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. 40 ................... X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 27 .................................. X
FEDERATED TAX-FREE TRUST
(Exact Name of Registrant as Specified in Charter)
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
(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, 1998
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.
Copies To:
Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky, LLP
2101 L Street, N.W.
Washington, D.C. 20037
<PAGE>
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; Performance
Information.
Item 4. General Description of
Registrant..................General Information; Investment
Information; Investment Objective;
Investment Policies;
Municipal Securities; Investment Risks; Investment Limitations.
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..................Account and Share Information;
Dividends; Capital Gains; Account
Activity; 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; Purchasing Shares by Wire;
Purchasing Shares by Check;
Automatic Investments.
Item 8. Redemption or Repurchase......How to Redeem Shares; Redeeming
Shares by Telephone; Redeeming
Shares by Mail; Account and
Share Information; Accounts With Low
Balances.
Item 9. Pending Legal Proceedings.....None.
<PAGE>
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.
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 .......................Performance Information; Yield.
Item 23. Financial Statements..........Filed in Part A.
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,
1998, 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, 1998 TABLE OF CONTENTS
Summary of Trust Expenses 1 Financial Highlights 2 General Information 3
Investment Information 3 Investment Objective 3 Investment Policies 3 Municipal
Securities 4 Investment Risks 5 Investment Limitations 5 Trust Information 5
Management of the Trust 5 Distribution of Shares 6 Administration of the Trust
7 Net Asset Value 7 How to Purchase Shares 7 Purchasing Shares by Wire 7
Purchasing Shares by Check 7 Automatic Investments 7 How to Redeem Shares 8
Redeeming Shares by Telephone 8 Redeeming Shares by Mail 8 Account and Share
Information 8 Dividends 8 Capital Gains 8 Account Activity 8 Accounts with Low
Balances 8 Voting Rights 9 Tax Information 9 Federal Income Tax 9 State and
Local Taxes 9 Performance Information 9 Financial Statements 10 Independent
Auditors' Report 22
SUMMARY OF TRUST EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
</TABLE>
ANNUAL TRUST OPERATING EXPENSES
(As a percentage of average net assets)
<TABLE>
<S> <C> <C>
Management Fee (after waiver)(1) 0.29%
12b-1 Fee None
Total Other Expenses 0.16%
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 shareholders 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 0.76% 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.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period,
<TABLE>
<S> <C>
1 Year $ 5
3 Years $14
5 Years $25
10 Years $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.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Independent Auditors' Report on page 22.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET
VALUE, BEGINNING
OF PERIOD $ 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 0.03 0.04 0.02 0.02 0.03 0.04 0.06 0.06 0.05
LESS
DISTRIBUTIONS
Distributions
from net
investment
income (0.03) (0.03) (0.04) (0.02) (0.02) (0.03) (0.04) (0.06) (0.06) (0.05)
NET ASSET $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
VALUE, END OF
PERIOD
TOTAL RETURN(A) 3.31% 3.18% 3.57% 2.43% 2.18% 2.88% 4.49% 5.68% 6.03% 4.87%
RATIOS TO
AVERAGE NET
ASSETS
Expenses 0.45% 0.45% 0.45% 0.45% 0.46% 0.46% 0.46% 0.45% 0.45% 0.45%
Net
investment
income 3.25% 3.12% 3.51% 2.38% 2.16% 2.84% 4.40% 5.54% 5.86% 4.74%
SUPPLEMENTAL
DATA
Net assets,
end of period
(000 omitted) $635,519 $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
</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
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 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
INVESTMENT OBJECTIVE
The investment objective of the Trust is to provide for its shareholders
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 in a portfolio of
municipal securities maturing in one year or less. This investment policy is
fundamental and may not be changed without shareholder approval. However, 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. Further, as a matter of fundamental
policy, at least 80% of the Trust's annual interest income will be exempt from
federal regular income tax except in extraordinary circumstances when management
feels that market conditions dictate a defensive posture in temporary
investments. (Federal regular income tax does not include the federal individual
alternative minimum tax or the federal alternative minimum tax for
corporations.)
ACCEPTABLE INVESTMENTS
As a matter of fundamental policy, 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
As a matter of fundamental policy, 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.
TEMPORARY INVESTMENTS
From time to time, when the investment adviser determines that market conditions
call for a temporary defensive posture, the Trust may, as a matter of
fundamental policy, 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; and
* may not invest more than 10% of its total assets 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.
The above investment limitations cannot be changed without shareholder approval.
The following investment limitations may be changed by the Board of Trustees
without shareholder approval.
The Trust will limit investments in illiquid securities to 10% of its net
assets.
TRUST INFORMATION
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The Trust is managed by a Board of Trustees. The Trustees are responsible for
managing the Trust's business affairs and for exercising all the Trust's powers
except those reserved for the shareholders. 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 0.40% 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 0.45% 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 $120 billion invested across more than 300
funds under management and/or administration by its subsidiaries, as of
December 31, 1997, 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 approximately
4,000 financial institutions nationwide.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the 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.
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 0.25% 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.
ADMINISTRATION OF THE TRUST
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:
MAXIMUM AVERAGE AGGREGATE
FEE DAILY NET ASSETS
0.150% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Services Company may choose voluntarily to waive a portion of its fee.
NET ASSET VALUE
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, Martin Luther
King, Jr. 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) in order to begin earning dividends that same 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 Shareholder Services
Company, P.O. Box 8600, Boston, MA 02266-8600. The check should be made payable
to: Federated Tax-Free Trust. Please include an account number on the check.
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
Shareholder 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 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 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 determines it necessary to
terminate or modify the telephone redemption privilege, shareholders will 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.
ACCOUNT ACTIVITY
Shareholders will receive periodic statements reporting all account
activity, including dividends paid. The Trust will not issue share
certificates.
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 & 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.
PORTFOLIO OF INVESTMENTS
FEDERATED TAX-FREE TRUST
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--100.8%
ALABAMA--2.9%
$ 715,000 Anniston, AL, IDB, (Series 1989-A) Weekly VRDNs (Union $ 715,000
Foundry Co.)/(Amsouth Bank N.A., Birmingham LOC)
2,325,000 Birmingham, AL, IDA, Revenue Refunding Bonds Weekly VRDNs 2,325,000
(S.P. Hotel Company)/ (Amsouth Bank N.A., Birmingham LOC)
6,500,000 Jefferson County, AL, GO Warrants (Series 1996) Weekly VRDNs 6,500,000
(Bayerische Landesbank Girozentrale LOC)
9,085,000 Jefferson County, AL, PA-196 Weekly VRDNs (FGIC INS)/(Merrill 9,085,000
Lynch Capital Services, Inc. LIQ)
&NBSP;&NBSP;&NBSP;&NBSP;TOTAL 18,625,000
ALASKA--0.9%
5,700,000 Alaska State Housing Finance Corp., General Mortgage Revenue 5,700,000
Bonds (Series 1997A) Weekly VRDNs (Bank of America NT and SA,
San Francisco LIQ)
ARIZONA--2.7%
6,000,000 Apache County, AZ Weekly VRDNs (Tucson Electric Power 6,000,000
Co.)/(Chase Manhattan Bank N.A., New York LOC)
5,780,000 Glendale, AZ IDA, Variable Rate Senior Living Facilities 5,780,000
Revenue Bonds Weekly VRDNs (Friendship Retirement
Corporation)/(Norwest Bank Minnesota, Minneapolis LOC)
3,500,000 Maricopa County, AZ School District No. 6, (Series 1997A), 3,510,276
4.40% TANs, 6/30/1998
2,000,000 Tempe, AZ School District No. 213, (Series 1997A), 4.40% 2,005,872
TANs, 6/30/1998
&NBSP;&NBSP;&NBSP;&NBSP;TOTAL 17,296,148
CALIFORNIA--2.3%
10,000,000 Los Angeles County, CA, 4.50% TRANs, 6/30/1998 10,036,171
2,500,000 Placer, CA Union High School District, (Series 1997), 4.45% 2,510,243
TRANs, 9/10/1998
2,200,000 Western Placer, CA Unified School District, 4.45% TRANs, 2,209,014
9/10/1998
&NBSP;&NBSP;&NBSP;&NBSP;TOTAL 14,755,428
COLORADO--0.4%
2,730,000 Loveland, CO, IDR (Series 1993S), 3.90% TOBs (Safeway, 2,730,000
Inc.)/(Bankers Trust Co., New York LOC), Mandatory Tender
12/1/1997
CONNECTICUT--3.5%
2,000,000 Connecticut State HEFA, (Series T) Weekly VRDNs (Yale 2,000,000
University)
20,000,000 Connecticut State, (1997 Series B) Weekly VRDNs (Bayerische 20,000,000
Landesbank Girozentrale LIQ)
TOTAL 22,000,000
</TABLE>
FEDERATED TAX-FREE TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
DISTRICT OF COLUMBIA--2.8%
$ 5,000,000 District of Columbia, (Series 1998C), 5.00% TRANs (Union Bank $ 5,046,160
of Switzerland, Zurich LOC), 9/30/1998
5,000,000 District of Columbia, (Series B), 4.50% TRANs (Morgan 5,025,139
Guaranty Trust Co., New York and Union Bank of Switzerland,
Zurich LOCs), 9/30/1998
7,500,000 District of Columbia, Variable Rate Demand/Fixed Rate Revenue 7,500,000
Bonds (Series 1997) Weekly VRDNs (Children's Defense
Fund)/(First National Bank of Maryland, Baltimore LOC)
TOTAL 17,571,299
FLORIDA--10.7%
8,000,000 Capital Projects Finance Authority, FL, Revenue Bonds (Series 8,000,000
1997) Weekly VRDNs (FSA INS)/(Credit Suisse First Boston,
Inc. LIQ)
4,200,000 Dade County, FL HFA, Hospital Revenue Bonds (Series 1995) 4,200,000
Weekly VRDNs (Miami Children's Hospital Project)/(AMBAC
INS)/(SunTrust Bank, Atlanta LIQ)
8,570,000 Gulf Breeze, FL, Floating Rate Demand Revenue Bonds (Series 8,570,000
1985 B) Weekly VRDNs (FGIC INS)/(Credit Local de France LIQ)
10,000,000 Highlands County, FL Health Facilities, (Series 1996A 10,000,000
Accounts Receivable) Weekly VRDNs (Adventist Health
System)/(Capital Markets Assurance Corp. INS)/(First National
Bank of Chicago LIQ)
5,500,000 Highlands County, FL Health Facilities, (Series 1996B 5,500,000
Accounts Receivable) Weekly VRDNs (Adventist Health
System)/(Capital Markets Assurance Corp. INS)/(Canadian
Imperial Bank of Commerce, Toronto LIQ)
5,900,000 Highlands County, FL Health Facilities, Variable Rate Demand 5,900,000
Revenue Bonds (Series 1996A) Weekly VRDNs (Adventist Health
System)/(SunTrust Bank, Central Florida LOC)
3,000,000 Miami, FL Health Facilities Authority, Health Facilities 3,000,000
Revenue Bonds (Series 1996) Weekly VRDNs (Miami Jewish Home
and Hospital for the Aged, Inc.)/(SunTrust Bank, Central
Florida LOC)
6,500,000 Orange County, FL HFA, Multi-family Housing Refunding Revenue 6,500,000
