1933 Act File No. 2-63343
1940 Act File No. 811-2891
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. ..........
Post-Effective Amendment No. 39 ......... X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 26 ........................ X
FEDERATED TAX-FREE TRUST
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
X on January 31, 1997 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i).
75 days after filing pursuant to paragraph (a)(ii)
on pursuant to paragraph (a)(ii) of Rule 485.
-----------------
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, and:
X filed the Notice required by that Rule on January 15, 1997 or
intends to file the Notice required by that Rule on or about
; or
------------
during the most recent fiscal year did not sell any securities pursuant
to Rule 24f-2 under the Investment Company Act of 1940, and, pursuant to
Rule 24f-2(b)(2), need not file the Notice.
CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of FEDERATED TAX-FREE
TRUST is comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page...............Cover Page.
Item 2. Synopsis.................Summary of Trust Expenses.
Item 3. Condensed Financial
Information............Financial Highlights.
Item 4. General Description of
Registrant.............General Information; Investment
Information; Investment Objective;
Investment Policies; Municipal
Securities; Investment Risks; Investment
Limitations; Performance Information.
Item 5. Management of the Fund...Trust Information; Management of the
Trust; Distribution of Shares;
Administration of the Trust.
Item 6. Capital Stock and Other
Securities.............Dividends; Capital Gains; Account and
Share Information; Voting Rights; Tax
Information; Federal Income Tax; State
and Local Taxes.
Item 7. Purchase of Securities Being
Offered................Net Asset Value; How to Purchase Shares;
Certificates and Confirmations.
Item 8. Redemption or Repurchase.How to Redeem Shares; Accounts With Low
Balances.
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page...............Cover Page.
Item 11. Table of Contents........Table of Contents.
Item 12. General Information and
History................About Federated Investors; Massachusetts
Partnership Law; Appendix.
Item 13. Investment Objectives and
Policies...............Investment Policies; Investment
Limitations.
Item 14. Management of the Fund...Federated Tax-Free Trust Management.
Item 15. Control Persons and Principal
Holders of Securities..Share Ownership.
Item 16. Investment Advisory and Other
Services...............Investment Advisory Services; Other
Services.
Item 17. Brokerage Allocation.....Brokerage Transactions.
Item 18. Capital Stock and Other
Securities.............Not applicable.
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered................Determining Net Asset Value; Redemption
in Kind.
Item 20. Tax Status...............The Trust's Tax Status.
Item 21. Underwriters.............Not applicable.
Item 22. Calculation of Performance
Data ..................Yield; Effective Yield; Tax Equivalent
Yield; Total Return; Tax-Equivalency
Table; Performance Information.
Item 23. Financial Statements.....(Filed in Part A)
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FEDERATED TAX-FREE TRUST
PROSPECTUS
The shares of Federated Tax-Free Trust (the "Trust") offered by this prospectus
represent interests in an open-end, management investment company (a mutual
fund). The Trust invests in short-term municipal securities to provide dividend
income exempt from federal regular income taxes while seeking relative stability
of principal.
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 OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE
TRUST ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE
CAN BE NO ASSURANCE THAT THE TRUST WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Trust. Keep this prospectus for future reference.
The Trust has also filed a Statement of Additional Information dated January 31,
1997, with the Securities and Exchange Commission ("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 make inquiries about the Trust, contact the Trust
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 Trust 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 January 31, 1997
TABLE OF CONTENTS
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SUMMARY OF TRUST EXPENSES 1
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FINANCIAL HIGHLIGHTS 2
- ------------------------------------------------------
GENERAL INFORMATION 3
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INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Municipal Securities 5
Investment Risks 6
Investment Limitations 6
TRUST INFORMATION 6
- ------------------------------------------------------
Management of the Trust 6
Distribution of Shares 7
Administration of the Trust 7
NET ASSET VALUE 8
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HOW TO PURCHASE SHARES 9
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HOW TO REDEEM SHARES 9
- ------------------------------------------------------
ACCOUNT AND SHARE INFORMATION 10
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TAX INFORMATION 11
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Federal Income Tax 11
State and Local Taxes 12
PERFORMANCE INFORMATION 12
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FINANCIAL STATEMENTS 13
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INDEPENDENT AUDITORS' REPORT 32
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ADDRESSES 33
- ------------------------------------------------------
SUMMARY OF TRUST EXPENSES
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<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)................................................... None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)................................................. None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)............................... None
Redemption Fee (as a percentage of amount redeemed, if applicable).................... None
Exchange Fee.......................................................................... None
ANNUAL TRUST OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1)...................................................... 0.28%
12b-1 Fee............................................................................. None
Total Other Expenses.................................................................. 0.17%
Shareholder Services Fee (after waiver)(2)................................. 0.05%
Total Operating Expenses(3)...................................................... 0.45%
</TABLE>
(1) The management fee has been reduced to reflect the waiver of a portion of
the management fee. 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 0.77% absent the 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 Trust will bear, either
directly or indirectly. For more complete descriptions of the various costs and
expenses, see " Trust Information." Wire-transferred redemptions of less than
$5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 invest-
ment, assuming (1) 5% annual return and (2) redemption
at the end of each time period........................ $5 $14 $25 $ 57
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FEDERATED TAX-FREE TRUST
FINANCIAL HIGHLIGHTS
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(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Independent Auditors' Report on page 32.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
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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 0.03 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 (0.03) (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) 3.18% 3.57% 2.43% 2.18% 2.88% 4.49% 5.68% 6.03% 4.87% 4.11%
- -----------
RATIOS TO
AVERAGE NET
ASSETS
- -----------
Expenses 0.45% 0.45% 0.45% 0.46% 0.46% 0.46% 0.45% 0.45% 0.45% 0.44%
- -----------
Net
investment
income 3.12% 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) $747,785 $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>
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
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The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated November 20, 1978. The Trust is designed for banks and other
institutions that hold assets for individuals, trusts, estates or partnerships,
as a convenient means of accumulating an interest in a professionally managed,
portfolio investing primarily in short-term municipal securities. The Trust may
not be a suitable investment for retirement plans because it invests in
municipal securities. A minimum initial investment of $25,000 over a 90-day
period is required.
The Trust attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
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INVESTMENT OBJECTIVE
The investment objective of the Trust is to provide dividend income exempt from
federal regular income taxes while seeking relative stability of principal. This
investment objective cannot be changed without shareholder approval. While there
is no assurance that the Trust will achieve its investment objective, it
endeavors to do so by complying with the diversification and other requirements
of Rule 2a-7 under the Investment Company Act of 1940 which regulates money
market mutual funds and by following the investment policies described in this
prospectus.
INVESTMENT POLICIES
The Trust pursues its investment objective by investing primarily in a portfolio
of municipal securities maturing in one year or less. As a matter of operating
policy, which may be changed without shareholder approval, the Trust will limit
the average maturity of its portfolio to 90 days or less, in order to meet
regulatory requirements.
As a matter of investment policy, which cannot be changed without shareholder
approval, at least 80% of the Trust's annual interest income will be exempt from
federal regular income tax. (Federal regular income tax does not include the
federal individual alternative minimum tax or the federal alternative minimum
tax for corporations.)
ACCEPTABLE INVESTMENTS. The Trust invests primarily in debt obligations issued
by or on behalf of states, territories, and possessions of the United States,
including the District of Columbia, and any political subdivision or financing
authority of any of these, the income from which is, in the opinion of qualified
legal counsel, exempt from federal regular income tax ("Municipal Securities").
Examples of Municipal Securities include, but are not limited to:
- tax and revenue anticipation notes issued to finance working capital
needs in anticipation of receiving taxes or other revenues;
- bond anticipation notes that are intended to be refinanced through a
later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
- participation, trust, and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Trust with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at
par. The interest rate may float or be adjusted at regular intervals
(ranging from daily to annually), and is normally based on a published
interest rate or interest rate index. Most variable rate demand notes allow
the Trust to demand the repurchase of the security on not more than seven
days prior notice. Other notes only permit the Trust to tender the security
at the time of each interest rate adjustment or at other fixed intervals.
See "Demand Features." The Trust treats variable rate demand notes as
maturing on the later of the date of the next interest rate adjustment or
the date on which the Trust may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Trust may purchase interests in Municipal
Securities from financial institutions such as commercial and investment
banks, savings associations, and insurance companies. These interests may
take the form of participations, beneficial interests in a trust,
partnership interests or any other form of indirect ownership that allows
the Trust to treat the income from the investment as exempt from federal
income tax. The Trust invests in these participation interests in order to
obtain credit enhancement or demand features that would not be available
through direct ownership of the underlying Municipal Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities. They may take the form of a lease, an installment purchase
contract, a conditional sales contract, or a participation interest in any
of the above. Lease obligations may be subject to periodic appropriation.
Municipal leases are subject to certain specific risks in the event of
default or failure of appropriation.
CREDIT ENHANCEMENT. Certain of the Trust's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, default, or change in the credit quality of the party providing
the credit enhancement will adversely affect the quality and marketability of
the underlying security and could cause losses to the Trust and affect its share
price. The Trust may have more than 25% of its total assets invested in
securities credit-enhanced by banks.
DEMAND FEATURES. The Trust may acquire securities that are subject to puts and
standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period (usually
seven days) following a demand by the Trust. The demand feature may be issued by
the issuer of the underlying securities, a dealer in the securities, or by
another third party, and may not be transferred separately from the underlying
security. The Trust uses these arrangements to provide the Trust with liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of the demand
feature, or a default on the underlying security or other event that terminates
the demand feature before its exercise, will adversely affect the liquidity of
the underlying security. Demand features that
are exercisable even after a payment default on the underlying security may be
treated as a form of credit enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Trust may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Trust purchases securities with payment and delivery scheduled for
a future time. The seller's failure to complete these transactions may cause the
Trust 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 Trust may dispose of a commitment prior to settlement if the adviser deems
it appropriate to do so. In addition, the Trust 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 Trust may realize short-term profits or losses upon the sale of such
commitments.
RESTRICTED AND ILLIQUID SECURITIES. The Trust may invest in restricted
securities. Restricted securities are any securities in which the Trust may
invest pursuant to its investment objective and policies but which are subject
to restrictions on resale under federal securities law. Under criteria
established by the Trustees, certain restricted securities are determined to be
liquid. To the extent that restricted securities are not determined to be liquid
the Trust will limit their purchase, together with other illiquid securities,
including non-negotiable time deposits to 10% of its net assets.
TEMPORARY INVESTMENTS. From time to time, when the investment adviser determines
that market conditions call for a temporary defensive posture, the Trust may
invest in tax-exempt or taxable securities, all of comparable quality to other
securities in which the Trust invests, such as: obligations issued by or on
behalf of municipal or corporate issuers; obligations issued or guaranteed by
the U.S. government, its agencies, or instrumentalities; instruments issued by a
U.S. branch of a domestic bank or other deposit institutions having capital,
surplus, and undivided profits in excess of $100,000,000 at the time of
investment; and repurchase agreements (arrangements in which the organization
selling the Trust a temporary investment agrees at the time of sale to
repurchase it at a mutually agreed upon time and price).
Although the Trust is permitted to make taxable, temporary investments, there is
no current intention to do so. However, the interest from certain Municipal
Securities is subject to the federal alternative minimum 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 short-term 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 Trust to achieve
its investment objective also depends on the continuing ability of the issuers
of Municipal Securities and participation interests, or the credit enhancers of
either, to meet their obligations for the payment of interest and principal when
due. In addition, from time to time, the supply of Municipal Securities
acceptable for purchase by the Trust could become limited.
The Trust may invest in Municipal Securities which are repayable out of revenue
streams generated from economically related projects or facilities and/or whose
issuers are located in the same state. Sizable investments in these Municipal
Securities could involve an increased risk to the Trust should any of these
related projects or facilities experience financial difficulties.
Obligations of issuers of Municipal Securities are subject to the provisions of
bankruptcy, insolvency, and other laws affecting the rights and remedies of
creditors. In addition, the obligations of such issuers may become subject to
laws enacted in the future by Congress, state legislators, or referenda
extending the time for payment of principal and/or interest, or imposing other
constraints upon enforcement of such obligations or upon the ability of states
or municipalities to levy taxes. There is also the possibility that, as a result
of litigation or other conditions, the power or ability of any issuer to pay,
when due, the principal of and interest on its municipal securities may be
materially affected. The Trust's concentration in Municipal Securities may
entail a greater level of risk than other types of money market funds.
INVESTMENT LIMITATIONS
The Trust will not borrow money or pledge securities except, under certain
circumstances, the Trust may borrow up to one-third of the value of its total
assets and pledge up to 10% of the value of such assets to secure such
borrowings. These investment limitations cannot be changed without shareholder
approval.
