
be resold upon registration under federal securities laws or in transactions
exempt from such registration. Many restricted securities may be resold in
the secondary market in transactions exempt from registration. In some
cases, the restricted securities may be resold without registration upon
exercise of a demand feature. Such restricted securities may be determined
to be liquid under criteria established by the Board of Trustees. The Trust
will not incur any registration costs upon such resales. Restricted
securities are valued at amortized cost in accordance with Rule 2a-7 under
the Act.
Additional information on each restricted security held at May 31, 1996, is
as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
LaSalle National Bank 10/11/95 $6,386,201
Leasetops, Trust, (Series 1995A)
Certificates Weekly VRDNS
(LaSalle National Bank, Chicago, LOC)
Cleveland, OH City School District, 4/30/96-5/13/96 $6,500,000
Energy Conservation
Improvement Bonds (Series 1994)
Weekly VRDNs (Internationale
Nederlanden Bank N.V. LIQ)
</TABLE>
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
OTHER -- Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest (without par value). At
May 31, 1996, capital paid-in aggregated $750,984,157.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED NOVEMBER 30,
MAY 31, 1996 1995
<S> <C> <C>
Shares sold 1,365,756,872 3,371,354,462
Shares issued to shareholders in payment of distributions declared 1,070,776 2,688,363
Shares redeemed (1,423,223,026) (3,782,230,461)
Net change resulting from share transactions (56,395,378) (408,187,636)
</TABLE>
FEDERATED TAX-FREE TRUST
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE -- Federated Research, the Trust's investment
adviser, (the "Adviser"), receives for its services an annual investment
advisory fee equal to 0.40% of the Trust's average daily net assets.
The Adviser will waive, to the extent of its advisory fee, the amount, if
any, by which the Trust's aggregate annual operating expenses exceed 0.45%
of the Trust's average daily net assets.
ADMINISTRATIVE FEE -- Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Trust with administrative
personnel and services. The fee paid to FServ is based on the level of
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received during
the period of the Administrative Services Agreement shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE -- Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services ("FSS"), the Trust will pay
FSS up to 0.25% of daily average net assets of the Trust shares for the
period. The fee paid to FSS is used to finance certain services for
shareholders and to maintain shareholder accounts. FSS may voluntarily
choose to waive any portion of its fee. FSS can modify or terminate this
voluntary waiver at any time at its sole discretion.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES -- FServ,
through its subsidiary, Federated Shareholder Services Company serves as
transfer and dividend disbursing agent for the Trust. The fee paid to FServ
is based on the size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES -- FServ maintains the Trust's accounting records
for which it receives a fee. The fee is based on the level of the Trust's
average daily net assets for the period, plus out-of-pocket expenses.
INTERFUND TRANSACTIONS -- During the period ended May 31, 1996, the Trust
engaged in purchase and sale transactions with funds that have a common
investment adviser (or affiliated investment advisers), common
Directors/Trustees, and/or common Officers. These purchase and sale
transactions were made at current market value pursuant to Rule 17a-7 under
the Act amounting to $860,340,000 and $625,510,000, respectively.
GENERAL -- Certain of the Officers and Trustees of the Trust are Officers
and Directors or Trustees of the above companies.
TRUSTEES OFFICERS
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Glen R. Johnson
William J. Copeland President
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Edward L. Flaherty, Jr. Edward C. Gonzales
Peter E. Madden Executive Vice President
Gregor F. Meyer John W. McGonigle
John E. Murray, Jr. Executive Vice President, Secretary and Treasurer
Wesley W. Posvar Richard B. Fisher
Marjorie P. Smuts Vice President
S. Elliott Cohan
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal. Although money market funds seek to
maintain a stable net asset value of $1.00 per share, there is no assurance
that they will be able to do so.
This report is authorized for distribution to prospective investors only
when preceded or accompanied by the fund's prospectus which contains facts
concerning its objective and policies, management fees, expenses and other
information.
FEDERATED
TAX-FREE
TRUST
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
MAY 31, 1996
[Graphic]
Federated Investors
Since 1955
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.
[Graphic]
Recycled Paper
Cusip 314282104
8070103 (7/96)