Bonds (1992 Series A) Weekly VRDNs (Smokewood/Sun Key
Apartments Project (FL))/(Citibank NA, New York LOC)
1,900,000 Orange County, FL HFA, Multifamily Housing Revenue Bonds 1,900,000
Weekly VRDNs (Sutton Place Ltd. Project)/(Nationsbank, N.A.,
Charlotte LOC)
2,500,000 Orange County, FL HFA, Variable Rate Certificates (Series 2,500,000
1997G) Weekly VRDNs (Bank of America NT and SA, San Francisco
LIQ)
11,090,000 Orange County, FL, Health Facilities Authority Weekly VRDNs 11,090,000
(Mayflower Retirement Community)/(Rabobank Nederland, Utrecht
LOC)
1,000,000 Pasco County, FL School Board, Variable Rate Certificates 1,000,000
Weekly VRDNs (AMBAC INS)/ (Landesbank Hessen-Thueringen,
Frankfurt LIQ)
TOTAL 68,160,000
GEORGIA--2.0%
10,000,000 Burke County, GA Development Authority, (Series 1997B), 3.80% 10,000,000
Bonds (Oglethorpe Power Corp. Vogtle Project)/(AMBAC INS),
5/28/1998
</TABLE>
FEDERATED TAX-FREE TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
GEORGIA--CONTINUED
$ 3,000,000 Marietta, GA Housing Authority, Multifamily Housing Revenue $ 3,000,000
Refunding Bonds (Series 1996) Weekly VRDNs (Winterset
Apartments Project)/(Wachovia Bank of Georgia NA, Atlanta
LOC)
TOTAL 13,000,000
ILLINOIS--5.5%
10,000,000 Chicago, IL, GO Tender Notes (Series 1997), 3.65% TOBs 10,000,000
(Morgan Guaranty Trust Co., New York LOC), Mandatory Tender
2/5/1998
1,000,000 Illinois Development Finance Authority Weekly VRDNs (Lyric 1,000,000
Opera of Chicago)/(Credit Agricole U.S.A., Inc., Harris Trust
& Savings Bank, Chicago, NBD Bank, Michigan and Northern
Trust Co., Chicago, IL LOCs)
17,900,000 Illinois Health Facilities Authority Weekly VRDNs (OSF Health 17,900,000
Care Systems)
6,000,000 Illinois Housing Development Authority, (1997 Subseries B-1), 6,000,000
4.10% TOBs, Mandatory Tender 7/7/1998
TOTAL 34,900,000
INDIANA--2.3%
8,500,000 Indiana Bond Bank, Series A-2, 4.25% TANs (Norwest Bank 8,506,311
Minnesota, Minneapolis LOC), 1/21/1998
6,000,000 Indianapolis, IN Local Public Improvement Bond Bank,
(Series 6,003,763 1997A), 4.375% TANs, 1/8/1998
TOTAL 14,510,074
MARYLAND--6.7%
800,000 Baltimore County, MD, (Series 1992) Weekly VRDNs (Sheppard & 800,000
Enoch Pratt Hospital Facility)/(Societe Generale, Paris LOC)
1,700,000 Baltimore, MD PCR Weekly VRDNs (SCM Plants,
Inc.)/(Barclays 1,700,000 Bank PLC, London LOC)
3,940,000 Maryland EDC, Variable Rate Demand/Fixed Rate Refunding 3,940,000
Revenue Bonds (1997 Issue) Weekly VRDNs (Jenkins Memorial
Nursing Home, Inc. Facility)/(First National Bank of
Maryland, Baltimore LOC)
2,764,000 Maryland Health & Higher Educational Facilities Authority, 2,764,000
Pooled Loan Program Revenue Notes, 3.80% CP (John Hopkins
University)/(Sanwa Bank Ltd., Osaka LIQ), Mandatory Tender
12/17/1997
13,320,000 Maryland Health & Higher Educational Facilities Authority, 13,320,000
Revenue Bonds (Series 1994) Weekly VRDNs (University
Physicians, Inc.)/(First National Bank of Maryland, Baltimore
LOC)
9,300,000 Maryland Health & Higher Educational Facilities Authority, 9,300,000
Series 1997 Weekly VRDNs (Augsburg Lutheran Home of MD.,
Inc.)/(First National Bank of Maryland, Baltimore LOC)
5,000,000 Montgomery County, MD, EDR Weekly VRDNs (Howard Hughes 5,000,000
Medical Center)
2,755,000 Queen Annes County, MD Economic Development Revenue, (Series 2,755,000
1994), 3.90% TOBs (Safeway, Inc.)/(Bankers Trust Co., New
York LOC), Mandatory Tender 12/1/1997
2,900,000 Washington Suburban Sanitation District, MD, (1996 Series) 2,900,000
Weekly VRDNs (Westdeutsche Landesbank Girozentrale LIQ)
TOTAL 42,479,000
</TABLE>
FEDERATED TAX-FREE TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
MASSACHUSETTS--0.8%
$ 4,973,000 North Andover, MA, 4.00% BANs, 1/22/1998 $ 4,975,046
MICHIGAN--1.6%
2,000,000 Kalamazoo, MI Economic Development Corp., 1995 Limited 2,000,000
Obligation Revenue Refunding Bonds Weekly VRDNs (Wyndham
Project, MI)/(First of America Bank - Illinois LOC)
8,000,000 Michigan State Hospital Finance Authority, (Series A) Weekly 8,000,000
VRDNs (OSF Health Care Systems)
TOTAL 10,000,000
MINNESOTA--8.4%
10,000,000 Minneapolis, MN, (Series 1993) Weekly VRDNs (Market Square 10,000,000
Real Estate, Inc.)/(Norwest Bank Minnesota, Minneapolis LOC)
8,700,000 Minneapolis, MN, Various Purpose Bonds (Series 1996) Weekly 8,700,000
VRDNs (Bayerische Vereinsbank AG, Munich LIQ)
13,500,000 Rochester, MN Health Care Facility Authority Weekly VRDNs 13,500,000
(Mayo Foundation)
18,000,000 Rochester, MN Health Care Facility Authority Weekly VRDNs 18,000,000
(Mayo Foundation)
3,000,000 Rosemount, MN, PCR (Series 1984) Weekly VRDNs (Koch Refining 3,000,000
Co.)
TOTAL 53,200,000
MISSOURI--3.1%
5,000,000 Missouri State Environmental Improvement & Energy Authority, 5,000,000
Pollution Control Revenue Bonds Series 1985B, 3.75% CP (Union
Electric Co.)/(Westdeutsche Landesbank Girozentrale LOC),
Mandatory Tender 2/26/1998
14,420,000 Missouri State HEFA, Health Facilities Revenue Bonds (Series 14,420,000
1996A) Weekly VRDNs (Deaconess Long Term Care of
Missouri)/(Bank One, Texas N.A. LOC)
TOTAL 19,420,000
NEW YORK--0.6%
4,000,000 New York State Energy Research & Development Authority, 4,000,000
(Series 1985A), 3.60% TOBs (Long Island Lighting
Co.)/(Deutsche Bank, AG LOC), Optional Tender 3/1/1998
NORTH CAROLINA--5.2%
20,000,000 Martin County, NC IFA, (Series 1993) Weekly VRDNs 20,000,000
(Weyerhaeuser Co.)
12,910,000 NCNB Pooled Tax-Exempt Trust, (Series 1990A) Weekly VRDNs 12,910,000
(NCNB Tax Exempt Trust 1990a)/(Nationsbank, N.A., Charlotte
LOC)
TOTAL 32,910,000
OHIO--7.6%
2,200,000 Clermont County, OH, Adjustable Rate Hospital Facilities 2,200,000
Revenue Bonds (Series 1996) Weekly VRDNs (Mercy Health
Systems)/(Credit Suisse First Boston LIQ)
18,500,000 Cuyahoga County, OH Hospital Authority, (Series 1997D) Weekly 18,500,000
VRDNs (Cleveland Clinic)/ (Bank of America NT and SA, San
Francisco LIQ)
13,782,040 Equity Trust I, (1996 Series) Weekly VRDNs (Bayerische 13,782,040
Hypotheken-Und Wechsel-Bank Ag LOC)
</TABLE>
FEDERATED TAX-FREE TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
OHIO--CONTINUED
$ 3,059,035 LaSalle National Bank Leasetops Trust, Series 1995A Leasetops $ 3,059,035
Certificates Weekly VRDNs (LaSalle National Bank, Chicago
LIQ)/(LaSalle National Bank, Chicago LOC)
1,260,000 Marion County, OH Hospital Authority, (Series 1991) Weekly 1,260,000
VRDNs (Marion County, OH Pooled Hospital Program)/(Bank One,
Ohio, N.A. LOC)
6,250,000 Montgomery County, OH Health Facilities Authority, (Series 6,250,000
1995) Weekly VRDNs (Sisters of Charity Health Care
System)/(Toronto-Dominion Bank LIQ)
1,000,000 Ohio State Air Quality Development Authority Weekly VRDNs 1,000,000
(Timken Co.)/(Credit Suisse First Boston LOC)
2,000,000 Ohio State Water Development Authority, Pollution Control 2,000,000
Revenue Refunding Bonds (Series 1997) Weekly VRDNs (Philip
Morris Cos., Inc.)
TOTAL 48,051,075
OKLAHOMA--5.8%
2,540,000 Muskogee, OK Industrial Trust, (Series 1985) Weekly VRDNs 2,540,000
(Muskogee Mall Limited Partnership)/(Boatmen's National Bank
of St. Louis LOC)
3,610,000 Muskogee, OK Industrial Trust, (Series 1985) Weekly VRDNs 3,610,000
(Warmack Muskogee Limited Partnership)/(Boatmen's National
Bank of St. Louis LOC)
20,000,000 Oklahoma State Industrial Authority, Health System Revenue 20,000,000
Bonds (Series 1995A) Weekly VRDNs (Baptist Medical Center,
OK)/(Credit Suisse First Boston and Morgan Guaranty Trust
Co., New York LIQs)
10,940,000 Tulsa, OK International Airport, Variable Rate Certificates 10,940,000
(Series 1997B-2) Weekly VRDNs (MBIA Insurance Corporation
INS)/(Bank of America NT and SA, San Francisco LIQ)
TOTAL 37,090,000
PENNSYLVANIA--7.1%
5,000,000 Dauphin County, PA General Authority, (Series A of 1997) 5,000,000
Weekly VRDNs (Allhealth Pooled Financing Program)/(FSA
INS)/(Credit Suisse First Boston LIQ)
25,500,000 Easton Area School District, PA, (Series 1997) Weekly VRDNs 25,500,000
(FGIC INS)/(FGIC Securities Purchase, Inc. LIQ)
14,500,000 Erie County, PA Hospital Authority Weekly VRDNs (St. Vincent 14,500,000
Health System)/(Mellon Bank NA, Pittsburgh LOC)
TOTAL 45,000,000
SOUTH DAKOTA--0.4%
2,685,000 South Dakota Housing Development Authority, (Series I), 3.90% 2,685,000
TOBs, Mandatory Tender 8/13/1998
TENNESSEE--3.0%
17,000,000 Chattanooga, TN HEFA Weekly VRDNs (McCallie School)/(SunTrust 17,000,000
Bank, Atlanta LOC)
2,185,000 Metropolitan Government Nashville & Davidson County, TN HEFA, 2,185,000
(Series 1985B), 3.95% TOBs (Vanderbilt University), Optional
Tender 5/1/1998
TOTAL 19,185,000
</TABLE>
FEDERATED TAX-FREE TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
TEXAS--8.8%
$ 3,660,000 Dallas, TX, (Series C), 3.95% TOBs, Optional Tender 6/15/1998 $ 3,660,000
6,950,000 Matagorda County, TX Navigation District Number One, CDC 6,950,000
(Series 1997D) Weekly VRDNs (Houston Light & Power Co.)/(FGIC
INS)/(CDC Municipal Products, Inc. LIQ)
17,000,000 Midland Independent School District, TX, Variable Rate 17,000,198
Unlimited Tax School Building Bonds (Series 1997), 3.91% TOBs
(Texas Permanent School Fund Guarantee Program GTD)/(Union
Bank of Switzerland, Zurich LIQ), Mandatory Tender 1/15/1998
10,000,000 Plano ISD, TX, Variable Rate Unlimited Tax School Building 10,000,584
Bonds, (Series 1997), 3.86% TOBs (Texas Permanent School Fund
Guarantee Program GTD)/(Union Bank of Switzerland, Zurich
LIQ), Mandatory Tender 2/5/1998
3,290,000 TX Pooled Tax Exempt Trust, Certificates of Participation 3,290,000
(Series 1996) Weekly VRDNs (Bank One, Texas N.A. LOC)
15,000,000 Texas State, (Series A), 4.75% TRANs, 8/31/1998 15,098,257
TOTAL 55,999,039
VERMONT--1.3%
8,000,000 Vermont IDA Weekly VRDNs (Wallace Computer,
Inc.)/(Wachovia 8,000,000 Bank of NC, NA, Winston-Salem
LOC)
WEST VIRGINIA--1.7%
3,425,000 Cabell County, WV Board of Education, Public School Refunding 3,431,783
Bonds (Series 1997), 4.50% Bonds, 5/1/1998
3,000,000 Oak Hill, WV, Variable Rate Industrial Development Refunding 3,024,246
Revenue Bonds (Series 1991A), 4.95% TOBs (Fayette
Plaza)/(ABN-AMRO Bank NV, New York LOC), Mandatory Tender
10/1/1998
4,355,000 West Virginia University Board of Regents, 3.80% TOBs (Morgan 4,355,000
Guaranty Trust Co., New York LOC), Optional Tender 2/1/1998
TOTAL 10,811,029
WISCONSIN--2.6%
8,600,000 Waukesha, WI School District, 4.10% TRANs, 8/21/1998 8,611,904
7,800,000 Wisconsin Health and Educational Facilities Authority, 7,800,000
Revenue Bonds (Series 1994) Weekly VRDNs (Felician Health
Care, Inc. Project)/(LaSalle National Bank, Chicago LOC)
TOTAL 16,411,904
WYOMING--0.1%
1,000,000 Wyoming Community Development Authority, (Series 1986C), 1,000,000
3.70% TOBs (First National Bank of Chicago LIQ), Optional
Tender 12/1/1997
TOTAL INVESTMENTS (AT AMORTIZED COST(B) $ 640,465,042
</TABLE>
(a) The Trust only invests in securities rated in the highest short-term rating
category by nationally recognized statistical rating organizations ("NRSROs") or
unrated securities of comparable quality. An NRSRO's highest rating category is
determined without regard for sub-categories and gradations. For example,
securities rated SP-1+ or SP-1 by Standard & Poor's, MIG-1 by Moody's Investors
Service, Inc., F-1+, and F-1 by Fitch Investors Service, L.P. are considered
rated in the highest short-term rating category.
Securities rated in the highest short-term rating category (and unrated
securities of comparable quality) are identified as First Tier securities.
Securities rated in the second highest short-term rating category (and unrated
securities of comparable quality) are identified as Second Tier securities. The
Trust follows application regulations in determining whether a security is rated
and whether a security rated by multiple NRSROs in different rating categories
should be identified as a First or Second Tier security.
At November 30, 1997, the portfolio securities were rated as follows:
Tier Rating Percentage Based on Total Market Value (Unaudited)
FIRST TIER SECOND TIER
100.0% 0%
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($635,519,277) at November 30, 1997.