TRUST INFORMATION
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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. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Trust are made by Federated
Research, the Trust's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Trust and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee equal
to .40% of the Trust's average daily net assets. Under the investment
advisory contract, the adviser will waive the amount, limited to the amount
of the advisory fee, by which the Trust's aggregate annual operating
expenses, including the investment advisory fee but excluding interest,
taxes, brokerage commissions, expenses of registering and qualifying the
Trust and its shares under federal and state laws and regulations, expenses
of withholding taxes, and extraordinary expenses exceed .45 of 1% of its
average daily net assets.
ADVISER'S BACKGROUND. Federated Research, a Delaware business trust,
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Research and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. With over $76 billion invested across
more than 338 funds under management and/or administration by its
subsidiaries, as of December 31, 1996, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 2,000 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,500 financial institutions nationwide.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Trust and its portfolio securities.
These codes recognize that such persons owe a fiduciary duty to the Trust'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 Trust; 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.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for shares of the Trust.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
ADMINISTRATION OF THE TRUST
SHAREHOLDER SERVICES. The Trust has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which the Trust may make payments
up to .25% of the average daily net asset value of its 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 Trust 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 Trust. 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 Trust's investment adviser or its affiliates.
ADMINISTRATIVE SERVICES. Federated Services Company, a subsidiary of Federated
Investors, provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Trust at an
annual rate which relates to the average aggregate daily net assets of all funds
advised by affiliates of Federated Investors specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
- ------------ ------------------------------------
<S> <C>
.15% on the first $250 million
.125% on the next $250 million
.10% on the next $250 million
.075% on assets in excess of $750 million
</TABLE>
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.
NET ASSET VALUE
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The Trust attempts to stabilize the net asset value of its shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per share is determined by subtracting total liabilities from total assets
and dividing the remainder by the number of shares outstanding. The Trust cannot
guarantee that its net asset value will always remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 3:00 p.m. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except
on New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day.
HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange is open for business. Shares may be purchased either by wire or by
check. The Trust reserves the right to reject any purchase request.
To make a purchase, open an account by calling Federated Securities Corp.
Information needed to establish the account will be taken by telephone. The
minimum initial investment is $25,000. However, an account may be opened with a
smaller amount as long as the minimum is reached within 90 days. Minimum
investments will be calculated by combining all accounts maintained with the
Trust. Financial institutions may impose different minimum investment
requirements on their customers.
PURCHASING SHARES BY WIRE. Shares may be purchased by Federal Reserve wire by
calling the Trust before 3:00 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, MA; Attention: EDGEWIRE; For Credit to: Federated Tax-Free
Trust; Fund Number (this number can be found on the account statement or by
contacting the Trust); Group Number or Order Number; Nominee or Institution
Name; and ABA Number 011000028. Shares cannot be purchased by wire on holidays
when wire transfers are restricted. Questions on wire purchases should be
directed to your shareholder services representative at the telephone number
listed on your account statement.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to
Federated Shareholders Services Company, P.O. Box 8600, Boston, MA 02266-8600.
The check should be made payable to Federated Tax-Free Trust. Orders by mail are
considered received when payment by check is converted into federal funds
(normally the business day after the check is received), and shares begin
earning dividends the next day.
AUTOMATIC INVESTMENTS. Investors may establish accounts with their financial
institutions to have cash accumulations automatically invested in the Trust. The
investments may be made on predetermined dates or when the investor's account
reaches a certain level. Participating financial institutions are responsible
for prompt transmission of orders relating to the program, and they may charge
for their services. Investors should read this prospectus along with the
financial institution's agreement or literature describing these services and
fees.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
Shares are redeemed at their net asset value next determined after Federated
Shareholders Services Company receives the redemption request. Redemptions will
be made on days on which the Trust computes its net asset value. Redemption
requests must be received in proper form and can be made as described below.
REDEEMING SHARES BY TELEPHONE. Redemptions in any minimum amount may be made by
calling the Trust provided the Trust has a properly completed authorization
form. These forms can be obtained from Federated Securities Corp. Proceeds from
redemption requests received before 12:00 noon (Eastern time) will be wired the
same day to the shareholder's account at a domestic commercial bank which is a
member of the Federal Reserve System, but will not include that day's dividend.
Proceeds from redemption requests received after that time include that day's
dividend but will be wired the following business day. 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.
Telephone instructions may be recorded and if reasonable procedures are not
followed by the Trust, 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 this occurs, "Redeeming Shares By Mail"
should be considered. If at any time the Trust shall determine it necessary to
terminate or modify the telephone redemption privilege, shareholders would be
promptly notified.
REDEEMING SHARES BY MAIL. Shares may be redeemed in any amount by mailing a
written request to: Federated Shareholder Services Company, P.O. Box 8600,
Boston, MA 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: the Trust name; the account name as registered
with the Trust; 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 Trust 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 Trust does not accept signatures guaranteed by a notary public.
ACCOUNT AND SHARE INFORMATION
- --------------------------------------------------------------------------------
DIVIDENDS. Dividends are declared daily and paid monthly. Dividends are
automatically reinvested on payment dates in additional shares of the Trust
unless cash payments are requested by writing to the Trust. Shares purchased by
wire before 3:00 p.m. (Eastern time) begin earning dividends that day. Shares
purchased by check begin earning dividends the day after the check is converted
into federal funds.
CAPITAL GAINS. The Trust does not expect to realize any capital gains or losses.
If capital gains or losses were to occur, they could result in an increase or
decrease in dividends. The Trust will distribute in cash or additional shares
any realized net long-term capital gains at least once every 12 months.
CERTIFICATES AND CONFIRMATIONS. As transfer agent for the Trust, Federated
Shareholder Services Company maintains a share account for each shareholder.
Share certificates are not issued unless requested by contacting the Trust or
Federated Shareholder Services Company in writing. Monthly confirmations are
sent to report all transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Trust may redeem shares in any account and pay the proceeds to
the shareholder if the account balance falls below a required minimum value of
$25,000 due to shareholder redemptions. 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.
VOTING RIGHTS. Each share of the Trust owned by a shareholder gives that
shareholder one vote in Trustee elections and other matters submitted to
shareholders for vote. The Trust is not required to hold annual shareholder
meetings. Shareholder approval will be sought only for certain changes in the
Trust's operation and for election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting shall be called by the Trustees upon the written request of
shareholders owning at least 10% of the outstanding shares of the Trust.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Trust will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
Shareholders are not required to pay the federal regular income tax on any
dividends received from the Trust that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds issued
after August 7, 1986, may be included in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for corporations.
The Trust may purchase, within the limits of its investment policies, all types
of municipal bonds, including private activity bonds.
The alternative minimum tax 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.
Dividends of the Trust 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.
STATE AND LOCAL TAXES
In the opinion of Houston, Donnelly and Meck, counsel to the Trust, Trust shares
may be subject to personal property taxes imposed by counties, municipalities,
and school districts in Pennsylvania to the extent that the portfolio securities
in the Trust would be subject to such taxes if owned directly by residents of
those jurisdictions.
Because interest received by the Trust 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 Trust. 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 Trust advertises its, yield, effective yield,
tax-equivalent yield, and total return.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment. The tax-equivalent yield is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that would have to be earned to equal
the Trust's tax-exempt yield, assuming a specific tax rate.
Total return represents the change, over a specified period of time, in the
value of an investment in the Trust after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
From time to time, advertisements for the Trust may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Trust's performance to certain indices.
FEDERATED TAX-FREE TRUST
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
SHORT-TERM MUNICIPALS--100.1%
- ----------------------------------------------------------------------------------
<C> <C> <S> <C>
ALABAMA--2.8%
---------------------------------------------------------------
$ 1,700,000 Birmingham, AL Medical Clinic Board Daily VRDNs (University of
Alabama Health System)/(Morgan Guaranty Trust Co., New York
LOC) $ 1,700,000
---------------------------------------------------------------
2,000,000 Birmingham, AL, (Series 1995) Weekly VRDNs (First Alabama Bank,
Birmingham LOC) 2,000,000
---------------------------------------------------------------
4,600,000 Birmingham, AL, GO (Series 1992A) Weekly VRDNs (First Alabama
Bank, Birmingham LOC) 4,600,000
---------------------------------------------------------------
1,300,000 Bon Air, AL IDB Weekly VRDNs (Avondale Mills, Inc.)/(SunTrust
Bank, Atlanta LOC) 1,300,000
---------------------------------------------------------------
4,000,000 Chatom, AL, IDB PCR, 3.70% CP (Alabama Electric Co-op, Inc.)/
(National Rural Utilities Cooperative Finance Corp. GTD),
Mandatory Tender 2/14/1997 4,000,000
---------------------------------------------------------------
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
---------------------------------------------------------------
2,000,000 Montgomery, AL BMC Special Care Facilities Finance Authority,
(Series 94A) Weekly VRDNs (Baptist Medical Center, AL)/
(Amsouth Bank N.A., Birmingham LOC) 2,000,000
--------------------------------------------------------------- ------------
Total 21,025,000
--------------------------------------------------------------- ------------
ALASKA--0.7%
---------------------------------------------------------------
5,000,000 Anchorage, AK, 4.25% TANs, 12/13/1996 5,001,375
--------------------------------------------------------------- ------------
ARIZONA--3.3%
---------------------------------------------------------------
11,600,000 Maricopa County, AZ, PCR (Series 1994C) Daily VRDNs (Arizona
Public Service Corp.)/(Toronto-Dominion Bank LOC) 11,600,000
---------------------------------------------------------------
5,000,000 Pima County, AZ IDA Weekly VRDNs (Tucson Electric Power Co.)/
(Barclays Bank PLC, London LOC) 5,000,000
---------------------------------------------------------------
</TABLE>
FEDERATED TAX-FREE TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
SHORT-TERM MUNICIPALS--CONTINUED
- ----------------------------------------------------------------------------------
<C> <C> <S> <C>
ARIZONA--CONTINUED
---------------------------------------------------------------
$ 8,100,000 Pima County, AZ IDA, (Series A) Weekly VRDNs (Tucson Electric
Power Co.)/(Barclays Bank PLC, London LOC) $ 8,100,000
--------------------------------------------------------------- ------------
Total 24,700,000
--------------------------------------------------------------- ------------
ARKANSAS--0.4%
---------------------------------------------------------------
3,265,000 Arkansas Development Finance Authority, Single Family Mortgage
Revenue bonds (1996 Series G), 3.70% TOBs, Mandatory Tender
11/5/1997 3,265,000
--------------------------------------------------------------- ------------
CALIFORNIA--7.8%
---------------------------------------------------------------
5,000,000 Alameda Unified School District, CA, 4.375% TRANs, 7/1/1997 5,015,376
---------------------------------------------------------------
8,000,000 California School Cash Reserve Program Authority, (Series A),
4.75% TRANs (MBIA Insurance Corporation INS), 7/2/1997 8,040,447
---------------------------------------------------------------
8,000,000 California State, (Series A), 4.50% RANs, 6/30/1997 8,023,570
---------------------------------------------------------------
14,000,000 California Statewide Communities Development Authority,
(1996 Series A), 4.75% TRANs (FSA INS), 6/30/1997 14,061,091
---------------------------------------------------------------
5,000,000 Los Angeles County, CA Local Educational Agencies, (Series A),
4.75% TRANs (FSA INS), 6/30/1997 5,019,852
---------------------------------------------------------------
13,250,000 Pitney Bowes Credit Corp. Leasetops Trust, Leasetops
Certificates (Series 1996A) Weekly VRDNs (San Diego County, CA,
Regional Communications System)/(San Diego County, CA, Regional
Communications System LIQ)/(Landesbank Hessen-Thueringen,
Frankfurt LOC) 13,250,000
---------------------------------------------------------------
100,000 Riverside County, CA, (Series A) Weekly VRDNs (Riverside, CA
Public Facility Finance)/(Commerzbank AG, Frankfurt and
National Westminster Bank, PLC, London LOCs) 100,000
---------------------------------------------------------------
5,000,000 South Coast, CA Local Education Agencies, (Series 1996A), 4.75%
TRANs, 6/30/1997 5,018,862
--------------------------------------------------------------- ------------
Total 58,529,198
--------------------------------------------------------------- ------------
</TABLE>
FEDERATED TAX-FREE TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
SHORT-TERM MUNICIPALS--CONTINUED
- ----------------------------------------------------------------------------------
<C> <C> <S> <C>
COLORADO--1.4%
---------------------------------------------------------------
$ 4,600,000 Denver, CO City & County Airport Authority, Subordinate Lien
Revenue Bonds (Series C), 6.00% Bonds (Toronto-Dominion Bank
LOC), 4/1/1997 (@100) $ 4,632,654
---------------------------------------------------------------
5,820,000 Loveland, CO, IDR (Series 1993S), 3.65% TOBs (Safeway, Inc.)/
(Bankers Trust Co., New York LOC), Mandatory Tender
12/1/1996-6/2/1997 5,820,000
--------------------------------------------------------------- ------------
Total 10,452,654
--------------------------------------------------------------- ------------
CONNECTICUT--1.5%
---------------------------------------------------------------
10,830,000 Connecticut State Transportation Infrastructure Authority
Weekly VRDNs (Connecticut State)/(Commerzbank AG, Frankfurt
LOC) 10,830,000
--------------------------------------------------------------- ------------
DELAWARE--0.5%
---------------------------------------------------------------
3,800,000 Delaware Health Facilities Authority, Revenue Bonds (Series
1988) Weekly VRDNs (Delaware Health Facilities Pooled Loan
Program)/ (MBIA Insurance Corporation INS)/(J.P. Morgan
Delaware, Wilmington LIQ) 3,800,000
--------------------------------------------------------------- ------------
FLORIDA--10.5%
---------------------------------------------------------------
9,940,000 Broward County, FL School District, (Series 1996A and 1996 B),
4.25% RANs, 4/24/1997 9,962,689
---------------------------------------------------------------
4,300,000 Collier County, FL HFA, Multi-Family Revenue Bonds (Series
1985) Weekly VRDNs (River Reach Project)/(Morgan Guaranty Trust
Co., New York LOC) 4,300,000
---------------------------------------------------------------
12,500,000 Dade County, FL HFA, Hospital Revenue Bonds (Series 1995)
Weekly VRDNs (Miami Children's Hospital Project)/
(AMBAC INS)/(SunTrust Bank, Atlanta LIQ) 12,500,000
---------------------------------------------------------------
12,000,000 Dade County, FL Water & Sewer System Weekly VRDNs (FGIC
INS)/(Commerzbank AG, Frankfurt LIQ) 12,000,000
---------------------------------------------------------------
5,000,000 Florida HFA Weekly VRDNs (Cornerstone Imaging, Inc.)/
(PNC Bank, N.A. LOC) 5,000,000
---------------------------------------------------------------
1,100,000 Florida HFA, Multi Family Housing Revenue Bonds (Series 1985TT)
Weekly VRDNs (River Oaks Project)/(Citibank NA, New York LOC) 1,100,000
---------------------------------------------------------------
</TABLE>
FEDERATED TAX-FREE TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
SHORT-TERM MUNICIPALS--CONTINUED
- ----------------------------------------------------------------------------------
<C> <C> <S> <C>
FLORIDA--CONTINUED
---------------------------------------------------------------
$ 2,000,000 Gulf Breeze, FL, Variable Rate Demand Revenue Bonds (Series
1995A) Weekly VRDNs (Florida Municipal Bond Fund)/ (Barnett
Bank, N.A. LOC) $ 2,000,000
---------------------------------------------------------------
7,532,000 Orange County, FL, 3.65% CP (NationsBank, South LOC), Mandatory
Tender 12/11/1996 7,532,000
---------------------------------------------------------------
4,000,000 Orange County, FL, Health Facilities Authority Weekly VRDNs
(Mayflower Retirement Community)/(Rabobank Nederland,
Utrecht LOC) 4,000,000
---------------------------------------------------------------
2,000,000 Pinellas County, FL Health Facility Authority, (Series 1987)
Weekly VRDNs (St. Mark Village Project)/(NationsBank, South
LOC) 2,000,000
---------------------------------------------------------------
3,000,000 Putnam County, FL Development Authority, PCR Bonds (Series
1984H) Weekly VRDNs (Seminole Electric Cooperative, Inc
(FL))/(National Rural Utilities Cooperative Finance Corp. LOC) 3,000,000
---------------------------------------------------------------
15,000,000 Tampa, FL, Occupational License Tax Bonds (Series 1996A) Weekly
VRDNs (FGIC INS)/(FGIC LIQ) 15,000,000
--------------------------------------------------------------- ------------
Total 78,394,689
--------------------------------------------------------------- ------------
GEORGIA--4.8%
---------------------------------------------------------------
15,000,000 Cobb-Marietta, GA Coliseum & Exhibit Hall Authority, Junior
Lien Revenue Bonds (Series 1996A) Weekly VRDNs (MBIA Insurance
Corporation INS)/(Canadian Imperial Bank of Commerce, Toronto
LIQ) 15,000,000
---------------------------------------------------------------
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
---------------------------------------------------------------
3,000,000 Marietta, GA Housing Authority, Multifamily Housing Revenue
Refunding Bonds (Series 1996) Weekly VRDNs (Winterset
Apartments Project)/(Wachovia Bank of Georgia NA, Atlanta LOC) 3,000,000
---------------------------------------------------------------
</TABLE>
FEDERATED TAX-FREE TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
SHORT-TERM MUNICIPALS--CONTINUED
- ----------------------------------------------------------------------------------
<C> <C> <S> <C>
GEORGIA--CONTINUED
---------------------------------------------------------------
$ 4,900,000 Rockdale County, GA Hospital Authority, Revenue Anticipation
Certificates (Series 1994) Weekly VRDNs (Rockdale Hospital)/
(SunTrust Bank, Atlanta LOC) $ 4,900,000
--------------------------------------------------------------- ------------
Total 35,785,000
--------------------------------------------------------------- ------------
ILLINOIS--8.9%
---------------------------------------------------------------
13,100,000 Chicago, IL, GO (Series 1996), 3.10% TOBs (Landesbank Hessen-
Thueringen, Frankfurt LOC), Mandatory Tender 2/4/1997 13,100,000
---------------------------------------------------------------
18,000,000 Illinois Development Finance Authority, (Series 1994) Weekly
VRDNs (Museum of Contemporary Art)/(Harris Trust & Savings
Bank, Chicago, Lasalle National Bank, Chicago, NBD Bank,
Michigan and Northern Trust Co., Chicago, IL LOCs) 18,000,000
---------------------------------------------------------------
15,000,000 Illinois Development Finance Authority, PCR, (Series 1996B)
Weekly VRDNs (Commonwealth Edison Co.)/(AMBAC INS)/
(Bank of New York, New York LIQ) 15,000,000
---------------------------------------------------------------
17,500,000 Illinois Health Facilities Authority Weekly VRDNs (OSF Health
Care Systems) 17,500,000
---------------------------------------------------------------
2,670,000 Rockford, IL, EDRB, 4.45% TOBs (Independence Village of
Rockford)/(Banque Paribas, Paris LOC), Optional Tender
12/1/1996 2,670,000
--------------------------------------------------------------- ------------
Total 66,270,000
--------------------------------------------------------------- ------------
INDIANA--1.2%
---------------------------------------------------------------
5,000,000 Indiana Bond Bank, Advance Funding Program Notes
(Series 1996 A-2), 4.25% BANs, 1/9/1997 5,003,872
---------------------------------------------------------------
4,000,000 Indianapolis, IN Local Public Improvement Bond Bank,
(Series 1996 B), 4.25% BANs, 1/9/1997 4,001,883
--------------------------------------------------------------- ------------
Total 9,005,755
--------------------------------------------------------------- ------------
IOWA--1.2%
---------------------------------------------------------------
6,060,000 Indianola, IA Health Care Facility, Refunding Revenue Bonds
(Series 1992) Weekly VRDNs (The Village Project)/(Norwest Bank
Minnesota, Minneapolis LOC) 6,060,000
---------------------------------------------------------------
</TABLE>
FEDERATED TAX-FREE TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
SHORT-TERM MUNICIPALS--CONTINUED
- ----------------------------------------------------------------------------------
<C> <C> <S> <C>
IOWA--CONTINUED
---------------------------------------------------------------
$ 2,500,000 Iowa Higher Education Loan Authority, Revenue Bonds Weekly
VRDNs (MBIA Insurance Corporation INS)/(Dai-Ichi Kangyo Bank
Ltd., Tokyo LIQ) $ 2,500,000
--------------------------------------------------------------- ------------
Total 8,560,000
--------------------------------------------------------------- ------------
KENTUCKY--1.9%
---------------------------------------------------------------
3,900,000 Kentucky Development Finance Authority Health Care System
Weekly VRDNs (Appalachian Regional Healthcare System)/
(Abn-Amro BKN.V. LOC) 3,900,000
---------------------------------------------------------------
10,000,000 Kentucky Interlocal School Transportation Association, (Series
A), 4.05% TRANs, 6/30/1997 10,000,000
--------------------------------------------------------------- ------------
Total 13,900,000
--------------------------------------------------------------- ------------
MARYLAND--2.7%
---------------------------------------------------------------
1,700,000 Baltimore County, MD Port Facility Monthly VRDNs (Occidental
Petroleum Corp.)/(Morgan Guaranty Trust Co., New York LOC) 1,700,000
---------------------------------------------------------------
800,000 Baltimore County, MD, (Series 1992) Weekly VRDNs (Sheppard &
Enoch Pratt Hospital Facility)/(Societe Generale, Paris LOC) 800,000
---------------------------------------------------------------
3,700,000 Baltimore, MD PCR Weekly VRDNs (SCM Plants, Inc.)/(Barclays
Bank PLC, London LOC) 3,700,000
---------------------------------------------------------------
1,000,000 Frederick County, MD, Revenue Bonds (Series 1995) Weekly VRDNs
(Sheppard Pratt Residential Treatment Facility)/(Societe
Generale, Paris LOC) 1,000,000
---------------------------------------------------------------
4,000,000 Montgomery County, MD, EDR Weekly VRDNs (Howard Hughes Medical
Center) 4,000,000
---------------------------------------------------------------
5,600,000 Queen Annes County, MD Economic Development Revenue, (Series
1994), 3.65% TOBs (Safeway, Inc.)/(Bankers Trust Co.,
New York LOC), Mandatory Tender 12/1/1996-6/2/1997 5,600,000
---------------------------------------------------------------
2,500,000 University of Maryland, Revolving Equipment Loan Program
(Series A) Weekly VRDNs (Student Loan Marketing Association
LIQ) 2,500,000
---------------------------------------------------------------
</TABLE>
FEDERATED TAX-FREE TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
SHORT-TERM MUNICIPALS--CONTINUED
- ----------------------------------------------------------------------------------
<C> <C> <S> <C>
MARYLAND--CONTINUED
---------------------------------------------------------------
$ 1,000,000 Washington Suburban Sanitation District, MD, (1996 Series)
Weekly VRDNs (Westdeutsche Landesbank Girozentrale LIQ) $ 1,000,000
--------------------------------------------------------------- ------------
Total 20,300,000
--------------------------------------------------------------- ------------
MASSACHUSETTS--1.1%
---------------------------------------------------------------
8,500,000 Massachusetts Bay Transit Authority, (Series C), 3.60% CP
(Westdeutsche Landesbank Girozentrale LOC), Mandatory Tender
1/24/1997 8,500,000
--------------------------------------------------------------- ------------
MICHIGAN--2.8%
---------------------------------------------------------------
3,000,000 Bruce Township, MI Hospital Finance Authority, Tender
Securities (ARTS) Weekly VRDNs (Sisters of Charity Health Care
System)/ (MBIA Insurance Corporation INS)/(Morgan Guaranty
Trust Co., New York LIQ) 3,000,000
---------------------------------------------------------------
3,600,000 Michigan State Hospital Finance Authority, (Series A) Weekly
VRDNs (OSF Health Care Systems) 3,600,000
---------------------------------------------------------------
3,000,000 Michigan State Housing Development Authority, Rental Housing