The following acronyms are used throughout this portfolio:
AMBAC --American Municipal Bond Assurance Corporation BANs --Bond Anticipation
Notes CP --Commercial Paper EDC --Economic Development Commission EDR --Economic
Development Revenue FGIC --Financial Guaranty Insurance Company FSA --Financial
Security Assurance GO --General Obligation GTD --Guaranty 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 ISD
- --Independent School District LIQ --Liquidity Agreement LOCs --Letter(s) of
Credit LOC --Letter of Credit MBIA --Municipal Bond Investors Assurance PCR
- --Pollution Control Revenue PLC --Public Limited Company SA --Support Agreement
TANs --Tax Anticipation Notes TOBs --Tender Option Bonds TRANs --Tax and Revenue
Anticipation Notes VRDNs --Variable Rate Demand Notes (See Notes which are
an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
FEDERATED TAX-FREE TRUST
NOVEMBER 30, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at amortized cost and value $ 640,465,042
Cash 252,910
Income receivable 5,076,611
Receivable for shares sold 53,795
Total assets 645,848,358
LIABILITIES:
Payable for investments purchased $ 8,570,000
Income distribution payable 1,698,068
Accrued expenses 61,013
Total liabilities 10,329,081
Net Assets for 635,549,681 shares outstanding $ 635,519,277
NET ASSETS CONSIST OF:
Paid in capital $ 635,541,822
Accumulated net realized loss on investments (22,545)
Total Net Assets $ 635,519,277
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER SHARE:
$635,519,277 / 635,549,681 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
FEDERATED TAX-FREE TRUST
YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 26,900,405
EXPENSES:
Investment advisory fee $ 2,902,993
Administrative personnel and services fee 547,940
Custodian fees 41,218
Transfer and dividend disbursing agent fees and expenses 39,573
Trustees' fees 21,278
Auditing fees 16,644
Legal fees 10,225
Portfolio accounting fees 119,504
Shareholder services fee 1,814,370
Share registration costs 18,698
Printing and postage 9,972
Insurance premiums 6,330
Taxes 16,692
Miscellaneous 10,038
Total expenses 5,575,475
Waivers --
Waiver of investment advisory fee $ (823,445)
Waiver of shareholder services fee (1,451,496)
Total waivers (2,274,941)
Net expenses 3,300,534
Net investment income 23,599,871
Net realized loss on investments (14,032)
Change in net assets resulting from operations $ 23,585,839
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED TAX-FREE TRUST
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 23,599,871 $ 25,430,813
Net realized gain (loss) on investments ($14,032 and (14,032) (6,253)
$18,018 net losses, respectively, as computed for federal
tax purposes)
Change in net assets resulting from operations 23,585,839 25,424,560
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (23,599,871) (25,430,813)
SHARE TRANSACTIONS--
Proceeds from sale of shares 2,258,839,187 2,635,145,132
Net asset value of shares issued to shareholders in payment 1,764,863 2,446,492
of distributions declared
Cost of shares redeemed (2,372,855,710) (2,697,169,818)
Change in net assets resulting from share transactions (112,251,660) (59,578,194)
Change in net assets (112,265,692) (59,584,447)
NET ASSETS:
Beginning of period 747,784,969 807,369,416
End of period $ 635,519,277 $ 747,784,969
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
FEDERATED TAX-FREE TRUST
NOVEMBER 30, 1997
ORGANIZATION
Federated Tax-Free Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end management
investment company. The investment objective of the Trust is dividend income
exempt from federal regular income tax while seeking relative stability of
principal.
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 uses the amortized cost method to value its portfolio securities in
accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Distributions to shareholders are recorded on the ex-dividend
date.
FEDERAL TAXES
It is the Trust's policy to comply with the provisions of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax are
necessary.
At November 30, 1997, the Trust, for federal tax purposes, had a capital loss
carryforward of $45,231, which will reduce the Trust's taxable income arising
from future net realized gain on investments, if any, to the extent permitted by
the Code, and thus will reduce the amount of the distributions to shareholders
which would otherwise be necessary to relieve the Trust of any liability for
federal tax. Pursuant to the Code, such capital loss carryforward will expire as
follows:
EXPIRATION YEAR EXPIRATION AMOUNT
2002 $ 11,840
2003 $ 1,341
2004 $ 18,018
2005 $ 14,032
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.
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, 1997, capital paid-in aggregated $635,541,822.
Transactions in shares were as follows:
<TABLE>
YEAR ENDED NOVEMBER 30,
1997 1996
<S> <C> <C>
Shares sold 2,258,839,187 2,635,145,132
Shares issued to shareholders in payment of distributions 1,764,863 2,446,492
declared
Shares redeemed (2,372,855,710) (2,697,169,818)
Net change resulting from share transactions (112,251,660) (59,578,194)
</TABLE>
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 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, 1997, the Trust engaged in purchase and
sale transactions with funds that have a common investment adviser (or
affiliated investment advisers), common Directors/Trustees, and/or common
Officers. These purchase and sale transactions were made at current market value
pursuant to Rule 17a-7 under the Act amounting to $1,268,125,160 and
$1,061,865,000, 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,
1997, the related statement of operations for the year then ended, the
statements of changes in net assets for the years ended November 30, 1997 and
1996, 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 as of
November 31, 1997, by correspondence with the custodian and brokers; where
replies were not received, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated Tax-Free
Trust as of November 30, 1997, 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.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
January 16, 1998
FEDERATED TAX-FREE TRUST
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Federated Research
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
CUSTODIAN
State Street Bank and
Trust Company
P.O. Box 8600
Boston, MA 02266-8600
TRANSFER AGENT
AND DIVIDEND
DISBURSING AGENT
Federated Shareholder
Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT AUDITORS
Deloitte & Touche LLP
2500 One PPG Place
Pittsburgh, PA 15222-5401
[Graphic]
FEDERATED TAX-FREE TRUST
Federated Investors
Federated Securities Corp., Distributor
1-800-341-7400
www.federatedinvestors.com
PROSPECTUS
JANUARY 31, 1998
An Open-End, Management Investment Company
Cusip 314282104
8010414A (1/98)
[Graphic]
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, 1998. This Statement is
not a prospectus. You may request a copy of a prospectus or a paper copy of this
Statement, if you have received it electronically, free of charge by calling
1-800-341-7400.
FEDERATED TAX-FREE TRUST
FEDERATED INVESTORS FUNDS
5800 CORPORATE DRIVE
PITTSBURGH, PA 15237-7000
Statement dated January 31, 1998
[Graphic]
Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 314282104
8010414B (1/98)
[Graphic]
TABLE OF CONTENTS
INVESTMENT POLICIES 1
Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
Ratings 1
When-Issued and Delayed Delivery Transactions 1
Repurchase Agreements 2
Reverse Repurchase Agreements 2
Credit Enhancement 2
INVESTMENT LIMITATIONS 2
Selling Short and Buying on Margin 2
Issuing Senior Securities and Borrowing Money 2
Pledging Assets 2
Lending Cash or Securities 3
Investing in Commodities and Minerals 3
Investing in Real Estate 3
Underwriting 3
Diversification of Investments 3
Investing in Restricted Securities 3
Investing in New Issuers 3
Investing in Issuers Whose Securities are Owned by Officers and
Trustees 3
Investing in Options 3
Investing in Securities of Other Investment Companies 3
Investing for Control 3
Concentration of Investments 4
Investing in Illiquid Securities 4
Regulatory Compliance 4
FEDERATED TAX-FREE TRUST MANAGEMENT 4
Share Ownership 8
Trustee Compensation 9
Trustee Liability 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
Shareholder Services 10
DETERMINING NET ASSET VALUE 11
REDEMPTION IN KIND 11
MASSACHUSETTS PARTNERSHIP LAW 11
THE TRUST'S TAX STATUS 12
PERFORMANCE INFORMATION 12
YIELD 12
Effective Yield 12
Tax-Equivalent Yield 12
Tax-Equivalency Table 13
Total Return 13
Performance Comparisons 14
Economic and Market Information 14
ABOUT FEDERATED INVESTORS 14
Mutual Fund Market 14
Institutional Clients 15
Bank Marketing 15
Broker/Dealers and Bank Broker/Dealer Subsidiaries 15
APPENDIX 16
INVESTMENT POLICIES
Unless indicated otherwise, the policies described below may be changed by
the Board of Trustees ("Trustees") without shareholder approval.
Shareholders will be notified before any material change in these policies
becomes effective.
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
As a matter of fundamental investment policy, the securities in which the Trust
invests are rated in the highest short-term rating category by one or more
nationally recognized statistical rating organizations ("NRSROs") or be of
comparable quality to securities having such ratings. An NRSRO's highest rating
category is determined without regard for sub-categories and gradations. For
example, securities rated SP-1+ or SP-1 by Standard & Poor's ("S&P"), MIG-1 by
Moody's Investors Service, Inc. ("Moody's"), or F-1+ or F-1 by Fitch Investors
Service, Inc. ("Fitch") are all considered rated in the highest short-term
rating category. The Trust will follow applicable regulations in determining
whether a security rated by more than one NRSRO can be treated as being in the
highest short-term rating category; currently, such securities must be rated by
two NRSROs in their highest rating category. See "Regulatory Compliance."
Further, the Trust has the ability but no present intention of investing in:
securities that are rated SP-2 by S&P, or F-2 by Fitch; and securities that
are not rated but are determined by the Trustees to be of comparable
quality. Shareholders will be notified should the Trust decide to invest in
these securities.
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. 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 the 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 pledge, mortgage, or hypothecate its
assets except that, to secure borrowings permitted, it may pledge securities
having a market value at the time of pledge not exceeding 10% of the value of
the Trust's total assets.
LENDING CASH OR SECURITIES
The Trust will not make loans, 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 exploration or development programs. INVESTING IN REAL ESTATE
The Trust will not purchase or sell real estate, but this shall not prevent
the Trust from investing in Municipal Securities secured by real estate or
interests therein.
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 the securities of any issuer (except cash and cash instruments and
securities issued or guaranteed by the United States government, its agencies
and instrumentalities) if, as a result, more than 5% of its total assets would
be invested in the securities of such 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 if its assets and revenues are
separate from those of the governmental body creating it and the security is
backed only by the assets and revenues of a non-governmental user, then such
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 guarantee 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 the value of its total assets in
securities which are subject to legal or contractual restrictions on resale.
INVESTING IN NEW ISSUERS
The Trust will not invest more than 0.5% 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 0.5% of the outstanding securities of
such issuer, together own beneficially more than 0.5% 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.
INVESTING FOR CONTROL
The Trust will not acquire voting securities except as part of a merger,
consolidation, reorganization, or acquisition of assets.
CONCENTRATION OF INVESTMENTS
The Trust does not intend to purchase securities if, as a result of such
purchase, more than 25% of the value of its assets would be invested in any one
industry or in the securities of governmental subdivisions located in any one
state, territory, or possession of the United States. The Trust may invest more
than 25% of the value of its assets in short-term tax-exempt project notes which
are guaranteed by the U.S. government regardless of the location of the issuing
municipality. In addition, the Trust may, at times, invest more than 25% of the
value of its assets in cash or cash items (including bank time and demand
deposits such as certificates of deposit), U.S. Treasury bills or securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities
or instruments secured by these money market instruments, such as repurchase
agreements, for defensive purposes. 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.
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. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Company.
Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Director, Member
of Executive Committee, University of Pittsburgh; Director or Trustee of the
Funds.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice President, John R.
Wood and Associates, Inc., Realtors; Partner or Trustee in private real
estate ventures in Southwest Florida; formerly, President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.; Director, Ryan
Homes, Inc.; Director or Trustee of the Funds.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine, University of Pittsburgh; Medical Director, University of
Pittsburgh Medical Center - Downtown; Member, Board of Directors, University of
Pittsburgh Medical Center; formerly, Hematologist, Oncologist, and Internist,
Presbyterian and Montefiore Hospitals; Director or Trustee of the Funds.
Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.
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.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica &
Murray; Director or Trustee of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University and U.S. Space Foundation;
President Emeritus, University of Pittsburgh; Founding Chairman, National
Advisory Council for Environmental Policy and Technology, Federal Emergency
Management Advisory Board and Czech Management Center, Prague; Director or
Trustee of the Funds.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public Relations/Marketing/Conference Planning; Director or Trustee of the
Funds.
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; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
Adjustable Rate U.S. Government Fund, Inc.; Federated American Leaders Fund,
Inc.; Federated ARMs Fund; Federated Equity Funds; Federated Equity Income Fund,
Inc.; Federated Fund for U.S. Government Securities, Inc.; Federated GNMA Trust;
Federated Government Income Securities, Inc.; Federated Government Trust;
Federated High Income Bond Fund, Inc.; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Insurance Series; Federated Investment
Portfolios; Federated Investment Trust; Federated Master Trust; Federated
Municipal Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.;
Federated Municipal Trust; Federated Short-Term Municipal Trust; Federated
Short-Term U.S. Government Trust; Federated Stock and Bond Fund, Inc.; Federated
Stock Trust; Federated Tax-Free Trust; Federated Total Return Series, Inc.;
Federated U.S. Government Bond Fund; Federated U.S. Government Securities Fund:
1-3 Years; Federated U.S. Government Securities Fund: 2-5 Years; Federated U.S.