Revenue Bonds (1994 Series C) Weekly VRDNs (Credit Suisse,
Zurich LOC) 3,000,000
---------------------------------------------------------------
10,000,000 Michigan Underground Storage Tank Financial Assurance
Authority, (Series I), 3.55% CP (Canadian Imperial Bank of
Commerce, Toronto LOC), Mandatory Tender 2/5/1997 10,000,000
---------------------------------------------------------------
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 21,085,000
--------------------------------------------------------------- ------------
MINNESOTA--10.9%
---------------------------------------------------------------
8,000,000 Bloomington, MN Port Authority, Special Tax Revenue Refunding
Bonds (Series 1994B) Weekly VRDNs (Mall of America)/(FSA
INS)/(Credit Local de France LIQ) 8,000,000
---------------------------------------------------------------
10,300,000 Burnsville, MN, Variable Rate Demand Revenue Bonds (Series
1996) Weekly VRDNs (YMCA Projects)/(Norwest Bank Minnesota,
Minneapolis LOC) 10,300,000
---------------------------------------------------------------
</TABLE>
FEDERATED TAX-FREE TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
SHORT-TERM MUNICIPALS--CONTINUED
- ----------------------------------------------------------------------------------
<C> <C> <S> <C>
MINNESOTA--CONTINUED
---------------------------------------------------------------
$ 7,000,000 Hennepin Co. MN, (Series 1995C) Weekly VRDNs (Hennepin Co. MN
GTD) $ 7,000,000
---------------------------------------------------------------
4,000,000 Minneapolis CDA, Revenue Refunding Bonds (Series 1995) Weekly
VRDNs (Walker Methodist Health Center, Inc. Project)/(First
Bank NA, Minneapolis LOC) 4,000,000
---------------------------------------------------------------
10,000,000 Minneapolis, MN, (Series 1993) Weekly VRDNs (Market Square Real
Estate, Inc.)/(Norwest Bank Minnesota, Minneapolis LOC) 10,000,000
---------------------------------------------------------------
3,200,000 Minneapolis, MN, Various Purpose Bonds (Series 1996) Weekly
VRDNs (Bayerische Vereinsbank AG, Munich LIQ) 3,200,000
---------------------------------------------------------------
8,000,000 Minnesota Agricultural and Economic Development Board, (Series
1996) Weekly VRDNs (Evangelical Lutheran Good Samaritan
Society)/(Rabobank Nederland, Utrecht LOC) 8,000,000
---------------------------------------------------------------
2,100,000 Owatonna, MN, Hospital Revenue Bonds Weekly VRDNs (Health
Central System)/(Norwest Bank Minnesota, Minneapolis LOC) 2,100,000
---------------------------------------------------------------
6,000,000 Rochester, MN Health Care Facility Authority Weekly VRDNs (Mayo
Foundation) 6,000,000
---------------------------------------------------------------
6,500,000 Rochester, MN Health Care Facility Authority Weekly VRDNs (Mayo
Foundation) 6,500,000
---------------------------------------------------------------
14,450,000 Rosemount, MN, PCR (Series 1984) Weekly VRDNs (Koch
Refining Co.) 14,450,000
---------------------------------------------------------------
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
--------------------------------------------------------------- ------------
Total 81,215,000
--------------------------------------------------------------- ------------
MISSOURI--3.2%
---------------------------------------------------------------
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,
Pollution Control Revenue Bonds Series 1985 B, 3.65% CP (Union
Electric Co.)/(Westdeutsche Landesbank Girozentrale LOC),
Mandatory Tender 6/12/1997 13,370,000
---------------------------------------------------------------
</TABLE>
FEDERATED TAX-FREE TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
SHORT-TERM MUNICIPALS--CONTINUED
- ----------------------------------------------------------------------------------
<C> <C> <S> <C>
MISSOURI--CONTINUED
---------------------------------------------------------------
$ 5,000,000 Missouri State Environmental Improvement & Energy Authority,
Pollution Control Revenue Bonds Series 1985 B, 3.90% CP (Union
Electric Co.)/(Westdeutsche Landesbank Girozentrale LOC),
Mandatory Tender 10/9/1997 $ 5,000,000
--------------------------------------------------------------- ------------
Total 24,170,000
--------------------------------------------------------------- ------------
NEW YORK--4.0%
---------------------------------------------------------------
5,000,000 Nassau County, NY, (Series 1996A), 4.00% RANs, 3/5/1997 5,007,842
---------------------------------------------------------------
10,000,000 New York City, NY, (Series A), 4.50% TANs, 2/12/1997 10,014,001
---------------------------------------------------------------
15,000,000 New York City, NY, (Series B), 4.50% RANs (Bank of Nova Scotia,
Toronto, Canadian Imperial Bank of Commerce, Toronto and
Commerzbank AG, Frankfurt LOCs), 6/30/1997 15,066,447
--------------------------------------------------------------- ------------
Total 30,088,290
--------------------------------------------------------------- ------------
NORTH CAROLINA--4.9%
---------------------------------------------------------------
20,000,000 Martin County, NC IFA, (Series 1993) Weekly VRDNs (Weyerhaeuser
Co.) 20,000,000
---------------------------------------------------------------
16,915,000 NCNB Pooled Tax-Exempt Trust , (Series 1990A) Weekly VRDNs
(NCNB Tax Exempt Trust 1990a)/(Nationsbank, N.A. LOC) 16,915,000
--------------------------------------------------------------- ------------
Total 36,915,000
--------------------------------------------------------------- ------------
OHIO--2.5%
---------------------------------------------------------------
800,000 Akron, OH, Sanitary Sewer System Revenue Bonds Weekly VRDNs
(Credit Suisse, Zurich LOC) 800,000
---------------------------------------------------------------
3,885,000 Franklin County, OH Hospital Facility Authority, (Series 1992)
Weekly VRDNs (Wesley Glenn, Inc.)/(Fifth Third Bank, Cincinnati
LOC) 3,885,000
---------------------------------------------------------------
3,700,000 Hamilton County, OH Health System Weekly VRDNs (West Park
Community)/(Fifth Third Bank, Cincinnati LOC) 3,700,000
---------------------------------------------------------------
2,540,000 Marion County, OH Hospital Authority, (Series 1991) Weekly
VRDNs (Marion County, OH Pooled Hospital Program)/(Bank One,
Columbus, N.A. LOC) 2,540,000
---------------------------------------------------------------
1,000,000 Ohio State Air Quality Development Authority Weekly VRDNs
(Timken Co.)/(Credit Suisse, Zurich LOC) 1,000,000
---------------------------------------------------------------
</TABLE>
FEDERATED TAX-FREE TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
SHORT-TERM MUNICIPALS--CONTINUED
- ----------------------------------------------------------------------------------
<C> <C> <S> <C>
OHIO--CONTINUED
---------------------------------------------------------------
$ 1,250,000 Ross County, OH, Hospital Facilities Revenue Bonds (Series
1995) Weekly VRDNs (Medical Center Hospital Project)/(Fifth
Third Bank, Cincinnati LOC) $ 1,250,000
---------------------------------------------------------------
5,500,000 University of Cincinnati, OH, General Receipts (Series N),
3.75% BANs, 3/20/1997 5,507,148
--------------------------------------------------------------- ------------
Total 18,682,148
--------------------------------------------------------------- ------------
OKLAHOMA--2.2%
---------------------------------------------------------------
2,640,000 Muskogee, OK Industrial Trust, (Series 1985) Weekly VRDNs
(Muskogee Mall Limited Partnership)/(Boatmen's National Bank of
St. Louis LOC) 2,640,000
---------------------------------------------------------------
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
---------------------------------------------------------------
10,000,000 Oklahoma State Industrial Authority, Flexible Rate Hospital
Revenue Bonds (Series 1990B) Weekly VRDNs (Baptist Medical
Center, OK)/ (Credit Suisse, Zurich and Morgan Guaranty Trust
Co., New York LIQs) 10,000,000
--------------------------------------------------------------- ------------
Total 16,450,000
--------------------------------------------------------------- ------------
PENNSYLVANIA--1.8%
---------------------------------------------------------------
3,000,000 Allegheny County, PA HDA, Hosp Revenue Bonds (Series B 1995)
Weekly VRDNs (Allegheny General Hospital)/(Morgan Guaranty
Trust Co., New York LOC) 3,000,000
---------------------------------------------------------------
7,000,000 Delaware County, PA PCR, (Series C), 3.65% CP (Philadelphia
Electric Co.)/(FGIC INS), Mandatory Tender 1/9/1997 7,000,000
---------------------------------------------------------------
3,000,000 Delaware County, PA PCR, 3.60% CP (Philadelphia Electric Co.)/
(FGIC INS), Mandatory Tender 1/16/1997 3,000,000
---------------------------------------------------------------
500,000 Erie County, PA Hospital Authority Weekly VRDNs (St. Vincent
Health System)/(Mellon Bank NA, Pittsburgh LOC) 500,000
--------------------------------------------------------------- ------------
Total 13,500,000
--------------------------------------------------------------- ------------
PUERTO RICO--1.6%
---------------------------------------------------------------
12,000,000 Puerto Rico Government Development Bank, 3.35% CP, Mandatory
Tender 12/13/1996 12,000,000
--------------------------------------------------------------- ------------
</TABLE>
22
FEDERATED TAX-FREE TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
SHORT-TERM MUNICIPALS--CONTINUED
- ----------------------------------------------------------------------------------
<C> <C> <S> <C>
RHODE ISLAND--0.3%
---------------------------------------------------------------
$ 2,200,000 Rhode Island Housing & Mortgage Finance Corp, (Series 19-C),
3.45% TOBs (Societe Generale, Paris INV), Mandatory Tender
1/30/1997 $ 2,200,000
--------------------------------------------------------------- ------------
TENNESSEE--3.9%
---------------------------------------------------------------
17,000,000 Chattanooga, TN HEFA Weekly VRDNs (Mccallie School)/ (SunTrust
Bank, Atlanta LOC) 17,000,000
---------------------------------------------------------------
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
---------------------------------------------------------------
4,855,000 Shelby County, TN Health Education & Housing Facilities Board,
(Series C), 4.05% TOBs (Methodist Health System, Inc.)/(MBIA
Insurance Corporation INS)/(Sanwa Bank Ltd, Osaka LIQ),
Optional Tender 8/1/1997 4,855,000
---------------------------------------------------------------
5,120,000 Tennessee State School Board Authority, (Series 1996A) Weekly
VRDNs (Union Bank of Switzerland, Zurich LIQ) 5,120,000
--------------------------------------------------------------- ------------
Total 29,280,000
--------------------------------------------------------------- ------------
TEXAS--3.3%
---------------------------------------------------------------
3,990,000 Dallas, TX, (Series C), 3.75% TOBs, Optional Tender 6/15/1997 3,990,000
---------------------------------------------------------------
5,000,000 TX Pooled Tax Exempt Trust, Certificates of Participation
(Series 1996) Weekly VRDNs (Bank One, Texas N.A. LOC) 5,000,000
---------------------------------------------------------------
15,500,000 Texas State, 4.75% TRANs, 8/29/1997 15,587,984
--------------------------------------------------------------- ------------
Total 24,577,984
--------------------------------------------------------------- ------------
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--1.0%
---------------------------------------------------------------
7,800,000 Roanoke, VA IDA, Hospital Revenue Bonds (Series 1995C) Weekly
VRDNs (Carillion Health System)/(Morgan Guaranty Trust Co., New
York LIQ) 7,800,000
--------------------------------------------------------------- ------------
</TABLE>
23
FEDERATED TAX-FREE TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
SHORT-TERM MUNICIPALS--CONTINUED
- ----------------------------------------------------------------------------------
<C> <C> <S> <C>
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 6,007,001
---------------------------------------------------------------
8,000,000 Wisconsin Health and Educational Facilities Authority, Revenue
Bonds (Series 1994) Weekly VRDNs (Felician Health Care, Inc.
Project)/(Lasalle National Bank, Chicago LOC) 8,000,000
--------------------------------------------------------------- ------------
Total 14,007,001
--------------------------------------------------------------- ------------
WYOMING--0.9%
---------------------------------------------------------------
2,500,000 Sweetwater County, WY IDA, PCR Refunding Bonds (Series 1994)
Daily VRDNs (Pacificorp)/(AMBAC INS)/(Bank of New York,
New York LIQ) 2,500,000
---------------------------------------------------------------
4,590,000 Wyoming Community Development Authority, (Series 1986C), 3.70%
TOBs (First National Bank of Chicago LIQ), Optional Tender
12/1/1996 4,590,000
--------------------------------------------------------------- ------------
Total 7,090,000
--------------------------------------------------------------- ------------
OTHER--2.5%
---------------------------------------------------------------
13,782,040 Equity Trust I, (1996 Series) Weekly VRDNs (Bayerische
Hypotheken-Und Wechsel-Bank Ag LOC) 13,782,040
---------------------------------------------------------------
4,999,567 LaSalle National Bank Leasetops Trust, Series 1995A Leasetops
Certificates Weekly VRDNs (Lasalle National Bank, Chicago LIQ)/
(Lasalle National Bank, Chicago LOC) 4,999,567
--------------------------------------------------------------- ------------
Total 18,781,607
--------------------------------------------------------------- ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(A) $748,900,701
--------------------------------------------------------------- ------------
</TABLE>
(a) Also represents cost for federal tax purposes amounts to 748,722,137.
Note: The categories of investments are shown as a percentage of net assets
($747,784,969) at November 30, 1996.
FEDERATED TAX-FREE TRUST
- --------------------------------------------------------------------------------
The following acronyms are used throughout this portfolio:
<TABLE>
<S> <C>
AMBAC --American Municipal Bond Assurance Corporation
BANs --Bond Anticipation Notes
CDA --Community Development Administration
CP --Commercial Paper
EDR --Economic Development Revenue
EDRB --Economic Development Revenue Bonds
FGIC --Financial Guaranty Insurance Company
FSA --Financial Security Assurance
GO --General Obligation
GTD --Guaranty
HDA --Hospital Development Authority
HEFA --Health and Education Facilities Authority
HFA --Housing Finance Authority
IDA --Industrial Development Authority
IDB --Industrial Development Bond
IDR --Industrial Development Revenue
IFA --Industrial Finance Authority
INS --Insured
INV --Investment Agreement
LIQ --Liquidity Agreement
LOCs --Letters of Credit
LOC --Letter of Credit
MBIA --Municipal Bond Investors Assurance
PCR --Pollution Control Revenue
PLC --Public Limited Company
RANs --Revenue Anticipation Notes
TANs --Tax Anticipation Notes
TOBs --Tender Option Bonds
TRANs --Tax and Revenue Anticipation Notes
VRDNs --Variable Rate Demand Notes
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED TAX-FREE TRUST
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Total investments in securities, at amortized cost and value $748,900,701
- --------------------------------------------------------------------------------
Cash 861,437
- --------------------------------------------------------------------------------
Income receivable 5,584,201
- --------------------------------------------------------------------------------
Receivable for shares sold 7,651
- -------------------------------------------------------------------------------- ------------
Total assets 755,353,990
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for investments purchased $5,665,571
- -------------------------------------------------------------------
Income distribution payable 1,793,383
- -------------------------------------------------------------------
Accrued expenses 110,067
- ------------------------------------------------------------------- ----------
Total liabilities 7,569,021
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 747,801,341 shares outstanding $747,784,969
- -------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Paid in capital $747,793,482
- --------------------------------------------------------------------------------
Accumulated net realized loss on investments (8,513)
- -------------------------------------------------------------------------------- ------------
Total Net Assets $747,784,969
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- --------------------------------------------------------------------------------
$747,784,969 / 747,801,341 shares outstanding $1.00
- -------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED TAX-FREE TRUST
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------
Interest $29,135,781
- -----------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------------------
Investment advisory fee $ 3,255,470
- --------------------------------------------------------------------
Administrative personnel and services fee 615,257
- --------------------------------------------------------------------
Custodian fees 92,479
- --------------------------------------------------------------------
Transfer and dividend disbursing agent fees and
expenses 57,071
- --------------------------------------------------------------------
Directors'/Trustees' fees 18,025
- --------------------------------------------------------------------
Auditing fees 16,350
- --------------------------------------------------------------------
Legal fees 5,854
- --------------------------------------------------------------------
Portfolio accounting fees 122,469
- --------------------------------------------------------------------
Shareholder services fee 2,034,669
- --------------------------------------------------------------------
Share registration costs 20,418
- --------------------------------------------------------------------
Printing and postage 12,723
- --------------------------------------------------------------------
Insurance premiums 8,421
- --------------------------------------------------------------------
Taxes 22,496
- --------------------------------------------------------------------
Miscellaneous 11,486
- -------------------------------------------------------------------- -----------
Total expenses 6,293,188
- --------------------------------------------------------------------
Waivers--
- --------------------------------------------------------------------
Waiver of investment advisory fee $ (960,485)
- ------------------------------------------------------
Waiver of shareholder services fee (1,627,735)
- ------------------------------------------------------ -----------
Total waivers (2,588,220)
- -------------------------------------------------------------------- -----------
Net expenses 3,704,968
- ----------------------------------------------------------------------------------- -----------
Net investment income 25,430,813
- -----------------------------------------------------------------------------------
Net realized loss on investments (6,253)
- ----------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $25,424,560
- ----------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED TAX-FREE TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------
Net investment income $ 25,430,813 $ 36,296,822
- ------------------------------------------------------------
Net realized gain (loss) on investments ($18,018 and $1,341
net losses, respectively, as computed for federal tax
purposes) (6,253) 9,580
- ------------------------------------------------------------ --------------- ---------------
Change in net assets resulting from operations 25,424,560 36,306,402
- ------------------------------------------------------------ --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------------------
Distributions from net investment income (25,430,813) (36,296,822)
- ------------------------------------------------------------ --------------- ---------------
SHARE TRANSACTIONS--
- ------------------------------------------------------------
Proceeds from sale of shares 2,635,145,132 3,371,354,462
- ------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of distributions declared 2,446,492 2,688,363
- ------------------------------------------------------------
Cost of shares redeemed (2,697,169,818) (3,782,230,461)
- ------------------------------------------------------------ --------------- ---------------
Change in net assets resulting from share transactions (59,578,194) (408,187,636)
- ------------------------------------------------------------ --------------- ---------------
Change in net assets (59,584,447) (408,178,056)
- ------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------
Beginning of period 807,369,416 1,215,547,472
- ------------------------------------------------------------ --------------- ---------------
End of period $ 747,784,969 $ 807,369,416
- ------------------------------------------------------------ --------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED TAX-FREE TRUST
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
(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 divided
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.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
expiring capital loss carryforwards. The following reclassifications have
been made to the financial statements.
<TABLE>
<CAPTION>
INCREASE (DECREASE)
-----------------------------------
ACCUMULATED
NET REALIZED
PAID-IN CAPITAL GAIN/LOSS
----------------- --------------
<S> <C>
($7,859) $7,859
</TABLE>
Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.
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, 1996, the Trust, for federal tax purposes, had a capital
loss carryforward of $31,199, 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
FEDERATED TAX-FREE TRUST
- --------------------------------------------------------------------------------
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
--------------- -----------------
<S> <C>
2002 $11,840
2003 $ 1,341
2004 $18,018
</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.
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
November 30, 1996, capital paid-in aggregated $747,801,369. Transactions in
shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
---------------------------------
1996 1995
- ------------------------------------------------------------- -------------- --------------
<S> <C> <C>
Shares sold 2,635,145,132 3,371,354,462
- -------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 2,446,492 2,688,363
- -------------------------------------------------------------
Shares redeemed (2,697,169,818) (3,782,230,461)
- ------------------------------------------------------------- -------------- --------------
Net change resulting from share transactions (59,578,194) (408,187,636)
- ------------------------------------------------------------- -------------- --------------
</TABLE>
(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 average daily net assets of
the Trust.
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 TAX-FREE TRUST
- --------------------------------------------------------------------------------
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 average daily net assets of the Trust for the period. The fee paid to FSS is
used to finance certain services for shareholders and to maintain shareholder
accounts. FSS may voluntarily choose to waive any portion of its fee. FSS can
modify or terminate this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--FServ, through its
subsidiary, Federated Shareholder Services Company ("FSSC") serves as transfer
and dividend disbursing agent for the Trust. The fee paid to FSSC is based on
the size, type, and number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Trust's accounting records for
which it receives a fee. The fee is based on the level of the Trust's average
daily net assets for the period, plus out-of-pocket expenses.
INTERFUND TRANSACTIONS--During the period ended November 30, 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 $1,560,705,000 and $1,094,545,000, respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Trustees
and Shareholders of FEDERATED TAX-FREE TRUST:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated Tax-Free Trust as of November 30,
1996, and the related statement of operations for the year then ended, the
statements of changes in net assets for the years ended November 30, 1996 and
1995, and the financial highlights 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 the securities owned at
November 30, 1996 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated Tax-Free
Trust as of November 30, 1996, the results of its operations, the changes in its
net assets and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
Pittsburgh, Pennsylvania
January 14, 1996
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated Tax-Free Trust Federated Investors Tower
Pittsburgh, PA 15222-3779
- ----------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- ----------------------------------------------------------------------------------------------------
Investment Adviser
Federated Research Federated Investors Tower
Pittsburgh, PA 15222-3779
- ----------------------------------------------------------------------------------------------------
Custodian
State Street Bank & P.O. Box 8600
Trust Co. 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
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, PA 15222-5401
- ----------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
FEDERATED TAX-FREE TRUST
- --------------------------------------------------------------------------------
PROSPECTUS
An Open-End, Diversified,
Management Investment Company
Prospectus dated January 31, 1997
LOGO
Cusip 314282104
8010414A (1/97)
FEDERATED TAX-FREE TRUST
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of Federated Tax-Free Trust (the ``Trust') dated January 31,
1997. This Statement is not a prospectus. You may request a copy of a
prospectus or a paper copy of this Statement, if you have received it
electronically, free of charge by calling 1-800-341-7400.
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Statement dated January 31, 1997
logo
Federated Securities Corp. is the distributor of the Fund
and is a subsidiary of Federated Investors.
Cusip 314282104
8010414B (1/97)
INVESTMENT POLICIES 1
Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
Ratings 1
When-Issued and Delayed Delivery
Transactions 1
Repurchase Agreements 1
Restricted and Illiquid Securities 2
Reverse Repruchase Agreements 2
Credit Enhancement 2
INVESTMENT LIMITATIONS 2
FEDERATED TAX-FREE TRUST MANAGEMENT 5
Share Ownership 8
Trustees Compensation 9
INVESTMENT ADVISORY SERVICES 9
Investment Adviser 9
Advisory Fees 9
BROKERAGE TRANSACTIONS 10
OTHER SERVICES 10
Trust Administration 10
Custodian and Portfolio Accountant 10
Transfer Agent 10
Independent Auditors 10
DETERMINING NET ASSET VALUE 10
Shareholder Services 11
REDEMPTION IN KIND 11
MASSACHUSETTS PARTNERSHIP LAW 11
THE TRUST'S TAX STATUS 12
PERFORMANCE INFORMATION 12
ABOUT FEDERATED INVESTORS 14
Mutual Fund Market 15
Institutional Clients 15
Bank Marketing 15
Broker/Dealers and
Bank Broker/Dealer Subsidiaries15
APPENDIX 16
INVESTMENT POLICIES
Unless indicated otherwise, the policies described below may not be changed
by the Board of Trustees without shareholder approval.
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of the
security; the issuer of any demand feature applicable to the security; or
any guarantor of either the security or any demand feature.
PARTICIPATION INTERESTS
The financial institutions from which the Trust purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Trust the right to
demand payment of the principal amounts of the participation interests plus
accrued interest on short notice (usually within seven days). The municipal
securities subject to the participation interests are not limited to the
Trust's maximum maturity requirements so long as the participation
interests include the right to demand payment from the issuers of those
interests. By purchasing these participation interests, the Trust is buying
a security meeting the maturity and quality requirements of the Trust and
also is receiving the tax-free benefits of the underlying securities.
MUNICIPAL LEASES
The Trust may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease
payments by a governmental or nonprofit entity. The lease payments and
other rights under the lease provide for and secure payments on the
certificates. Lease obligations may be limited by municipal charter or the
nature of the appropriation for the lease. Furthermore, a lease may provide
that the participants cannot accelerate lease obligations upon default. The
participants would only be able to enforce lease payments as they became
due. In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the investment
adviser, under the authority delegated by the Trustees, will base its
determination on the following factors: whether the lease can be terminated
by the lessee; the potential recovery, if any, from a sale of the leased
property upon termination of the lease; the lessee's general credit
strength (e.g., its debt, administrative, economic and financial
characteristics and prospects); the likelihood that the lessee will
discontinue appropriating funding for the leased property because the
property is no longer deemed essential to its operations (e.g., the
potential for an `event of non-appropriation''); and any credit enhancement
or legal recourse provided upon an event of non-appropriation or other
termination of the lease.
RATINGS
The securities in which the Trust invests must be rated in one of the
two highest short-term rating categories by one or more nationally
recognized statistical rating organizations (`NRSROs'') or be of comparable
quality to securities having such ratings. An NRSRO's two highest rating
categories are determined without regard for sub-categories and gradations.
For example, securities rated SP-1+, SP-1, or SP-2 by Standard & Poor's
Ratings Group (`S&P''), MIG-1 or MIG-2 by Moody's Investors Service, Inc.
(`Moody's''), or F-1+, F-1, or F-2 by Fitch Investors Service, Inc.
(`Fitch'') are all considered rated in one of the two highest short-term
rating categories. The Trust will follow applicable regulations in
determining whether a security rated by more than one NRSRO can be treated
as being in one of the two highest short-term rating categories; currently,
such securities must be rated by two NRSROs in one of their two highest
rating categories. See `Regulatory Compliance.''
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Trust. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of the
Trust in a dollar amount sufficient to make payment for the securities to
be purchased are: segregated on the Trust`s records at the trade date;
marked to market daily; and maintained until the transaction is settled.
The Trust does not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more than 20%
of the total value of its assets.
REPURCHASE AGREEMENTS
Certain securities in which the Trust invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which
banks, broker/dealers, and other recognized financial institutions sell
securities to the Trust and agree at the time of sale to repurchase them at
a mutually agreed upon time and price. To the extent that the seller does
not repurchase the securities from the Trust, the Trust could receive less
than the repurchase price on any sale of such securities. The Trust or its
custodian will take possession of the securities subject to repurchase
agreements, and these securities will be marked to market daily. In the
event that a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Trust might be delayed pending court
action. The Trust believes that under the regular procedures normally in
effect for custody of the Trust's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in
favor of the Trust and allow retention or disposition of such securities.
The Trust will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Trust's adviser to be creditworthy pursuant to guidelines
established by the Trustees.