Government Securities Fund: 5-10 Years; Federated Utility Fund, Inc.; First
Priority Funds; Fixed Income Securities, Inc.; High Yield Cash Trust;
Intermediate Municipal Trust; International Series, Inc.; Investment Series
Funds, Inc.; Investment Series Trust; Liberty Term Trust, Inc.1999; Liberty U.S.
Government Money Market Trust; Liquid Cash Trust; Managed Series Trust; Money
Market Management, Inc.; Money Market Obligations Trust; Money Market
Obligations Trust II; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; RIMCO Monument Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; The Planters Funds; The Virtus Funds; Trust for Financial
Institutions; Trust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations; Wesmark Funds; WCT
Funds; and World Investment Series, Inc. SHARE OWNERSHIP Officers and
Trustees as a group own less than 1% of the Trust.
As of January 7, 1998, the following shareholders of record owned 5% or more of
the outstanding shares of the Trust: Fiduciary Trust Company International, New
York, NY, owned 142,141,700 shares (23.39%).
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, $1,610 $111,222 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
John T. Conroy, Jr., $1,771 $122,362 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
William J. Copeland, $1,771 $122,362 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
James E. Dowd, $1,771 $122,362 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
Lawrence D. Ellis, M.D., $1,610 $111,222 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
Edward L. Flaherty, Jr., $1,771 $122,362 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
Peter E. Madden, $1,610 $111,222 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
John E. Murray, $1,610 $111,222 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
Wesley W. Posvar, $1,610 $111,222 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
Marjorie P. Smuts, $1,610 $111,222 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
* Information is furnished for the fiscal year ended November 30, 1997.
+ The information is provided for the last calendar year.
TRUSTEE LIABILITY
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, 1997, 1996, and 1995, the adviser earned $2,902,993, $3,255,470, and
$4,138,814, respectively, of which $823,445, $960,485, and $1,198,154,
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, 1997, 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, a subsidiary of Federated Investors, served as the Trust's
Administrator. For purposes of this Statement of Additional Information,
Federated Services Company and Federated Administrative Services may hereinafter
collectively be referred to as the "Administrators." For the fiscal years ended
November 30, 1997, 1996, and 1995, the Administrators earned $547,940, $615,257,
and $783,271, 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.
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
Trust 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, 1997, the Trust earned shareholder
service fees in the amount of $1,814,370, $362,874 of which was paid to
financial institutions.
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% 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. 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;
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, 1997,
was 3.51%. 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, 1997,
was 3.58%. 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,
1997, was 5.81%. 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 1998
MULTISTATE MUNICIPAL FUND
FEDERAL INCOME
TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%
JOINT $1- $42,351- $102,301- $155,951- OVER
RETURN 42,350 102,300 155,950 278,450 $278,450
SINGLE $1- $25,351- $61,401- $128,101- OVER
RETURN 25,350 61,400 128,100 278,450 $278,450
TAX-EXEMPT YIELD TAXABLE YIELD EQUIVALENT 1.00% 1.18% 1.39% 1.45% 1.56% 1.66%
1.50% 1.76% 2.08% 2.17% 2.34% 2.48% 2.00% 2.35% 2.78% 2.90% 3.13% 3.31% 2.50%
2.94% 3.47% 3.62% 3.91% 4.14% 3.00% 3.53% 4.17% 4.35% 4.69% 4.97% 3.50% 4.12%
4.86% 5.07% 5.47% 5.79% 4.00% 4.71% 5.56% 5.80% 6.25% 6.62% 4.50% 5.29% 6.25%
6.52% 7.03% 7.45% 5.00% 5.88% 6.94% 7.25% 7.81% 8.28% 5.50% 6.47% 7.64% 7.97%
8.59% 9.11% 6.00% 7.06% 8.33% 8.70% 9.38% 9.93% 6.50% 7.65% 9.03% 9.42% 10.16%
10.76% 7.00% 8.24% 9.72% 10.14% 10.94% 11.59% 7.50% 8.82% 10.42% 10.87% 11.72%
12.42% 8.00% 9.41% 11.11% 11.59% 12.50% 13.25%
Note: The maximum marginal tax rate for each bracket was used
in calculating the taxable yield equivalent.
The chart above is for illustrative purposes only. It is not an indicator of
past or future performance of the Trust.
* Some portion of the Trust's income may be subject to the federal alternative
minimum tax and state and local 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, 1997, were 3.31%, 2.93%, and 3.85%, 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:
* LIPPER 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.
* IBC/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.
* MONEY, 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 portfolio managers 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 the growth of the industry, from sources such as the
Investment Company Institute. ABOUT FEDERATED INVESTORS Federated
Investors is dedicated to meeting investor needs which is reflected in its
investment decision making --structured, straightforward, and consistent. This
has resulted in a history of competitive performance with a range of competitive
investment products that have gained the confidence of thousands of clients and
their customers. The company's disciplined security selection process is
firmly rooted in sound methodologies backed by fundamental and technical
research. Investment decisions are made and executed by teams of portfolio
managers, analysts, and traders dedicated to specific market sectors. These
traders handle trillions of dollars in annual trading volume. In the 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,
1997, Federated Investors managed more than $63.1 billion in assets across 51
money market funds, including 17 government, 12 prime, and 22 municipal with
assets approximating $29.7 billion, $22.5 billion, and $10.9 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 and global
portfolios.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $4.4 trillion to the more than 6,700 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
* Source: Investment Company Institute
Institutional Clients
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional clients
include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division.
BANK MARKETING
Other institutional clients include close relationships with more than 1,600
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios. The
marketing effort to trust clients is headed by Timothy C. Pillion, Senior Vice
President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwidewe have over 2,200 broker/dealer and bank broker/dealer relationships
across the countrysupported by more wholesalers than any other mutual fund
distributor. Federated's service to financial professionals and institutions has
earned it high ratings in several surveys performed by DALBAR, Inc. DALBAR is
recognized as the industry benchmark for service quality measurement. The
marketing effort to these firms is headed by James F. Getz, President, Federated
Securities Corp. APPENDIX
STANDARD & POOR'S SHORT-TERM MUNICIPAL OBLIGATION RATINGS
A Standard & Poor's (S&P) note rating reflects the liquidity concerns and market
access risks unique to notes.
SP-1Very 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-2Satisfactory 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 SERVICE, L.P. 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 Specimen Certificate of Shares of
Beneficial Interest of the Registrant; (1)
(5) Conformed copy of the Investment Advisory
Contract; (8)
(6) (i) Conformed copy of the Distributor's
Contract; (8)
(ii) The Registrant hereby incorporates the
conformed copy of the specimen Mutual
Fund Sales and Service Agreement; and
Plan/Trustee Mutual Funds Service
Agreement from Item 24(b)(6) of the
Cash Trust Series II Registration Statement on
Form N-1A, filed with the Commission on
July 24, 1995. (File Nos. 33-38550 and 811-6269);
(7) Not applicable;
(8) (i) Conformed copy of the Custodian Agreement
of the Registrant; (9)
(ii) Conformed copy of Custodian Fee Schedule; +
(9) (i) Conformed copy of Shareholder Services
Agreement of the Registrant; (9)
(ii) Conformed copy of Amended and Restated
Shareholder Services Agreement; +
(iii) Conformed copy of Agreement for Fund
Accounting Services, Administrative
Services, Transfer Agency Services and
Custody Services Procurement; +
(iv) The responses described in Item
24(b)(6)(ii) are hereby incorporated by
reference;
(10) Paper copy of Opinion and Consent of Counsel
as to legality of shares being registered; (2)
+ 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)
2. Response is incorporated by reference to Amendment No. 1 to Registrant's
Initial Registration Statement on Form S-5 filed February 2, 1979. (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. (File No. 2-63343)
<PAGE>
(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; (10)
+ All exhibits have been filed electronically.
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 22 on Form N-1A filed January 25, 1989. (File No. 2-63343)
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 39 on Form N-1A filed January 23, 1997. (File No. 2-63343)
<PAGE>
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 7, 1998
Shares of Beneficial Interest
(no par value) 785
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 four of the Trustees
and one of the Officers of the investment adviser are included in Part
B of this Registration Statement under "Federated Tax-Free Trust
Management." 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:
Executive Vice Presidents: William D. Dawson, III
Henry A. Frantzen
J. Thomas Madden
Senior Vice Presidents: Drew J. Collins
Jonathan C. Conley
Deborah A. Cunningham
Mark E. Durbiano
J. Alan Minteer
Susan M. Nason
Mary Jo Ochson
Robert J. Ostrowski
1. Response is incorporated by reference to Registrant's Initial Registration
Statement on Form S-5 filed December 27, 1978. (File Nos. 2-63343 and
811-2891)
<PAGE>
Vice Presidents: J. Scott Albrecht
Joseph M. Balestrino
Randall S. Bauer
David A. Briggs
Kenneth J. Cody
Alexandre de Bethmann
Michael P. Donnelly
Linda A. Duessel
Donald T. Ellenberger
Kathleen M. Foody-Malus
Thomas M. Franks
Edward C. Gonzales
James E. Grefenstette
Susan R. Hill
Stephen A. Keen
Robert K. Kinsey
Robert M. Kowit
Jeff A. Kozemchak
Steven Lehman
Marian R. Marinack
Sandra L. McInerney
Charles A. Ritter
Scott B. Schermerhorn
Frank Semack
Aash M. Shah
Christopher Smith
William F. Stotz
Tracy P. Stouffer
Edward J. Tiedge
Paige M. Wilhelm
Jolanta M. Wysocka
Assistant Vice Presidents: Todd A. Abraham
Stefanie L. Bachhuber
Arthur J. Barry
Micheal W. Casey
Robert E. Cauley
Salvatore A. Esposito
Donna M. Fabiano
John T. Gentry
William R. Jamison
Constantine Kartsonsas
Joseph M. Natoli
Keith J. Sabol
Michael W. Sirianni
Gregg S. Tenser
Secretary: Stephen A. Keen
Treasurer: Thomas R. Donahue
Assistant Secretaries: Thomas R. Donahue
Richard B. Fisher
Christine I. McGonigle
Assistant Treasurer: Richard B. Fisher
The business address of each of the Officers of the investment adviser
is Federated Investors Tower, Pittsburgh, Pennsylvania 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.
<PAGE>
Item 29. Principal Underwriters:
(a) Federated Securities Corp. the Distributor for shares of the
Registrant, acts as principal underwriter for the following
open-end investment companies, including the Registrant:
111 Corcoran Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
Adjustable Rate U.S. Government Fund, Inc.; Federated American Leaders Fund,
Inc.; Federated ARMs Fund; Federated Core Trust; Federated Equity Funds;
Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Investment Portfolios; Federated Investment Trust; Federated
Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated Stock and Bond
Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income Securities,
Inc.; High Yield Cash Trust; 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 Obligations Trust II; 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 Planters Funds; The Virtus
Funds; The Wachovia Funds; The Wachovia Municipal 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.; and World Investment Series, Inc.
Federated Securities Corp. also acts as principal underwriter for the
following closed-end investment company: Liberty Term Trust, Inc.- 1999.
<PAGE>
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Richard B. Fisher Director, Chairman, Chief
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 Vice
Federated Investors Tower President, Federated,
Pittsburgh, PA 15222-3779 Securities Corp.
Thomas R. Donahue Director, Assistant Secretary
Federated Investors Tower and Assistant Treasurer
Pittsburgh, PA 15222-3779 Federated Securities Corp.
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
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
Laura M. Deger 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
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
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
Teresa M. Antoszyk 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
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 Securities Corp.
Pittsburgh, PA 15222-3779
Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
William C. Doyle 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
Raymond Hanley Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Beth A. Hetzel 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
Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Brian G. Kelly 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
Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Renee L. Martin 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
Alec H. Neilly 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
Richard A. Recker 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
George D. Riedel 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
John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas S. Schinabeck 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
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John A. Staley 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
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
John F. Wallin 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
Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Beth C. Dell 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
Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
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 Shareholder Federated Investors Tower
Services Company Pittsburgh, PA 15222-3779
("Transfer Agent and Dividend
Disbursing Agent")
Federated Services Company Federated Investors Tower
("Administrator") Pittsburgh, PA 15222-3779
Federated Advisers Federated Investors Tower
("Advisor") Pittsburgh, PA 15222-3779
State Street Bank and Trust Company P.O. Box 8600
("Custodian") Boston, MA 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.
<PAGE>
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
28th day of January, 1998.
FEDERATED TAX-FREE TRUST
BY: /s/ Matthew S. Hardin
Matthew S. Hardin, Assistant Secretary
Attorney in Fact for John F. Donahue
January 29, 1998
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/ Matthew S. Hardin
Matthew S. Hardin Attorney In Fact January 29, 1998
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
John E. Murray, Jr.* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
* By Power of Attorney
Exhibit 8(ii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
STATE STREET
DOMESTIC CUSTODY
FEE SCHEDULE
FEDERATED FUNDS
I. Custody Services
Maintain custody of fund assets. Settle portfolio purchases and sales.
Report buy and sell fails. Determine and collect portfolio income. Make
cash disbursements and report cash transactions. Monitor corporate
actions.
ANNUAL FEES
ASSET
Per Fund .25 Basis Points
Wire Fees $3.00 per wire
Settlements:
o Each DTC Transaction $5.00
o Each Federal Reserve Book Entry Transaction $3.75
o Each Repo Transaction (All Repo) $3.75
o Each Physical Transaction (NY/Boston, Private Placement) $15.00
o Each Option Written/Exercised/Expired $18.75
Each Book Entry Muni (Sub-custody) Transaction $15.00
o Government Paydowns $5.00
o Maturity Collections $8.00
o PTC Transactions $6.00
II. Special Services
Fees for activities of a non-recurring nature such as fund consolidation
or reorganization, extraordinary security shipments and the preparation of
special reports will be subject to negotiation.