RESTRICTED AND ILLIQUID SECURITIES
The Trust may invest in commercial paper issued in reliance on the
exemption from registration afforded by Section 4(2) of the Securities Act
of 1933. Section 4(2) commercial paper is restricted as to disposition
under federal securities law, and is generally sold to institutional
investors, such as the Trust, who agree that they are purchasing the paper
for investment purposes and not with a view to public distribution. Any
resale by the purchaser must be in an exempt transaction. Section 4(2)
commercial paper is normally resold to other institutional investors like
the Trust through or with the assistance of the issuer or investment
dealers who make a market in Section 4(2) commercial paper, thus providing
liquidity. The Trust believes that Section 4(2) commercial paper and
possibly certain other restricted securities which meet the criteria for
liquidity established by the Trustees of the Trust are quite liquid. The
Trust intends, therefore, to treat the restricted securities which meet the
criteria for liquidity established by the Trustees, including Section 4(2)
commercial paper, as determined by the Trust's investment adviser, as
liquid and not subject to the investment limitation applicable to illiquid
securities.
REVERSE REPURCHASE AGREEMENTS
The Trust may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement, the Trust transfers possession of a portfolio instrument in
return for a percentage of the instrument's market value in cash and agrees
that on a stipulated date in the future the Trust will repurchase the
portfolio instrument by remitting the original consideration plus interest
at an agreed upon rate. The use of reverse repurchase agreements may enable
the Trust to avoid selling portfolio instruments at a time when a sale may
be deemed to be disadvantageous, but does not ensure this result. However,
liquid assets of the Trust, in a dollar amount sufficient to make payment
for the securities to be purchased, are: segregated on the Trust's records
at the trade date; marked to market daily; and maintained until the
transaction is settled.
CREDIT ENHANCEMENT
The Trust typically evaluates the credit quality and ratings of credit-
enhanced securities based upon the financial condition and ratings of the
party providing the credit enhancement (the `credit enhancer''), rather
than the issuer. However, credit-enhanced securities will not be treated as
having been issued by the credit enhancer for diversification purposes,
unless the Trust has invested more than 10% of its assets in securities
issued, guaranteed or otherwise credit enhanced by the credit enhancer, in
which case the securities will be treated as having been issued by both the
issuer and the credit enhancer.
The Trust may have more than 25% of its total assets invested in securities
credit enhanced by banks.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Trust will not make short sales of securities or purchase any
securities on margin, except for such credits as are necessary for
clearance of transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Trust will not issue senior securities except that the Trust may borrow
money in amounts up to one-third of the value of its total assets,
including the amounts borrowed.
The Trust 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 any portfolio
securities. This borrowing provision is not for investment leverage but
solely to facilitate management of the portfolio by enabling the Trust to
meet redemption requests where the liquidation of portfolio securities is
deemed to be inconvenient or disadvantageous. While any such borrowings are
outstanding, no net purchases of investment securities will be made by the
Trust. If, due to market fluctuations or other reasons the value of the
Trust's assets falls below 300% of its borrowing, the Trust will reduce its
borrowing within three business days.
PLEDGING ASSETS
The Trust will not mortgage, pledge, or hypothecate any assets except as
necessary 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 pledge.
LENDING CASH OR SECURITIES
The Trust will not lend any of its assets, except that the Trust may, in
accordance with its investment objective, policies and limitations, acquire
publicly or non-publicly issued municipal securities or temporary
investments or enter into repurchase agreements.
INVESTING IN COMMODITIES AND MINERALS
The Trust will not purchase or sell commodities or commodity contracts, or
oil, gas or other mineral explorations or development programs.
INVESTING IN REAL ESTATE
The Trust will not purchase or sell real estate, although it may invest in
municipal securities secured by real estate or interests in real estate.
UNDERWRITING
The Trust 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.
DIVERSIFICATION OF INVESTMENTS
The Trust will not purchase securities of any one issuer (other than cash,
cash items, or securities issued or guaranteed by the government of the
United States or its agencies or instrumentalities and repurchase
agreements collateralized by such U.S. government securities) if as a
result more than 5% of the value of its total assets would be invested in
the securities of that issuer. For purposes of this limitation, each
governmental subdivision, i.e. state, territory, possession, of the United
States or any political subdivision of any of the foregoing, including
agencies, authorities, instrumentalities, or similar entities, or of the
District of Columbia shall be considered a separate issuer it its assets
and revenues are separate from those of the governmental body creating it
ant the security is backed only the assets and revenues of a non-
governmental user will be determined to be the sole issuer. If, however, in
the case of an industrial development bond, or governmental issued
security, a governmental or some other entity guarantees the security, such
guaranty would be considered a separate security issued by the guarantor as
well as the other issuer, subject to limited exclusions allowed by the
Investment Company Act of 1940. For purposes of this limitation, cash
instruments do not include securities issued by banks.
INVESTING IN RESTRICTED SECURITIES
The Trust will not invest more than 10% of its total assets in securities
subject to legal or contractual restrictions on resale.
INVESTING IN NEW ISSUERS
The Trust will not invest more than 5% of the assets of the Trust in
securities of issuers (or in the alternative, guarantors, where applicable)
which have a record of less than three years of continuous operation,
including the operation of any predecessor.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES
The Trust will not purchase or retain the securities of any issuer other
than the securities of the Trust, if, to the Trust's knowledge, those
officers and Trustees of the Trust or the Adviser, who individually own
beneficially more than 1/2 of 1% of the outstanding securities of such
issuer, together own beneficially more than 5% of such outstanding
securities.
INVESTING IN OPTIONS
The Trust will not purchase or sell puts, calls, straddles, or spreads
or any combination thereof, except that the Trust may purchase variable
rate municipal securities from a broker, dealer or other person accompanied
by the agreement of such seller to purchase, at the Trust's option, the
municipal security prior to the maturity thereof.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Trust will not invest in securities issued by any other investment
company or investment trust. The Trust will not acquire voting securities
except as part of a merger, consolidation, reorganization, or acquisition
of assets.
The above limitations cannot be changed without shareholder approval. The
following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
INVESTING IN ILLIQUID SECURITIES
The Trust will not invest more than 10% of the value of its net assets in
illiquid securities.
INVESTING FOR CONTROL
The Trust will not acquire voting securities except as part of a merger,
consolidation, reorganization, or acquisition of assets.
For purposes of the above limitations, the Trust considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic
bank or savings association having capital, surplus, and undivided profits
in excess of $100,000,000 at the time of investment to be `cash items.''
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 limitation.
The Trust did not borrow money or pledge securities in excess of 5% of the
value of its net assets during the last fiscal year and has no present
intent to do so during the coming fiscal year.
REGULATORY COMPLIANCE
The Trust may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in
the prospectus and this Statement of Additional Information, in order to
comply with applicable laws and regulations, including the provisions of
and regulations under the Investment Company Act of 1940. In particular,
the Trust will comply with the various requirements of Rule 2a-7, which
regulates money market mutual funds. The Trust will determine the effective
maturity of its investments, as well as its ability to consider a security
as having received the requisite short-term ratings by NRSROs, according to
Rule 2a-7. The Trust may change these operational policies to reflect
changes in the laws and regulations without the approval of its
shareholders.
FEDERATED TAX-FREE TRUST MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Tax-Free Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee of the
Funds.
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Trustee,
University of Pittsburgh; Director or Trustee of the Funds.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John
R. Wood and Associates, Inc., Realtors; Partner or Trustee in private real
estate ventures in Southwest Florida; formerly, President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
formerly, Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.;
Director, Ryan Homes, Inc.; Director or Trustee of the Funds.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine, University of Pittsburgh; Medical Director,
University of Pittsburgh Medical Center - Downtown; Member, Board of
Directors, University of Pittsburgh Medical Center; formerly, Hematologist,
Oncologist, and Internist, Presbyterian and Montefiore Hospitals; Director
or Trustee of the Funds.
Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.
Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Trustee
Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street
Boston Corporation; Director or Trustee of the Funds.
Gregor F. Meyer
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney, Member of Miller, Ament, Henny & Kochuba; Chairman, Meritcare,
Inc.; Director, Eat'N Park Restaurants, Inc.; Director or Trustee of the
Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director or Trustee of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., National Defense University, U.S. Space Foundation
and Czech Management Center; President Emeritus, University of Pittsburgh;
Founding Chairman, National Advisory Council for Environmental Policy and
Technology, Federal Emergency Management Advisory Board and Czech
Management Center; Director or Trustee of the Funds.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/Marketing/Conference Planning, Manchester Craftsmen's
Guild; Restaurant Consultant, Frick Art & History Center; Conference
Coordinator, University of Pittsburgh Art History Department; Director or
Trustee of the Funds.
Glen R. Johnson
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President
Trustee, Federated Investors; President and/or Trustee of some of the
Funds; staff member, Federated Securities Corp.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company, and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee of the Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company; Trustee or Director of
some of the Funds; President, Executive Vice President and Treasurer of
some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President , Secretary and Treasurer
Executive Vice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.;
Trustee, Federated Shareholder Services Company; Director, Federated
Services Company; President and Trustee, Federated Shareholder Services;
Director, Federated Securities Corp.; Executive Vice President and
Secretary of the Funds; Treasurer of some of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some
of the Funds; Director or Trustee of some of the Funds.
*This Trustee is deemed to be an `interested person'' as defined in
the Investment Company Act of 1940.
@Member of the Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board between
meetings of the Board.
As referred to in the list of Trustees and Officers, `Funds'' includes the
following investment companies:
111 Corcoran Funds; Arrow Funds; Automated Government Money Trust;
Blanchard Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust Series
II; Cash Trust Series, Inc. ; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund,
Inc.; Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated
Equity Funds; Federated Equity Income Fund, Inc.; Federated Fund for U.S.
Government Securities, Inc.; Federated GNMA Trust; Federated Government
Income Securities, Inc.; Federated Government Trust; Federated High Income
Bond Fund, Inc.; Federated High Yield Trust; Federated Income Securities
Trust; Federated Income Trust; Federated Index Trust; Federated
Institutional Trust; Federated Insurance Series; Federated Investment
Portfolios; Federated Investment Trust; Federated Master Trust; Federated
Municipal Opportunities Fund, Inc.; Federated Municipal Securities Fund,
Inc.; Federated Municipal Trust; Federated Short-Term Municipal Trust;
Federated Short-Term U.S. Government Trust; Federated Stock and Bond Fund,
Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income
Securities, Inc.; High Yield Cash Trust; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Term Trust, Inc. - 1999; Liberty U.S. Government
Money Market Trust; Liquid Cash Trust; Managed Series Trust; Money Market
Management, Inc.; Money Market Obligations Trust; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; Peachtree Funds; RIMCO
Monument Funds; Targeted Duration Trust; Tax-Free Instruments Trust; The
Planters Funds; The Starburst Funds; The Starburst Funds II; The Virtus
Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; and World Investment Series, Inc.
SHARE OWNERSHIP
Officers and Trustees as a group own less than 1% of the Trust`s
outstanding shares.
As of January 2, 1997, the following shareholders of record owned 5% or
more of the outstanding Shares of the Fund: Fiduciary Trust Company
International, New York, New York, owned approximately 88,862,590 shares
(12.31%); Wells Fargo Bank, Calabasas, California, owned approximately
76,877,427 shares (10.65%).
TRUSTEE COMPENSATION
AGGREGATE
NAME , . COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST* FROM FUND COMPLEX +
John F. Donahue, $0 $0 for the Trust and
Chairman and Trustee 56 other investment companies in
the Fund Complex
Thomas G. Bigley, $1,775 $108,725 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
John T. Conroy, Jr., $1,953 $119,615 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
William J. Copeland, $1,953 $119,615 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
James E. Dowd, $1,953 $119,615 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
Lawrence D. Ellis, M.D., $1,775 $108,725 for the Trust
and
Trustee 56 other investment companies in
the Fund Complex
Edward L. Flaherty, Jr., $1,953 $119,615 for the Trust
and
Trustee 56 other investment companies in
the Fund Complex
Peter E. Madden, $1,775 $108,725 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
Gregor F. Meyer, $1,775 $108,725 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
John E. Murray, $1,775 $108,725 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
Wesley W. Posvar, $1,775 $108,725 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
Marjorie P. Smuts, $1,775 $108,725 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
*Information is furnished for the fiscal year ended November 30, 1996.
+The information is provided for the last calendar year.
The 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
INVESTMENT ADVISER
The Trust's investment adviser is Federated Research. It is a subsidiary of
Federated Investors. All the voting securities of Federated Investors are
owned by a trust, the trustees of which are John F. Donahue, his wife and
his son, J. Christopher Donahue.
The adviser shall not be liable to the Trust 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 Trust.
ADVISORY FEES
For its advisory services, Federated Research receives an annual
investment advisory fee as described in the prospectus. For the fiscal
years ended November 30,1996, 1995, and 1994, the adviser earned
$3,255,470, $4,138,814 and $5,196,527, respectively, of which $960,485,
$1,198,154, and $1,249,214, respectively, were waived.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the order
at a favorable price. In working with dealers, the adviser will generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the
Trustees. The adviser may select brokers and dealers who offer brokerage
and research services. These services may be furnished directly to the
Trust 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 Trust 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 year ended November 30, 1996, the
Trust paid no brokerage commissions.
Although investment decisions for the Trust are made independently from
those of the other accounts managed by the adviser, investments of the type
the Trust may make may also be made by those other accounts. When the Trust
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 Trust or
the size of the position obtained or disposed of by the Trust. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Trust.
OTHER SERVICES
TRUST ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors,
provides administrative personnel and services to the Trust for a fee as
described in the prospectus. From March 1, 1994 to March 1, 1996, Federated
Administrative Services served as the Trust's Administrator. Prior to March
1, 1994, Federated Administrative Services, Inc. served as the Trust's
Administrator. Both former Administrators are subsidiaries of Federated
Investors. For purposes of this Statement of Additional Information,
Federated Services Company, Federated Administrative Services and Federated
Administrative Services, Inc. may hereinafter collectively be referred to
as the 'Administrators.'' For the fiscal years ended November 30, 1996,
1995, and 1994, the Administrators earned $615,257, $783,271, and $897,360,
respectively.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Trust. Federated Services Company, Pittsburgh,
PA, provides certain accounting and recordkeeping services with respect to
the Trust's portfolio investments. The fee paid for this service is based
upon the level of the Trust'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 on the
level of the Trust's average net assets for the period plus out-of-pocket
expenses.
INDEPENDENT AUDITORS
The independent auditors for the Trust are Deloitte & Touche LLP,
Pittsburgh, PA.
DETERMINING NET ASSET VALUE
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization
of premium or accumulation of discount rather than at current market value.
Accordingly, neither the amount of daily income nor the net asset value is
affected by any unrealized appreciation or depreciation of the portfolio.
In periods of declining interest rates, the indicated daily yield on shares
of the Trust computed by dividing the annualized daily income on the
Trust's portfolio by the net asset value computed as above may tend to be
higher than a similar computation made by using a method of valuation based
upon market prices and estimates. In periods of rising interest rates, the
opposite may be true.
The Trust's use of the amortized cost method of valuing portfolio
instruments depends on its compliance with certain conditions in Rule 2a-7
(the `Rule'') promulgated by the Securities and Exchange Commission under
the Investment Company Act of 1940. Under the Rule, the Trustees must
establish procedures reasonably designed to stabilize the net asset value
per share, as computed for purposes of distribution and redemption, at
$1.00 per share, taking into account current market conditions and the
Trust's investment objective. The procedures include monitoring the
relationship between the amortized cost value per share and the net asset
value per share based upon available indications of market value. The
Trustees will decide what, if any, steps should be taken if there is a
difference of more than 0.5 of 1% between the two values. The Trustees will
take any steps they consider appropriate (such as redemption in kind or
shortening the average portfolio maturity) to minimize any material
dilution or other unfair results arising from differences between the two
methods of determining net asset value.
SHAREHOLDER SERVICES
This arrangement permits the payment of fees to Federated Shareholder
Services 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 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 November 30, 1996, the Trust paid shareholder
service fees in the amount of $2,034,669. $1,627,735 of which was
voluntarily waived.
REDEMPTION IN KIND
The Trust is obligated to redeem shares solely in cash up to $250,000 or 1%
of the Trust's net asset value, whichever is less, for any one shareholder
within a 90-day period. Any redemption beyond this amount will also be in
cash unless the Trustees determine that further payments should be in kind.
In such cases, the Trust will pay all or a portion of the remainder of the
redemption in portfolio instruments valued in the same way as the Trust
determines net asset value. The portfolio instruments will be selected in a
manner that the Trustees deem fair and equitable. Redemption in kind is
not as liquid as a cash redemption. If redemption is made in kind,
shareholders who sell these securities could receive less than the
redemption value and could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect
its shareholders, 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 the Trust or its
Trustees enter into or sign.
In the unlikely event a shareholder is held personally liable for the
Trust's obligations, the Trust is required by the Declaration of Trust to
use its property to protect or compensate the shareholder. On request, the
Trust will defend any claim made and pay any judgment against a shareholder
for any act or obligation of the Trust. Therefore, financial loss resulting
from liability as a shareholder will occur only if the Trust itself cannot
meet its obligations to indemnify shareholders and pay judgments against
them.
THE TRUST'S TAX STATUS
To qualify for the special tax treatment afforded to regulated investment
companies, the Trust must, among other requirements: derive at least 90%
of its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within certain
statutory limits; and distribute to its shareholders at least 90% of its
net income earned during the year.
PERFORMANCE INFORMATION
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is invested;
changes in interest rates; changes in expenses; and the relative amount of
cash flow. To the extent that financial institutions and broker/dealers
charge fees in connection with services provided in conjunction with an
investment in shares of the Trust, the performance will be reduced for
those shareholders paying those fees.
YIELD
The yield is calculated based upon the seven days ending on the day of the
calculation, called the `base period.'' This yield is computed by:
determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net
change excluding capital changes but including the value of any additional
shares purchased with dividends earned from the original one share and all
dividends declared on the original and any purchased shares; dividing the
net change in the account's value by the value of the account at the
beginning of the base period to determine the base period return; and
multiplying the base period return by 365/7.
The Trust's yield for the seven-day period ended November 30, 1996, was
3.09%.
EFFECTIVE YIELD
The effective yield is calculated by compounding the unannualized base
period return by: adding 1 to the base period return; raising the sum to
the 365/7th power; and subtracting 1 from the result. The Trust's effective
yield for the seven-day period ended November 30, 1996, was 3.14%.
TAX-EQUIVALENT YIELD
The tax-equivalent yield of the Trust is calculated similarly to the yield
but is adjusted to reflect the taxable yield that the Trust would have had
to earn to equal its actual yield, assuming 39.60% tax rate (the maximum
effective federal rate for individuals) and assuming that the income is
100% tax exempt.
The Trust's tax-equivalent yield for the seven-day period ended November
30, 1996, was 5.12%.
TAX-EQUIVALENCY TABLE
A tax-equivalency table may be used in advertising and sales literature.
The interest earned by the municipal securities in the Trust'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 can be an attractive choice for investors, particularly
in times of narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1997
MULTISTATE MUNICIPAL FUNDS
FEDERAL INCOME TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%
JOINT $1- $41,201- $99,601- $151,751- OVER
RETURN 41,200 99,600 151,750 271,050 $271,050
SINGLE $1- $24,651- $59,751- $124,651- OVER
RETURN 24,650 59,750 124,650 271,050 $271,050
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.
TOTAL RETURN
Average annual total return is the average compounded rate of return for a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period
by the net asset value per share at the end of the period. The number of
shares owned at the end of the period is based on the number of shares
purchased at the beginning of the period with $1,000, adjusted over the
period by any additional shares, assuming the monthly reinvestment of all
dividends and distributions.
The Trust's average annual total returns for the one-, five-, and ten-
year periods ended November 30, 1996, were 3.18%, 2.85% and 3.93%,
respectively.
PERFORMANCE COMPARISONS
Investors may use financial publications and/or indices to obtain a more
complete view of the Trust'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 Trust
uses in advertising may include:
OLIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund
categories based on total return, which assumes the reinvestment of
all income dividends and capital gains distributions, if any.
oIBC/DONOGHUE'S MONEY FUND REPORT publishes annualized yields of
money market funds weekly. Donoghue's Money Market Insight
publication reports monthly and 12-month-to-date investment results
for the same money funds.
oMONEY, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day effective
yield.
Advertising and other promotional literature may include charts, graphs
and other illustrations using the Trust`s returns, or returns in general,
that demonstrate basic investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment. In addition,
the Trust 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 Trust 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 the Trust portfolio mangers and their views and
analysis on how such developments could affect the Funds. In addition,
advertising and sales literature may quote statistics and give general
information about the mutual fund industry, including growth of the
industry, from sources such as the Investment Company Institute.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is
reflected in its investment decision making-structured, straightforward,
and consistent. This has resulted in a history of competitive performance
with a range of competitive investment products that have gained the
confidence of thousands of clients and their customers.
The company's disciplined security selection process is firmly rooted in
sound methodologies backed by fundamental and technical research.
Investment decisions are made and executed by teams of portfolio managers,
analysts, and traders dedicated to specific market sectors. These traders
handle trillions of dollars in annual trading volume.
In the money market sector, Federated Investors gained prominence in the
mutual fund industry in 1974 with the creation of the first institutional
money market fund. Simultaneously, the company pioneered the use of the
amortized cost method of accounting for valuing shares of money market
funds, a principal means used by money managers today to value money market
fund shares. Other innovations include the first institutional tax-free
money market fund. As of December 31, 1996, Federated Investors managed
more than $50.3 billion in assets across 50 money market funds, including
18 government, 11 prime and 21 municipal with assets approximating $28.0
billion, $12.8 billion and $9.5 billion, respectively.
J. Thomas Madden, Executive Vice President, oversees Federated Investors'
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors' domestic fixed
income management. Henry A. Frantzen, Executive Vice President, oversees
the management of Federated Investors' international portfolios.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $3.5 trillion to the more than 6,000
funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for
a variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional
clients nationwide by managing and servicing separate accounts and mutual
funds for a variety of applications, including defined benefit and defined
contribution programs, cash management, and asset/liability management.
Institutional clients include corporations, pension funds, tax-exempt
entities, foundations/endowments, insurance companies, and investment and
financial advisors. The marketing effort to these institutional clients is
headed by John B. Fisher, President, Institutional Sales Division.
BANK MARKETING
Other institutional clients include close relationships with more than
1,600 banks and trust organizations. Virtually all of the trust divisions
of the top 100 bank holding companies use Federated funds in their clients'
portfolios. The marketing effort to trust clients is headed by Mark R.
Gensheimer, Executive 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 Investors' service to financial
professionals and institutions has earned it high ratings in several
surveys performed by DALBAR, Inc. DALBAR is recognized as the industry
benchmark for service quality measurement. The marketing effort to these
firms is headed by James F. Getz, President, Federated Securities Corp.
*Source: Investment Company Institute
APPENDIX
STANDARD & POOR'S RATINGS GROUP
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
A Standard & Poor's Ratings Group (S&P) note rating reflects the liquidity
concerns and market access risks unique to notes.
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.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of
their provisions a variable rate demand feature. The first rating (long-
term rating) addresses the likelihood of repayment of principal and
interest when due, and the second rating (short-term rating) describes the
demand characteristics. Several examples are AAA/A-l+, AA/A-I+, A/A-1. (The
definitions for the long-term and the short-term ratings are provided
below.)
COMMERCIAL PAPER (CP) RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365
days.
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 as
for issues designated A-1.
LONG-TERM DEBT 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 rate `AA'' has a very strong capacity to pay interest and repay
principal and differs from the highest 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.
MOODY'S INVESTORS SERVICE, INC.,
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
Moody's Investor Service, Inc. (Moody's) short-term ratings are designated
Moody's Investment Grade (MIG or VMIG) (see below). The purpose of the MIG
or VMIG ratings is to provide investors with a simple system by which the
relative investment qualities of short-term obligations may be evaluated.
MIG1 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 This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
Short-term ratings on issues with demand features are differentiated by the
use of the VMIG symbol to reflect such characteristics as payment upon
periodic demand rather than fixed maturity dates and payment relying on
external liquidity. In this case, two ratings are usually assigned, (for
example, AAA/VMIG-1); the first representing an evaluation of the degree of
risk associated with scheduled principal and interest payments, and the
second representing an evaluation of the degree of risk associated with the
demand feature. The VMIG rating can be assigned a 1 or 2 designation using
the same definitions described above for the MIG rating.
COMMERCIAL PAPER (CP) RATINGS
P-1 Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations.
PRIME-1 repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well established
industries, high rates of return on funds employed, conservative
capitalization structure with moderate reliance on debt and ample
asset protection, broad margins in earning coverage of fixed financial
charges and high internal cash generation, well-established access to
a range of financial markets and assured sources of alternate
liquidity.
P-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.
LONG-TERM DEBT RATINGS
AAA Bonds which are rated AAA are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as `gilt edged.'' Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA Bonds which are rated AA are judged to be of high quality by all
standards. Together with the AAA group, they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in AAA
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-
term risks appear somewhat larger than in AAA securities.
A Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
NR Indicates that both the bonds and the obligor or credit enhancer are
not currently rated by S&P or Moody's with respect to short-term
indebtedness. However, management considers them to be of comparable
quality to securities rated A-1 or P-1.
NR(1) The underlying issuer/obligor/guarantor has other outstanding
debt rated `AAA'' by S&P or ``AAA'' by Moody's.
NR(2) The underlying issuer/obligor/guarantor has other outstanding
debt rated `AA'' by S&P or ``AA'' by Moody's.
NR(3) The underlying issuer/obligor/guarantor has other outstanding
debt rated `A'' by S&P or Moody's.