III. Balance Credit
Municipal Funds
A balance credit equal to 75% of the average demand deposit account
balance in the custodian account for the month billed times the 30 day
T-Bill Rate on the last Monday of the month billed, will be applied
against the month's custodian bill.
Transfer Agent
A balance credit equal to 100% of the average balance in the transfer
agent demand deposit accounts, less the reserve requirement and applicable
related expenses, times 75% of the 30 average Fed Funds Rate.
IV. Payment
The above fees will be charged against the funds' custodian checking
account thirty (30) days after the invoice is mailed to the funds' offices.
V. Term of Contract
The parties agree that this fee schedule shall become effective January 1,
1997.
FEDERATED SERVICES COMPANY STATE STREET
BY: /s/ Douglas L. Hein BY: /s/ Michael E. Hagerty
TITLE: Senior Vice President TITLE: Vice President
DATE: April 15, 1997 DATE: April 8, 1997
Exhibit 9(ii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
AMENDED AND RESTATED
SHAREHOLDER SERVICES AGREEMENT
THIS AGREEMENT, amended and restated as of the first day of September,
1995, (originally made and enterered into as of the first day of March, 1994),
by and between those investment companies listed on Exhibit 1, as may be amended
from time to time, having their principal office and place of business at
Federated Investors Tower, Pittsburgh, PA 15222-3779 and who have approved this
form of Agreement (individually referred to herein as a "Fund" and collectively
as "Funds") and Federated Shareholder Services, a Delaware business trust,
having its principal office and place of business at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779 ("FSS").
1. The Funds hereby appoint FSS to render or cause to be rendered personal
services to shareholders of the Funds and/or the maintenance of accounts
of shareholders of the Funds ("Services"). In addition to providing
Services directly to shareholders of the Funds, FSS is hereby appointed
the Funds' agent to select, negotiate and subcontract for the performance
of Services. FSS hereby accepts such appointments. FSS agrees to provide
or cause to be provided Services which, in its best judgment (subject to
supervision and control of the Funds' Boards of Trustees or Directors, as
applicable), are necessary or desirable for shareholders of the Funds. FSS
further agrees to provide the Funds, upon request, a written description
of the Services which FSS is providing hereunder.
2. During the term of this Agreement, each Fund will pay FSS and FSS agrees
to accept as full compensation for its services rendered hereunder a fee
at an annual rate, calculated daily and payable monthly, up to 0.25% of 1%
of average net assets of each Fund.
For the payment period in which this Agreement becomes effective or
terminates with respect to any Fund, there shall be an appropriate
proration of the monthly fee on the basis of the number of days that this
Agreement is in effect with respect to such Fund during the month.
3. This Agreement shall continue in effect for one year from the date of its
execution, and thereafter for successive periods of one year only if the
form of this Agreement is approved at least annually by the Board of each
Fund, including a majority of the members of the Board of the Fund who are
not interested persons of the Fund ("Independent Board Members") cast in
person at a meeting called for that purpose.
4. Notwithstanding paragraph 3, this Agreement may be terminated as follows:
(a) at any time, without the payment of any penalty, by the vote of a
majority of the Independent Board Members of any Fund or by a vote of
a majority of the outstanding voting securities of any Fund as
defined in the Investment Company Act of 1940 on sixty (60) days'
written notice to the parties to this Agreement;
(b) automatically in the event of the Agreement's assignment as defined in
the Investment Company Act of 1940; and
(c) by any party to the Agreement without cause by giving the other party
at least sixty (60) days' written notice of its intention to
terminate.
5. FSS agrees to obtain any taxpayer identification number certification from
each shareholder of the Funds to which it provides Services that is
required under Section 3406 of the Internal Revenue Code, and any
applicable Treasury regulations, and to provide each Fund or its designee
with timely written notice of any failure to obtain such taxpayer
identification number certification in order to enable the implementation
of any required backup withholding.
6. FSS shall not be liable for any error of judgment or mistake of law or for
any loss suffered by any Fund in connection with the matters to which this
Agreement relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or
from reckless disregard by it of its obligations and duties under this
Agreement. FSS shall be entitled to rely on and may act upon advice of
counsel (who may be counsel for such Fund) on all matters, and shall be
without liability for any action reasonably taken or omitted pursuant to
such advice. Any person, even though also an officer, trustee, partner,
employee or agent of FSS, who may be or become a member of such Fund's
Board, officer, employee or agent of any Fund, shall be deemed, when
rendering services to such Fund or acting on any business of such Fund
(other than services or business in connection with the duties of FSS
hereunder) to be rendering such services to or acting solely for such Fund
and not as an officer, trustee, partner, employee or agent or one under the
control or direction of FSS even though paid by FSS.
This Section 6 shall survive termination of this Agreement.
7. No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the
party against which an enforcement of the change, waiver, discharge or
termination is sought.
8. FSS is expressly put on notice of the limitation of liability as set forth
in the Declaration of Trust of each Fund that is a Massachusetts business
trust and agrees that the obligations assumed by each such Fund pursuant
to this Agreement shall be limited in any case to such Fund and its assets
and that FSS shall not seek satisfaction of any such obligations from the
shareholders of such Fund, the Trustees, Officers, Employees or Agents of
such Fund, or any of them.
9. The execution and delivery of this Agreement have been authorized by the
Trustees of FSS and signed by an authorized officer of FSS, acting as
such, and neither such authorization by such Trustees nor such execution
and delivery by such officer shall be deemed to have been made by any of
them individually or to impose any liability on any of them personally,
and the obligations of this Agreement are not binding upon any of the
Trustees or shareholders of FSS, but bind only the trust property of FSS
as provided in the Declaration of Trust of FSS.
10. Notices of any kind to be given hereunder shall be in writing (including
facsimile communication) and shall be duly given if delivered to any Fund
and to such Fund at the following address: Federated Investors Tower,
Pittsburgh, PA 15222-3779, Attention: President and if delivered to FSS at
Federated Investors Tower, Pittsburgh, PA 15222-3779, Attention:
President.
11. This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof
whether oral or written. If any provision of this Agreement shall be held
or made invalid by a court or regulatory agency decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
Subject to the provisions of Sections 3 and 4, hereof, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and shall be governed by Pennsylvania law;
provided, however, that nothing herein shall be construed in a manner
inconsistent with the Investment Company Act of 1940 or any rule or
regulation promulgated by the Securities and Exchange Commission
thereunder.
12. This Agreement may be executed by different parties on separate
counterparts, each of which, when so executed and delivered, shall be an
original, and all such counterparts shall together constitute one and the
same instrument.
13. This Agreement shall not be assigned by any party without the prior
written consent of FSS in the case of assignment by any Fund, or of the
Funds in the case of assignment by FSS, except that any party may assign
to a successor all of or a substantial portion of its business to a party
controlling, controlled by, or under common control with such party.
Nothing in this Section 14 shall prevent FSS from delegating its
responsibilities to another entity to the extent provided herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
Investment Companies (listed on Exhibit 1)
By:
John F. Donahue
Chairman
Federated Shareholder Services
By:
President
<PAGE>
EXHIBIT 1
AUTOMATED GOVERNMENT MONEY TRUST
CASH TRUST SERIES, INC.:
Government Cash Series
Municipal Cash Series
Prime Cash Series
Treasury Cash Series
FEDERATED ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC.
FEDERATED AMERICAN LEADERS FUND, INC.
Class A Shares
Class C Shares
Class F Shares
FEDERATED ARMS FUND
Institutional Service Shares
Institutional Shares
FEDERATED CORE TRUST:
High Yield Bond Portfolio
FEDERATED EQUITY FUNDS:
Federated Aggressive Growth Fund
Class A Shares
Class C Shares
Federated Capital Appreciation Fund
Class A Shares
Class C Shares
Federated Growth Strategies Fund
Class A Shares
Class C Shares
Federated Small Cap Strategies Fund
Class A Shares
Class C Shares
FEDERATED EQUITY INCOME FUND, INC.
Class A Shares
Class C Shares
Class F Shares
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
Class A Shares
Class C Shares
FEDERATED GNMA TRUST
Institutional Service Shares
Institutional Shares
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
Class A Shares
Class C Shares
Class F Shares
FEDERATED GOVERNMENT TRUST"
Automated Government Cash Reserves
Automated Treasury Cash Reserves
U.S. Treasury Cash Reserves
Institutional Service Shares
Institutional Shares
FEDERATED HIGH INCOME BOND FUND, INC.
Class A Shares
Class C Shares
FEDERATED HIGH YIELD TRUST
FEDERATED INCOME SECURITIES TRUST:
Federated Short-Term Income Fund
Institutional Service Shares
Institutional Shares
Federated Intermediate Income Fund
Institutional Service Shares
Institutional Shares
Federated Income Trust
Institutional Service Shares
Institutional Shares
FEDERATED INDEX TRUST:
Federated Max-Cap Fund
CLASS C SHARES
Institutional Service Shares
Institutional Shares
Federated Mid-Cap Fund
Federated Mini-Cap Fund
CLASS C SHARES
Institutional Shares
FEDERATED INSTITUTIONAL TRUST:
Federated Institutional Short-Term Government Fund
FEDERATED INVESTMENT TRUST:
Federated Bond Index Fund
Institutional Shares
Institutional Service Shares
Federated Master Trust
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
Class A Shares
Class C Shares
Class F Shares
FEDERATED MUNICIPAL SECURITIES FUND, INC.
Class A Shares
Class C Shares
FEDERATED MUNICIPAL TRUST:
Alabama Municipal Cash Trust
California Municipal Cash Trust
Institutional Service Shares
Institutional Shares
Connecticut Municipal Cash Trust
Institutional Service Shares
Florida Municipal Cash Trust
Cash II Shares
Institutional Shares
Georgia Municipal Cash Trust
Maryland Municipal Cash Trust
Massachusetts Municipal Cash Trust
Institutional Service Shares
Boston 1784 Funds Shares
Michigan Municipal Cash Trust
Institutional Service Shares
Institutional Shares
Minnesota Municipal Cash Trust
Cash Series Shares
Institutional Shares
New Jersey Municipal Cash Trust
Institutional Service Shares
Institutional Shares
New York Municipal Cash Trust
Cash II Shares
Institutional Service Shares
North Carolina Municipal Cash Trust
Ohio Municipal Cash Trust
Cash II Shares
Institutional Shares
Institutional Service Shares
Pennsylvania Municipal Cash Trust
Cash Series Shares
Institutional Service Shares
Institutional Shares
Tennessee Municipal Cash Trust
Institutional Shares
Institutional Service Shares
Virginia Municipal Cash Trust
Institutional Service Shares
Institutional Shares
FEDERATED SHORT-TERM MUNICIPAL TRUST
Institutional Service Shares
Institutional Shares
FEDERATED SHORT-TERM U.S. GOVERNMENT TRUST
FEDERATED STOCK AND BOND FUND, INC.
Class A Shares
Class C Shares
FEDERATED STOCK TRUST
FEDERATED TAX-FREE TRUST
FEDERATED U.S. GOVERNMENT BOND FUND
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 1-3 YEARS
Institutional Service Shares
Institutional Shares
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 2-5 YEARS
Institutional Service Shares
Institutional Shares
FEDERATED U. S. GOVERNMENT SECURITIES FUND: 5-10 YEARS
Institutional Service Shares
Institutional Shares
FIXED INCOME SECURITIES, INC.:
Federated Limited Term Fund
Class A Shares
Class F Shares
Federated Limited Term Municipal Fund
Class A Shares
Class F Shares
<PAGE>
Federated Strategic Income Fund
Class A Shares
Class C Shares
Class F Shares
FEDERATED TOTAL RETURN SERIES, INC.:
Federated Limited Duration Government Fund
Institutional Shares
Institutional Service Shares
Federated Total Return Bond Fund
Institutional Shares
Institutional Service Shares
Federated Total Return Government Fund
Institutional Shares
Institutional Service Shares
Federated Total Return Limited Duration Fund
Institutional Shares
Institutional Service Shares
FEDERATED UTILITY FUND, INC.
Class A Shares
Class C Shares
Class F Shares
INTERMEDIATE MUNICIPAL TRUST:
Federated Intermediate Municipal Trust
Federated Pennsylvania Intermediate Municipal Trust
INTERNATIONAL SERIES, INC.:
Federated International Equity Fund
Class A Shares
Class C Shares
Federated International Income Fund
Class A Shares
Class C Shares
INVESTMENT SERIES FUNDS, INC.:
Federated Bond Fund
Class A Shares
Class C Shares
Class F Shares
EDWARD D. JONES & CO. DAILY PASSPORT CASH TRUST
LIBERTY TERM TRUST, INC. -- 1999
LIBERTY U.S. GOVERNMENT MONEY MARKET TRUST
Class A Shares
LIQUID CASH TRUST
MANAGED SERIES TRUST:
Federated Aggressive Growth Fund
Institutional Shares
Select Shares
Federated Managed Growth and Income Fund
Institutional Shares
Select Shares
Federated Managed Growth Fund
Institutional Shares
Select Shares
<PAGE>
Federated Managed Income Fund
Institutional Shares
Select Shares
MONEY MARKET MANAGEMENT, INC.
MONEY MARKET OBLIGATIONS TRUST:
Automated Cash Management Trust
Cash II Shares
Institutional Shares
Government Obligations Fund
Institutional Shares
Institutional Service Shares
Government Obligations Tax-Managed Fund
Institutional Shares
Institutional Service Shares
Prime Obligations Fund
Institutional Shares
Institutional Service Shares
Tax-Free Obligations Fund
Institutional Shares
Institutional Service Shares
Treasury Obligations Fund
Institutional Capital Shares
Institutional Shares
Institutional Service Shares
MONEY MARKET OBLIGATIONS TRUST II:
Municipal Obligations Fund
Institutional Capital Shares
Institutional Service Shares
Institutional Shares
Prime Cash Obligations Fund
Institutional Capital Shares
Institutional Service Shares
Institutional Shares
Prime Value Obligations Fund
Institutional Capital Shares
Institutional Service Shares
Institutional Shares
MONEY MARKET TRUST
MUNICIPAL SECURITIES INCOME TRUST:
Federated California Municipal Income Fund
Class F Shares
Federated Michigan IntermediateMunicipal Trust
Federated New York Municipal Income Fund
Class F Shares
Federated Ohio Municipal Income Fund
Class F Shares
Federated Pennsylvania Municipal Income Fund
Class A Shares
<PAGE>
TAX-FREE INSTRUMENTS TRUST
Institutional Service Shares
Investment Shares
TRUST FOR GOVERNMENT CASH RESERVES
TRUST FOR SHORT-TERM U.S. GOVERNMENT SECURITIES
TRUST FOR U.S. TREASURY OBLIGATIONS
WORLD INVESTMENT SERIES, INC.:
Federated Asia Pacific Growth Fund
Class A Shares
Class C Shares
Federated Emerging Markets Fund
Class A Shares
Class C Shares
Federated European Growth Fund
Class A Shares
Class C Shares
Federated Global Equity Income Fund
Class A Shares
Class C Shares
Federated International Growth Fund
Class A Shares
Class C Shares
Federated International High Income Fund
Class A Shares
Class C Shares
Federated International Small Company Fund
Class A Shares
Class C Shares
Federated Latin American Growth Fund
Class A Shares
Class C Shares
Federated World Utility Fund
Class A Shares
Class C Shares
Class F Shares
Exhibit 9(iii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
AGREEMENT
FOR
FUND ACCOUNTING SERVICES,
ADMINISTRATIVE SERVICES,
TRANSFER AGENCY SERVICES
AND
CUSTODY SERVICES PROCUREMENT
AGREEMENT made as of March 1, 1996, by and between those investment companies
listed on Exhibit 1 as may be amended from time to time, having their principal
office and place of business at Federated Investors Tower, Pittsburgh, PA
15222-3779 (the "Investment Company"), on behalf of the portfolios (individually
referred to herein as a "Fund" and collectively as "Funds") of the Investment
Company, and FEDERATED SERVICES COMPANY, a Pennsylvania corporation, having its
principal office and place of business at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779 on behalf of itself and its subsidiaries (the
"Company").
WHEREAS, the Investment Company is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), with authorized and issued shares of capital stock or beneficial
interest ("Shares");
WHEREAS, the Investment Company may desire to retain the Company as fund
accountant to provide fund accounting services (as herein defined) including
certain pricing, accounting and recordkeeping services for each of the Funds,
including any classes of shares issued by any Fund ("Classes") if so indicated
on Exhibit 1, and the Company desires to accept such appointment;
WHEREAS, the Investment Company may desire to appoint the Company as its
administrator to provide it with administrative services (as herein defined), if
so indicated on Exhibit, and the Company desires to accept such appointment;
WHEREAS, the Investment Company may desire to appoint the Company as its
transfer agent and dividend disbursing agent to provide it with transfer agency
services (as herein defined) if so indicated on Exhibit 1, and agent in
connection with certain other activities, and the Company desires to accept such
appointment; and
WHEREAS, the Investment Company may desire to appoint the Company as its
agent to select, negotiate and subcontract for custodian services from an
approved list of qualified banks if so indicated on Exhibit 1, and the Company
desires to accept such appointment; and
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, and intending to be legally bound hereby, the parties hereto agree as
follows:
SECTION ONE: FUND ACCOUNTING.
ARTICLE 1. APPOINTMENT.
The Investment Company hereby appoints the Company to provide certain pricing
and accounting services to the Funds, and/or the Classes, for the period and on
the terms set forth in this Agreement. The Company accepts such appointment and
agrees to furnish the services herein set forth in return for the compensation
as provided in Article 3 of this Section.
ARTICLE 2. THE COMPANY'S DUTIES.
Subject to the supervision and control of the Investment Company's Board of
Trustees or Directors ("Board"), the Company will assist the Investment Company
with regard to fund accounting for the Investment Company, and/or the Funds,
and/or the Classes, and in connection therewith undertakes to perform the
following specific services;
A. Value the assets of the Funds using: primarily, market
quotations, including the use of matrix pricing, supplied by the
independent pricing services selected by the Company in
consultation with the adviser, or sources selected by the
adviser, and reviewed by the board; secondarily, if a designated
pricing service does not provide a price for a security which the
Company believes should be available by market quotation, the
Company may obtain a price by calling brokers designated by the
investment adviser of the fund holding the security, or if the
adviser does not supply the names of such brokers, the Company
will attempt on its own to find brokers to price those
securities; thirdly, for securities for which no market price is
available, the Pricing Committee of the Board will determine a
fair value in good faith. Consistent with Rule 2a-4 of the 40
Act, estimates may be used where necessary or appropriate. The
Company's obligations with regard to the prices received from
outside pricing services and designated brokers or other outside
sources, is to exercise reasonable care in the supervision of the
pricing agent. The Company is not the guarantor of the securities
prices received from such agents and the Company is not liable to
the Fund for potential errors in valuing a Fund's assets or
calculating the net asset value per share of such Fund or Class
when the calculations are based upon such prices. All of the
above sources of prices used as described are deemed by the
Company to be authorized sources of security prices. The Company
provides daily to the adviser the securities prices used in
calculating the net asset value of the fund, for its use in
preparing exception reports for those prices on which the adviser
has comment. Further, upon receipt of the exception reports
generated by the adviser, the Company diligently pursues
communication regarding exception reports with the designated
pricing agents;
B. Determine the net asset value per share of each Fund and/or Class,
at the time and in the manner from time to time determined by the
Board and as set forth in the Prospectus and Statement of
Additional Information ("Prospectus") of each Fund;
C. Calculate the net income of each of the Funds, if any;
D. Calculate realized capital gains or losses of each of the Funds
resulting from sale or disposition of assets, if any;
E. Maintain the general ledger and other accounts, books and
financial records of the Investment Company, including for each
Fund, and/or Class, as required under Section 31(a) of the 1940
Act and the Rules thereunder in connection with the services
provided by the Company;
F. Preserve for the periods prescribed by Rule 31a-2 under the 1940
Act the records to be maintained by Rule 31a-1 under the 1940 Act
in connection with the services provided by the Company. The
Company further agrees that all such records it maintains for the
Investment Company are the property of the Investment Company and
further agrees to surrender promptly to the Investment Company
such records upon the Investment Company's request;
G. At the request of the Investment Company, prepare various reports
or other financial documents in accordance with generally accepted
accounting principles as required by federal, state and other
applicable laws and regulations; and
H. Such other similar services as may be reasonably requested by the
Investment Company.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section One,
shall hereafter be referred to as "Fund Accounting Services."
ARTICLE 3. COMPENSATION AND ALLOCATION OF EXPENSES.
A. The Funds will compensate the Company for Fund Accounting Services
in accordance with the fees agreed upon from time to time between
the parties hereto. Such fees do not include out-of-pocket
disbursements of the Company for which the Funds shall reimburse
the Company. Out-of-pocket disbursements shall include, but shall
not be limited to, the items agreed upon between the parties from
time to time.
B. The Fund and/or the Class, and not the Company, shall bear the
cost of: custodial expenses; membership dues in the Investment
Company Institute or any similar organization; transfer agency
expenses; investment advisory expenses; costs of printing and
mailing stock certificates, Prospectuses, reports and notices;
administrative expenses; interest on borrowed money; brokerage
commissions; taxes and fees payable to federal, state and other
governmental agencies; fees of Trustees or Directors of the
Investment Company; independent auditors expenses; legal and audit
department expenses billed to the Company for work performed
related to the Investment Company, the Funds, or the Classes; law
firm expenses; organizational expenses; or other expenses not
specified in this Article 3 which may be properly payable by the
Funds and/or Classes.
C. The compensation and out-of-pocket expenses attributable to the
Fund shall be accrued by the Fund and shall be paid to the Company
no less frequently than monthly, and shall be paid daily upon
request of the Company. The Company will maintain detailed
information about the compensation and out-of-pocket expenses by
Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be
adjusted from time to time, shall be dated and signed by a duly
authorized officer of the Investment Company and/or the Funds and
a duly authorized officer of the Company.
E. The fee for the period from the effective date of this Agreement
with respect to a Fund or a Class to the end of the initial month
shall be prorated according to the proportion that such period
bears to the full month period. Upon any termination of this
Agreement before the end of any month, the fee for such period
shall be prorated according to the proportion which such period
bears to the full month period. For purposes of determining fees
payable to the Company, the value of the Fund's net assets shall
be computed at the time and in the manner specified in the Fund's
Prospectus.
F. The Company, in its sole discretion, may from time to time
subcontract to, employ or associate with itself such person or
persons as the Company may believe to be particularly suited to
assist it in performing Fund Accounting Services. Such person or
persons may be affiliates of the Company, third-party service
providers, or they may be officers and employees who are employed
by both the Company and the Investment Company; provided, however,
that the Company shall be as fully responsible to each Fund for
the acts and omissions of any such subcontractor as it is for its
own acts and omissions. The compensation of such person or persons
shall be paid by the Company and no obligation shall be incurred
on behalf of the Investment Company, the Funds, or the Classes in
such respect.
SECTION TWO: ADMINISTRATIVE SERVICES.
ARTICLE 4. APPOINTMENT.
The Investment Company hereby appoints the Company as Administrator for the
period on the terms and conditions set forth in this Agreement. The Company
hereby accepts such appointment and agrees to furnish the services set forth in
Article 5 of this Agreement in return for the compensation set forth in Article
9 of this Agreement.
ARTICLE 5. THE COMPANY'S DUTIES.
As Administrator, and subject to the supervision and control of the Board and
in accordance with Proper Instructions (as defined hereafter) from the
Investment Company, the Company will provide facilities, equipment, and
personnel to carry out the following administrative services for operation of
the business and affairs of the Investment Company and each of its portfolios:
A. prepare, file, and maintain the Investment Company's governing
documents and any amendments thereto, including the Charter
(which has already been prepared and filed), the By-laws and
minutes of meetings of the Board and Shareholders;
B. prepare and file with the Securities and Exchange Commission and
the appropriate state securities authorities the registration
statements for the Investment Company and the Investment
Company's shares and all amendments thereto, reports to
regulatory authorities and shareholders, prospectuses, proxy
statements, and such other documents all as may be necessary to
enable the Investment Company to make a continuous offering of
its shares;
C. prepare, negotiate, and administer contracts (if any) on behalf
of the Investment Company with, among others, the Investment
Company's investment advisers and distributors, subject to any
applicable restrictions of the Board or the 1940 Act;
D. calculate performance data of the Investment Company for
dissemination to information services covering the investment
company industry;
E. prepare and file the Investment Company's tax returns;
F. coordinate the layout and printing of publicly disseminated
prospectuses and reports;
G. perform internal audit examinations in accordance with a charter
to be adopted by the Company and the Investment Company;
H. assist with the design, development, and operation of the
Investment Company and the Funds;
I. provide individuals reasonably acceptable to the Board for
nomination, appointment, or election as officers of the
Investment Company, who will be responsible for the management of
certain of the Investment Company's affairs as determined by the
Investment Company's Board; and
J. consult with the Investment Company and its Board on matters
concerning the Investment Company and its affairs.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section Two,
shall hereafter be referred to as "Administrative Services."
ARTICLE 6. RECORDS.
The Company shall create and maintain all necessary books and records in
accordance with all applicable laws, rules and regulations, including but not
limited to records required by Section 31(a) of the Investment Company act of
1940 and the rules thereunder, as the same may be amended from time to time,
pertaining to the Administrative Services performed by it and not otherwise
created and maintained by another party pursuant to contract with the Investment
Company. Where applicable, such records shall be maintained by the Company for
the periods and in the places required by Rule 31a-2 under the 1940 Act. The
books and records pertaining to the Investment Company which are in the
possession of the Company shall be the property of the Investment Company. The
Investment Company, or the Investment Company's authorized representatives,
shall have access to such books and records at all times during the Company's
normal business hours. Upon the reasonable request of the Investment Company,
copies of any such books and records shall be provided promptly by the Company
to the Investment Company or the Investment Company's authorized
representatives.
ARTICLE 7. DUTIES OF THE FUND.
The Fund assumes full responsibility for the preparation, contents and
distribution of its own offering document and for complying with all applicable
requirements the 1940 Act, the Internal Revenue Code, and any other laws, rules
and regulations of government authorities having jurisdiction.