FITCH INVESTORS SERVICES, INC.
SHORT-TERM DEBT RATING DEFINITIONS
F-1+ Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely
payment.
F-1 Very Strong Credit Quality. Issues assigned this rating reflect an
assurance for timely payment, only slightly less in degree than issues
rated F-1+.
F-2 Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is
not as great as for issues assigned F-1+ and F-1 ratings.
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (Filed in Part A)
(b) Exhibits:
(1) Conformed copy of the Declaration of Trust of the
Registrant (1);
(2) (i) Copy of the By-Laws of the Registrant as amended
(1,5);
(ii) Copy of Amendment No. 2 to By-Laws of the
Registrant (6);
(3) Not applicable;
(4) Copy of the Specimen Certificate of Shares of
Beneficial Interest of the Registrant (1);
(5) Conformed copy of the new Investment Advisory Contract
(8);
(6) Conformed copy of the new Distributor's Contract (8);
(7) Not applicable;
(8) (i) Conformed copy of the Custodian Agreement of the
Registrant; (9)
(9) (i) Conformed copy of Shareholder Services Plan of the
Registrant; (9)
(ii) Copy of Shareholder Services Sub-Contract of the
Registrant; (9)
(iii) Conformed copy of Shareholder Services Agreement
of the Registrant; (9)
(iv) Conformed copy of Administrative Services
Agreement of the Registrant; (9)
(v) Conformed Copy of Agreement for Fund Accounting,
Shareholder Recordkeeping, and Custody Services
Procurement; (9)
(10) Not applicable;
(11) Conformed copy of Consent of Independent Auditors; +
(12) Not applicable;
(13) Not applicable;
(14) Not applicable;
(15) Not applicable;
(16) Schedule for Computation of Trust Performance Data (7);
(17) Copy of Financial Data Schedule; +
(18) Not applicable;
(19) Conformed copy of Power of Attorney; +
+ All exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's Initial
Registration Statement on Form S-5 filed December 27, 1978. (File
No. 2-63343)
5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 on Form N-1 filed March 23, 1984. (File No. 2-63343)
6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 on Form N-1A filed January 25, 1988. (File No. 2-
63343)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 23 on Form N-1A filed November 21, 1989. (File No. 2-
63343)
9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 35 on Form N-1A filed January 23, 1995.
Item 25. Persons Controlled by or Under Common
Control with Registrant:
None
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of January 1, 1997
Shares of Beneficial Interest 1,126
(no par value)
Item 27. Indemnification: (1)
Item 28. Business and Other Connections of Investment Adviser:
(a)For a description of the other business of the investment
adviser, see the section entitled "Trust Information -
Management of the Trust" in Part A. The affiliations with
the Registrant of Three of the Trustees and two of the
Officers of the investment adviser are included in Part B of
this Registration Statement under "Trust Management -
Officers and Trustees." The remaining Trustee of the
investment adviser, his position with the investment adviser,
and, in parentheses, his principal occupation is: Mark D.
Olson, Partner, Wilson, Halbrook & Bayard, 107 W. Market
Street, Georgetown, Delaware 19947.
The remaining Officers of the investment adviser are: Mark
L. Mallon, Henry A. Franzen, William D. Dawson III, and J.
Thomas Madden, Executive Vice Presidents; Peter R. Anderson,
Drew J. Collins, Jonathan C. Conley, Mark E. Durbiano, J.
Alan Minteer, Mary Jo Ochson, Christopher H. Wiles, J. Alan
Minteer, Senior Vice Presidents; J. Scott Albrecht, Joseph M.
Balestrino, Randall A. Bauer,David F. Belton, David A.
Briggs, Kenneth J. Cody, Deborah A. Cunningham, Michael P.
Donnelly, Linda A. Duessel, Kathleen Foody-Malus, Thomas M.
Franks, Edward C. Gonzales, James E. Grefenstette, Stephen A.
Keen, Mark S. Kopinski, Robert M. Kowit, Jeff A. Kozemchak,
Marian R. Marinack, Sandra L. McInerney, Susan M. Nason,
Robert J. Ostrowski, Charles A. Ritter, Scott B.
Schermerhorn, Frank Semack, William F. Stotz, Tracey P.
Stouffer, Edward J. Tiedge, Jolanta M. Wysocka, Vice
Presidents; Thomas R. Donahue, Treasurer; and Stephen A.
Keen, Secretary. The business address of each of the
Officers of the investment adviser is Federated Investors
Tower, Pittsburgh, PA 15222-3779. These individuals are also
officers of a majority of the investment advisers to the
Funds listed in Part B of this Registration Statement under
"Federated Tax-Free Trust Management."
1. Response is incorporated by reference to Registrant's Initial
Registration Statement on Form S-5 filed December 27, 1978. (File
No. 2-63343)
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the Distributor for shares of the
Registrant, also acts as principal underwriter for the following open-
end investment companies: 111 Corcoran Funds; Arrow Funds; Automated
Government Money Trust; BayFunds; Blanchard Funds; Blanchard Precious
Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust;
Federated Adjustable Rate U.S. Government Fund, Inc.; Federated
American Leaders Fund, Inc.; Federated ARMs Fund; Federated Equity
Funds; Federated Equity Income Fund, Inc.; Federated Fund for U.S.
Government Securities, Inc.; Federated GNMA Trust; Federated
Government Income Securities, Inc.; Federated Government Trust;
Federated High Income Bond Fund, Inc.; Federated High Yield Trust;
Federated Income Securities Trust; Federated Income Trust; Federated
Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Investment Portfolios; Federated Investment Trust;
Federated Master Trust; Federated Municipal Opportunities Fund, Inc.;
Federated Municipal Securities Fund, Inc.; Federated Municipal Trust;
Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock and Bond Fund, Inc.; Federated Stock
Trust; Federated Tax-Free Trust; Federated Total Return Series, Inc.;
Federated U.S. Government Bond Fund; Federated U.S. Government
Securities Fund: 1-3 Years; Federated U.S. Government Securities Fund:
2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income
Securities, Inc.; High Yield Cash Trust; Independence One Mutual
Funds; Intermediate Municipal Trust; International Series, Inc.;
Investment Series Funds, Inc.; Investment Series Trust; Liberty U.S.
Government Money Market Trust; Liquid Cash Trust; Managed Series
Trust; Marshall Funds, Inc.; Money Market Management, Inc.; Money
Market Obligations Trust; Money Market Trust; Municipal Securities
Income Trust; Newpoint Funds; Peachtree Funds; RIMCO Monument Funds;
SouthTrust Vulcan Funds; Star Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; The Biltmore Funds; The Biltmore Municipal Funds;
The Monitor Funds; The Planters Funds; The Starburst Funds; The
Starburst Funds II; The Virtus Funds; Tower Mutual Funds; Trust for
Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury
Obligations; Vision Group of Funds, Inc.; andWorld Investment Series,
Inc.
Federated Securities Corp. also acts as principal underwriter for the
following closed-end investment company: Liberty Term Trust, Inc.-
1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief Vice President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary, and Asst.
Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive ViceExecutive Vice President
Federated Investors Tower President, Federated,
Pittsburgh, PA 15222-3779 Securities Corp.
Thomas R. Donahue Director, Assistant Secretary,
Federated Investors Tower Assistant Treasurer
Pittsburgh, PA 15222-3779 Federated Securities Corp
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust, Federated
Pittsburgh, PA 15222-3779 Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Byron F. Bowman Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Dale R. Browne Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securites Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Steven A. La Versa Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert D. Oehlschlager Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard Suder Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jamie M. Teschner Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charlene H. Jennings Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Timothy Radcliff Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Leslie K. Platt Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(c) Not applicable.
Item 30. Location of Accounts and Records:
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Registrant Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Services Company
(`Transfer Agent and Dividend
Disbursing Agent)
Federated Administrative Services
(`Administrator'')
Federated Research
(`Advisor'')
State Street Bank and Trust Company P.O. Box 8600
(`Custodian'') Boston, Massachusetts
.................... 02266-8600
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED TAX-FREE TRUST,
certifies that it meets all of the requirements for effectiveness of this
Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Pittsburgh and Commonwealth of
Pennsylvania, on the 23rd day of January, 1997.
FEDERATED TAX-FREE TRUST
BY: /s/ S. Elliott Cohan
S. Elliott Cohan, Assistant Secretary
Attorney in Fact for John F. Donahue
January 23, 1997
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE DATE
By:/s/ S. Elliott Cohan
S. Elliott Cohan Attorney In Fact January 23, 1997
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
Glen R. Johnson* President
John W. McGonigle* Treasurer, Executive
Vice President and Secretary
(Principal Financial and
Accounting Officer)
Thomas G. Bigley* Trustee
John T. Conroy, Jr.* Trustee
William J. Copeland* Trustee
James E. Dowd* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr.* Trustee
Peter E. Madden* Trustee
Gregor F. Meyer* Trustee
John E. Murray, Jr.* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
* By Power of Attorney
Exhibit (11) under Form N-1A
Exhibit 23 under 601/Reg SK
INDEPENDENT AUDITORS' CONSENT
To the Board of Trustees and Shareholder of
FEDERATED TAX-FREE TRUST:
We consent to the use in Post Effective Amendment No. 39 to Registrations
Statement 2-63343 of Federated Tax-Free Trust of our report dated January
14, 1997, appearing in the Prospectus, which is a part of such Registration
Statement, and to the reference to us under the heading `Financial
Highlights''in such Prospectus.
By:/s/DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
January 22, 1997
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of FEDERATED TAX-FREE
TRUST and
the Deputy General Counsel of Federated Investors, and each of them, their
true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for them and in their names, place and
stead, in any and all capacities, to sign any and all documents to be filed
with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, the Securities Exchange Act of 1934 and the Investment Company Act
of 1940, by means of the Securities and Exchange Commission's electronic
disclosure system known as EDGAR; and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents,
and each of them, full power and authority to sign and perform each and
every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as each of them might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
SIGNATURES TITLE DATE
/s/John F. Donahue Chairman and TrusteeJanuary 10, 1997
John F. Donahue (Chief Executive Officer)
/s/Glen R. Johnson President January 10, 1997
Glen R. Johnson
/s/John W. McGonigle Treasurer, ExecutiveJanuary 10, 1997
John W. McGonigle Vice President and Secretary
(Principal Financial and
Accounting Officer)
/s/Thomas G. Bigley Trustee January 10, 1997
Thomas G. Bigley
/s/John T. Conroy, Jr. Trustee January 10,1997
John T. Conroy, Jr.
SIGNATURES TITLE DATE
/s/William J. Copeland Trustee January 10, 1997
William J. Copeland
/s/James E. Dowd Trustee January 10, 1997
James E. Dowd
/s/Lawrence D. Ellis, M.D. Trustee January 10, 1997
Lawrence D. Ellis, M.D.
/s/ Edward L. Flaherty, Jr. Trustee January 10, 1997
Edward L. Flaherty, Jr.
/s/Peter E. Madden Trustee January 10, 1997
Peter E. Madden
/s/Gregor F. Meyer Trustee January 10, 1997
Gregor F. Meyer
/s/John E. Murray, Jr. Trustee January 10, 1997
John E. Murray, Jr.
/s/Wesley W. Posvar Trustee January 10, 1997
Wesley W. Posvar
/s/Marjorie P. Smuts Trustee January 10, 1997
Marjorie P. Smuts
Sworn to and subscribed before me this 10th day of January, 1997
/s/Marie M. Hamm
Marie M. Hamm
Notarial Seal
Marie M. Hamm, Notary Public
Plum Boro, Allegheny County
My Commission Expires Oct. 9, 2000
Member, Pennsylvania Association of Notaries
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> Federated Tax-Free Trust
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Nov-30-1996
<PERIOD-END> Nov-30-1996
<INVESTMENTS-AT-COST> 748,900,701
<INVESTMENTS-AT-VALUE> 748,900,701
<RECEIVABLES> 5,591,852
<ASSETS-OTHER> 861,437
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 755,353,990
<PAYABLE-FOR-SECURITIES> 5,665,571
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,903,450
<TOTAL-LIABILITIES> 7,569,021
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 747,784,969
<SHARES-COMMON-STOCK> 747,801,341
<SHARES-COMMON-PRIOR> 807,379,535
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (16,372)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 747,784,969
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 29,135,781
<OTHER-INCOME> 0
<EXPENSES-NET> 3,704,968
<NET-INVESTMENT-INCOME> 25,430,813
<REALIZED-GAINS-CURRENT> (6,253)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 25,424,560
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 25,430,813
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,635,145,132
<NUMBER-OF-SHARES-REDEEMED> 2,697,169,818
<SHARES-REINVESTED> 2,446,492
<NET-CHANGE-IN-ASSETS> (59,584,447)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (10,119)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,255,470
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,293,188
<AVERAGE-NET-ASSETS> 813,867,549
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.030
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.030
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