ARTICLE 8. EXPENSES.
The Company shall be responsible for expenses incurred in providing office
space, equipment, and personnel as may be necessary or convenient to provide the
Administrative Services to the Investment Company, including the compensation of
the Company employees who serve as trustees or directors or officers of the
Investment Company. The Investment Company shall be responsible for all other
expenses incurred by the Company on behalf of the Investment Company, including
without limitation postage and courier expenses, printing expenses, travel
expenses, registration fees, filing fees, fees of outside counsel and
independent auditors, or other professional services, organizational expenses,
insurance premiums, fees payable to persons who are not the Company's employees,
trade association dues, and other expenses properly payable by the Funds and/or
the Classes.
ARTICLE 9. COMPENSATION.
For the Administrative Services provided, the Investment Company hereby
agrees to pay and the Company hereby agrees to accept as full compensation for
its services rendered hereunder an administrative fee at an annual rate per
Fund, as specified below.
The compensation and out of pocket expenses attributable to the Fund shall be
accrued by the Fund and paid to the Company no less frequently than monthly, and
shall be paid daily upon request of the Company. The Company will maintain
detailed information about the compensation and out of pocket expenses by the
Fund.
MAX. ADMIN. AVERAGE DAILY NET ASSETS
FEE OF THE FUNDS
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of $750 million
(Average Daily Net Asset break-points are on a complex-wide basis)
However, in no event shall the administrative fee received during any year of
the Agreement be less than, or be paid at a rate less than would aggregate
$125,000 per Fund and $30,000 per Class. The minimum fee set forth above in this
Article 9 may increase annually upon each March 1 anniversary of this Agreement
over the minimum fee during the prior 12 months, as calculated under this
agreement, in an amount equal to the increase in Pennsylvania Consumer Price
Index (not to exceed 6% annually) as last reported by the U.S. Bureau of Labor
Statistics for the twelve months immediately preceding such anniversary.
ARTICLE 10. RESPONSIBILITY OF ADMINISTRATOR.
A. The Company shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Investment Company in
connection with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
The Company shall be entitled to rely on and may act upon advice of
counsel (who may be counsel for the Investment Company) on all
matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice. Any person, even though also
an officer, director, trustee, partner, employee or agent of the
Company, who may be or become an officer, director, trustee, partner,
employee or agent of the Investment Company, shall be deemed, when
rendering services to the Investment Company or acting on any business
of the Investment Company (other than services or business in
connection with the duties of the Company hereunder) to be rendering
such services to or acting solely for the Investment Company and not
as an officer, director, trustee, partner, employee or agent or one
under the control or direction of the Company even though paid by the
Company.
B. The Company shall be kept indemnified by the Investment Company
and be without liability for any action taken or thing done by it
in performing the Administrative Services in accordance with the
above standards. In order that the indemnification provisions
contained in this Article 10 shall apply, however, it is
understood that if in any case the Investment Company may be
asked to indemnify or hold the Company harmless, the Investment
Company shall be fully and promptly advised of all pertinent
facts concerning the situation in question, and it is further
understood that the Company will use all reasonable care to
identify and notify the Investment Company promptly concerning
any situation which presents or appears likely to present the
probability of such a claim for indemnification against the
Investment Company. The Investment Company shall have the option
to defend the Company against any claim which may be the subject
of this indemnification. In the event that the Investment Company
so elects, it will so notify the Company and thereupon the
Investment Company shall take over complete defense of the claim,
and the Company shall in such situation initiate no further legal
or other expenses for which it shall seek indemnification under
this Article. The Company shall in no case confess any claim or
make any compromise in any case in which the Investment Company
will be asked to indemnify the Company except with the Investment
Company's written consent.
SECTION THREE: TRANSFER AGENCY SERVICES.
ARTICLE 11. TERMS OF APPOINTMENT.
Subject to the terms and conditions set forth in this Agreement, the
Investment Company hereby appoints the Company to act as, and the Company agrees
to act as, transfer agent and dividend disbursing agent for each Fund's Shares,
and agent in connection with any accumulation, open-account or similar plans
provided to the shareholders of any Fund ("Shareholder(s)"), including without
limitation any periodic investment plan or periodic withdrawal program.
ARTICLE 12. DUTIES OF THE COMPANY.
The Company shall perform the following services in accordance with Proper
Instructions as may be provided from time to time by the Investment Company as
to any Fund:
A. Purchases
(1) The Company shall receive orders and payment for the purchase of
shares and promptly deliver payment and appropriate documentation
therefore to the custodian of the relevant Fund, (the
"Custodian"). The Company shall notify the Fund and the Custodian
on a daily basis of the total amount of orders and payments so
delivered.
(2) Pursuant to purchase orders and in accordance with the Fund's
current Prospectus, the Company shall compute and issue the
appropriate number of Shares of each Fund and/or Class and hold
such Shares in the appropriate Shareholder accounts.
(3) For certificated Funds and/or Classes, if a Shareholder or its
agent requests a certificate, the Company, as Transfer Agent,
shall countersign and mail by first class mail, a certificate to
the Shareholder at its address as set forth on the transfer books
of the Funds, and/or Classes, subject to any Proper Instructions
regarding the delivery of certificates.
(4) In the event that any check or other order for the purchase of
Shares of the Fund and/or Class is returned unpaid for any reason,
the Company shall debit the Share account of the Shareholder by
the number of Shares that had been credited to its account upon
receipt of the check or other order, promptly mail a debit advice
to the Shareholder, and notify the Fund and/or Class of its
action. In the event that the amount paid for such Shares exceeds
proceeds of the redemption of such Shares plus the amount of any
dividends paid with respect to such Shares, the Fund and/the Class
or its distributor will reimburse the Company on the amount of
such excess.
B. Distribution
(1) Upon notification by the Funds of the declaration of any
distribution to Shareholders, the Company shall act as Dividend
Disbursing Agent for the Funds in accordance with the provisions
of its governing document and the then-current Prospectus of the
Fund. The Company shall prepare and mail or credit income, capital
gain, or any other payments to Shareholders. As the Dividend
Disbursing Agent, the Company shall, on or before the payment date
of any such distribution, notify the Custodian of the estimated
amount required to pay any portion of said distribution which is
payable in cash and request the Custodian to make available
sufficient funds for the cash amount to be paid out. The Company
shall reconcile the amounts so requested and the amounts actually
received with the Custodian on a daily basis. If a Shareholder is
entitled to receive additional Shares by virtue of any such
distribution or dividend, appropriate credits shall be made to the
Shareholder's account, for certificated Funds and/or Classes,
delivered where requested; and
(2) The Company shall maintain records of account for each Fund and
Class and advise the Investment Company, each Fund and Class and
its Shareholders as to the foregoing.
C. Redemptions and Transfers
(1) The Company shall receive redemption requests and redemption
directions and, if such redemption requests comply with the
procedures as may be described in the Fund Prospectus or set forth
in Proper Instructions, deliver the appropriate instructions
therefor to the Custodian. The Company shall notify the Funds on a
daily basis of the total amount of redemption requests processed
and monies paid to the Company by the Custodian for redemptions.
(2) At the appropriate time upon receiving redemption proceeds from
the Custodian with respect to any redemption, the Company shall
pay or cause to be paid the redemption proceeds in the manner
instructed by the redeeming Shareholders, pursuant to procedures
described in the then-current Prospectus of the Fund.
(3) If any certificate returned for redemption or other request for
redemption does not comply with the procedures for redemption
approved by the Fund, the Company shall promptly notify the
Shareholder of such fact, together with the reason therefor, and
shall effect such redemption at the price applicable to the date
and time of receipt of documents complying with said procedures.
(4) The Company shall effect transfers of Shares by the registered
owners thereof.
(5) The Company shall identify and process abandoned accounts and
uncashed checks for state escheat requirements on an annual basis
and report such actions to the Fund.
D. Recordkeeping
(1) The Company shall record the issuance of Shares of each Fund,
and/or Class, and maintain pursuant to applicable rules of the
Securities and Exchange Commission ("SEC") a record of the total
number of Shares of the Fund and/or Class which are authorized,
based upon data provided to it by the Fund, and issued and
outstanding. The Company shall also provide the Fund on a regular
basis or upon reasonable request with the total number of Shares
which are authorized and issued and outstanding, but shall have no
obligation when recording the issuance of Shares, except as
otherwise set forth herein, to monitor the issuance of such Shares
or to take cognizance of any laws relating to the issue or sale of
such Shares, which functions shall be the sole responsibility of
the Funds.
(2) The Company shall establish and maintain records pursuant to
applicable rules of the SEC relating to the services to be
performed hereunder in the form and manner as agreed to by the
Investment Company or the Fund to include a record for each
Shareholder's account of the following:
(a) Name, address and tax identification number (and whether such
number has been certified);
(b) Number of Shares held;
(c) Historical information regarding the account, including
dividends paid and date and price for all transactions;
(d) Any stop or restraining order placed against the account;
(e) Information with respect to withholding in the case of a
foreign account or an account for which withholding is
required by the Internal Revenue Code;
(f) Any dividend reinvestment order, plan application, dividend
address and correspondence relating to the current
maintenance of the account;
(g) Certificate numbers and denominations for any Shareholder
holding certificates;
(h) Any information required in order for the Company to perform
the calculations contemplated or required by this Agreement.
(3) The Company shall preserve any such records required to be
maintained pursuant to the rules of the SEC for the periods
prescribed in said rules as specifically noted below. Such record
retention shall be at the expense of the Company, and such records
may be inspected by the Fund at reasonable times. The Company may,
at its option at any time, and shall forthwith upon the Fund's
demand, turn over to the Fund and cease to retain in the Company's
files, records and documents created and maintained by the Company
pursuant to this Agreement, which are no longer needed by the
Company in performance of its services or for its protection. If
not so turned over to the Fund, such records and documents will be
retained by the Company for six years from the year of creation,
during the first two of which such documents will be in readily
accessible form. At the end of the six year period, such records
and documents will either be turned over to the Fund or destroyed
in accordance with Proper Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Fund periodically the following
information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) The total number of Shares issued and outstanding in each
state for "blue sky" purposes as determined according to
Proper Instructions delivered from time to time by the Fund
to the Company;
(d) Shareholder lists and statistical information;
(e) Payments to third parties relating to distribution
agreements, allocations of sales loads, redemption fees, or
other transaction- or sales-related payments;
(f) Such other information as may be agreed upon from time to
time.
(2) The Company shall prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies, and, if
required, mail to Shareholders, such notices for reporting
dividends and distributions paid as are required to be so filed
and mailed and shall withhold such sums as are required to be
withheld under applicable federal and state income tax laws, rules
and regulations.
(3) In addition to and not in lieu of the services set forth above,
the Company shall:
(a) Perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, agent in connection
with accumulation, open-account or similar plans (including
without limitation any periodic investment plan or periodic
withdrawal program), including but not limited to: maintaining
all Shareholder accounts, mailing Shareholder reports and
Prospectuses to current Shareholders, withholding taxes on
accounts subject to back-up or other withholding (including
non-resident alien accounts), preparing and filing reports on
U.S. Treasury Department Form 1099 and other appropriate forms
required with respect to dividends and distributions by federal
authorities for all Shareholders, preparing and mailing
confirmation forms and statements of account to Shareholders for
all purchases and redemptions of Shares and other conformable
transactions in Shareholder accounts, preparing and mailing
activity statements for Shareholders, and providing Shareholder
account information; and
(b) provide a system which will enable the Fund to monitor the
total number of Shares of each Fund (and/or Class) sold in
each state ("blue sky reporting"). The Fund shall by Proper
Instructions (i) identify to the Company those transactions
and assets to be treated as exempt from the blue sky
reporting for each state and (ii) verify the classification
of transactions for each state on the system prior to
activation and thereafter monitor the daily activity for
each state. The responsibility of the Company for each
Fund's (and/or Class's) state blue sky registration status
is limited solely to the recording of the initial
classification of transactions or accounts with regard to
blue sky compliance and the reporting of such transactions
and accounts to the Fund as provided above.
F. Other Duties
(1) The Company shall answer correspondence from Shareholders relating
to their Share accounts and such other correspondence as may from
time to time be addressed to the Company;
(2) The Company shall prepare Shareholder meeting lists, mail proxy
cards and other material supplied to it by the Fund in connection
with Shareholder meetings of each Fund; receive, examine and
tabulate returned proxies, and certify the vote of the
Shareholders;
(3) The Company shall establish and maintain facilities and procedures
for safekeeping of stock certificates, check forms and facsimile
signature imprinting devices, if any; and for the preparation or
use, and for keeping account of, such certificates, forms and
devices.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section Three,
shall hereafter be referred to as "Transfer Agency Services."
ARTICLE 13. DUTIES OF THE INVESTMENT COMPANY.
A. Compliance
The Investment Company or Fund assume full responsibility for the
preparation, contents and distribution of their own and/or their
classes' Prospectus and for complying with all applicable requirements
of the Securities Act of 1933, as amended (the "1933 Act"), the 1940 Act
and any laws, rules and regulations of government authorities having
jurisdiction.
B. Share Certificates
The Investment Company shall supply the Company with a sufficient supply
of blank Share certificates and from time to time shall renew such
supply upon request of the Company. Such blank Share certificates shall
be properly signed, manually or by facsimile, if authorized by the
Investment Company and shall bear the seal of the Investment Company or
facsimile thereof; and notwithstanding the death, resignation or removal
of any officer of the Investment Company authorized to sign
certificates, the Company may continue to countersign certificates which
bear the manual or facsimile signature of such officer until otherwise
directed by the Investment Company.
C. Distributions
The Fund shall promptly inform the Company of the declaration of any
dividend or distribution on account of any Fund's shares.
ARTICLE 14. COMPENSATION AND EXPENSES.
A. Annual Fee
For performance by the Company pursuant to Section Three of this
Agreement, the Investment Company and/or the Fund agree to pay the
Company an annual maintenance fee for each Shareholder account as agreed
upon between the parties and as may be added to or amended from time to
time. Such fees may be changed from time to time subject to written
agreement between the Investment Company and the Company. Pursuant to
information in the Fund Prospectus or other information or instructions
from the Fund, the Company may sub-divide any Fund into Classes or other
sub-components for recordkeeping purposes. The Company will charge the
Fund the same fees for each such Class or sub-component the same as if
each were a Fund.
B. Reimbursements
In addition to the fee paid under Article 7A above, the Investment
Company and/or Fund agree to reimburse the Company for out-of-pocket
expenses or advances incurred by the Company for the items agreed upon
between the parties, as may be added to or amended from time to time. In
addition, any other expenses incurred by the Company at the request or
with the consent of the Investment Company and/or the Fund, will be
reimbursed by the appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by
the Fund and shall be paid to the Company no less frequently than
monthly, and shall be paid daily upon request of the Company. The
Company will maintain detailed information about the compensation
and out-of-pocket expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be
adjusted from time to time, shall be dated and signed by a duly
authorized officer of the Investment Company and/or the Funds and
a duly authorized officer of the Company.
SECTION FOUR: CUSTODY SERVICES PROCUREMENT.
ARTICLE 15. APPOINTMENT.
The Investment Company hereby appoints Company as its agent to evaluate and
obtain custody services from a financial institution that (i) meets the criteria
established in Section 17(f) of the 1940 Act and (ii) has been approved by the
Board as eligible for selection by the Company as a custodian (the "Eligible
Custodian"). The Company accepts such appointment.
ARTICLE 16. THE COMPANY AND ITS DUTIES.
Subject to the review, supervision and control of the Board, the Company
shall:
A. evaluate and obtain custody services from a financial institution that
meets the criteria established in Section 17(f) of the 1940 Act and has
been approved by the Board as being eligible for selection by the Company
as an Eligible Custodian;
B. negotiate and enter into agreements with Eligible Custodians for
the benefit of the Investment Company, with the Investment Company
as a party to each such agreement. The Company may, as paying
agent, be a party to any agreement with any such Eligible
Custodian;
C. establish procedures to monitor the nature and the quality of the
services provided by Eligible Custodians;
D. monitor and evaluate the nature and the quality of services
provided by Eligible Custodians;
E. periodically provide to the Investment Company (i) written reports
on the activities and services of Eligible Custodians; (ii) the
nature and amount of disbursements made on account of the each
Fund with respect to each custodial agreement; and (iii) such
other information as the Board shall reasonably request to enable
it to fulfill its duties and obligations under Sections 17(f) and
36(b) of the 1940 Act and other duties and obligations thereof;
F. periodically provide recommendations to the Board to enhance
Eligible Custodian's customer services capabilities and improve
upon fees being charged to the Fund by Eligible Custodian; and
The foregoing, along with any additional services that Company shall agree in
writing to perform for the Fund under this Section Four, shall hereafter be
referred to as "Custody Services Procurement."
ARTICLE 17. FEES AND EXPENSES.
A. Annual Fee
For the performance of Custody Services Procurement by the Company
pursuant to Section Four of this Agreement, the Investment Company
and/or the Fund agree to compensate the Company in accordance with
the fees agreed upon from time to time.
B. Reimbursements
In addition to the fee paid under Section 11A above, the Investment
Company and/or Fund agree to reimburse the Company for out-of-pocket
expenses or advances incurred by the Company for the items agreed upon
between the parties, as may be added to or amended from time to time. In
addition, any other expenses incurred by the Company at the request or
with the consent of the Investment Company and/or the Fund, will be
reimbursed by the appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by
the Fund and shall be paid to the Company no less frequently than
monthly, and shall be paid daily upon request of the Company. The
Company will maintain detailed information about the compensation
and out-of-pocket expenses by Fund.
D. Any schedule of compensation agreed to hereunder, as may be
adjusted from time to time, shall be dated and signed by a duly
authorized officer of the Investment Company and/or the Funds and
a duly authorized officer of the Company.
ARTICLE 18. REPRESENTATIONS.
The Company represents and warrants that it has obtained all required
approvals from all government or regulatory authorities necessary to enter into
this arrangement and to provide the services contemplated in Section Four of
this Agreement.
SECTION FIVE: GENERAL PROVISIONS.
ARTICLE 19. PROPER INSTRUCTIONS.
As used throughout this Agreement, a "Proper Instruction" means a writing
signed or initialed by one or more person or persons as the Board shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved. Oral instructions will be deemed to
be Proper Instructions if (a) the Company reasonably believes them to have been
given by a person previously authorized in Proper Instructions to give such
instructions with respect to the transaction involved, and (b) the Investment
Company, or the Fund, and the Company promptly cause such oral instructions to
be confirmed in writing. Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided that the
Investment Company, or the Fund, and the Company are satisfied that such
procedures afford adequate safeguards for the Fund's assets. Proper Instructions
may only be amended in writing.
ARTICLE 20. ASSIGNMENT.
Except as provided below, neither this Agreement nor any of the rights or
obligations under this Agreement may be assigned by either party without the
written consent of the other party.
A. This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns.
B. With regard to Transfer Agency Services, the Company may without
further consent on the part of the Investment Company subcontract
for the performance of Transfer Agency Services with
(1) its subsidiary, Federated Shareholder Service Company, a Delaware
business trust, which is duly registered as a transfer agent
pursuant to Section 17A(c)(1) of the Securities Exchange Act of
1934, as amended, or any succeeding statute ("Section 17A(c)(1)");
or
(2) such other provider of services duly registered as a transfer
agent under Section 17A(c)(1) as Company shall select.
The Company shall be as fully responsible to the Investment
Company for the acts and omissions of any subcontractor as it is
for its own acts and omissions.
C. With regard to Fund Accounting Services, Administrative Services
and Custody Procurement Services, the Company may without further
consent on the part of the Investment Company subcontract for the
performance of such services with Federated Administrative
Services, a wholly-owned subsidiary of the Company.
D. The Company shall upon instruction from the Investment Company
subcontract for the performance of services under this Agreement with an
Agent selected by the Investment Company, other than as described in B.
and C. above; provided, however, that the Company shall in no way be
responsible to the Investment Company for the acts and omissions of the
Agent.
ARTICLE 21. DOCUMENTS.
A. In connection with the appointment of the Company under this
Agreement, the Investment Company shall file with the Company the
following documents:
(1) A copy of the Charter and By-Laws of the Investment Company and
all amendments thereto;
(2) A copy of the resolution of the Board of the Investment Company
authorizing this Agreement;
(3) Specimens of all forms of outstanding Share certificates of the
Investment Company or the Funds in the forms approved by the Board
of the Investment Company with a certificate of the Secretary of
the Investment Company as to such approval;
(4) All account application forms and other documents relating to
Shareholders accounts; and
(5) A copy of the current Prospectus for each Fund.
B. The Fund will also furnish from time to time the following
documents:
(1) Each resolution of the Board of the Investment Company
authorizing the original issuance of each Fund's, and/or Class's
Shares;
(2) Each Registration Statement filed with the SEC and amendments
thereof and orders relating thereto in effect with respect to the
sale of Shares of any Fund, and/or Class;
(3) A certified copy of each amendment to the governing document and
the By-Laws of the Investment Company;
(4) Certified copies of each vote of the Board authorizing officers to
give Proper Instructions to the Custodian and agents for fund
accountant, custody services procurement, and shareholder
recordkeeping or transfer agency services;
(5) Specimens of all new Share certificates representing Shares of
any Fund, accompanied by Board resolutions approving such forms;
(6) Such other certificates, documents or opinions which the Company
may, in its discretion, deem necessary or appropriate in the
proper performance of its duties; and
(7) Revisions to the Prospectus of each Fund.
ARTICLE 22. REPRESENTATIONS AND WARRANTIES.
A. Representations and Warranties of the Company
The Company represents and warrants to the Fund that:
(1) it is a corporation duly organized and existing and in good
standing under the laws of the Commonwealth of Pennsylvania;
(2) It is duly qualified to carry on its business in each
jurisdiction where the nature of its business requires such
qualification, and in the Commonwealth of Pennsylvania;
(3) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this
Agreement;
(4) all requisite corporate proceedings have been taken to authorize
it to enter into and perform its obligations under this
Agreement;
(5) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement;
(6) it is in compliance with federal securities law requirements and
in good standing as an administrator and fund accountant;
and
B. Representations and Warranties of the Investment Company
The Investment Company represents and warrants to the Company that:
(1) It is an investment company duly organized and existing and in
good standing under the laws of its state of organization;
(2) It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform its obligations under this
Agreement;
(3) All corporate proceedings required by said Charter and By-Laws
have been taken to authorize it to enter into and perform its
obligations under this Agreement;
(4) The Investment Company is an open-end investment company
registered under the 1940 Act; and
(5) A registration statement under the 1933 Act will be effective,
and appropriate state securities law filings have been made and
will continue to be made, with respect to all Shares of each Fund
being offered for sale.
ARTICLE 23. STANDARD OF CARE AND INDEMNIFICATION.
A. Standard of Care
With regard to Sections One, Three and Four, the Company shall be held
to a standard of reasonable care in carrying out the provisions of this
Contract. The Company shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Investment Company) on all
matters, and shall be without liability for any action reasonably taken
or omitted pursuant to such advice, provided that such action is not in
violation of applicable federal or state laws or regulations, and is in
good faith and without negligence.
B. Indemnification by Investment Company
The Company shall not be responsible for and the Investment Company or
Fund shall indemnify and hold the Company, including its officers,
directors, shareholders and their agents, employees and affiliates,
harmless against any and all losses, damages, costs, charges, counsel
fees, payments, expenses and liabilities arising out of or attributable
to:
(1) The acts or omissions of any Custodian, Adviser, Sub-adviser or other
party contracted by or approved by the Investment Company or Fund,
(2) The reliance on or use by the Company or its agents or subcontractors
of information, records and documents in proper form which
(a) are received by the Company or its agents or subcontractors
and furnished to it by or on behalf of the Fund, its
Shareholders or investors regarding the purchase, redemption
or transfer of Shares and Shareholder account information;
(b) are received by the Company from independent pricing
services or sources for use in valuing the assets of the
Funds; or
(c) are received by the Company or its agents or subcontractors
from Advisers, Sub-advisers or other third parties
contracted by or approved by the Investment Company of Fund
for use in the performance of services under this Agreement;
(d) have been prepared and/or maintained by the Fund or its
affiliates or any other person or firm on behalf of the
Investment Company.
(3) The reliance on, or the carrying out by the Company or its agents
or subcontractors of Proper Instructions of the Investment
Company or the Fund.
(4) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws
or regulations of any state that such Shares be registered in such
state or in violation of any stop order or other determination or
ruling by any federal agency or any state with respect to the
offer or sale of such Shares in such state.
Provided, however, that the Company shall not be protected by this
Article 23.B. from liability for any act or omission resulting
from the Company's willful misfeasance, bad faith, negligence or
reckless disregard of its duties or failure to meet the standard
of care set forth in 23.A. above.
C. Reliance
At any time the Company may apply to any officer of the Investment
Company or Fund for instructions, and may consult with legal counsel
with respect to any matter arising in connection with the services to be
performed by the Company under this Agreement, and the Company and its
agents or subcontractors shall not be liable and shall be indemnified by
the Investment Company or the appropriate Fund for any action reasonably
taken or omitted by it in reliance upon such instructions or upon the
opinion of such counsel provided such action is not in violation of
applicable federal or state laws or regulations. The Company, its agents
and subcontractors shall be protected and indemnified in recognizing
stock certificates which are reasonably believed to bear the proper
manual or facsimile signatures of the officers of the Investment Company
or the Fund, and the proper countersignature of any former transfer
agent or registrar, or of a co-transfer agent or co-registrar.
D. Notification
In order that the indemnification provisions contained in this Article
23 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification
shall promptly notify the other party of such assertion, and shall keep
the other party advised with respect to all developments concerning such
claim. The party who may be required to indemnify shall have the option
to participate with the party seeking indemnification in the defense of
such claim. The party seeking indemnification shall in no case confess
any claim or make any compromise in any case in which the other party
may be required to indemnify it except with the other party's prior
written consent.
ARTICLE 24. TERM AND TERMINATION OF AGREEMENT.
This Agreement shall be effective from March 1, 1996 and shall continue until
February 28, 2003 (`Term"). Thereafter, the Agreement will continue for 18 month
terms. The Agreement can be terminated by either party upon 18 months notice to
be effective as of the end of such 18 month period. In the event, however, of
willful misfeasance, bad faith, negligence or reckless disregard of its duties
by the Company, the Investment Company has the right to terminate the Agreement
upon 60 days written notice, if Company has not cured such willful misfeasance,
bad faith, negligence or reckless disregard of its duties within 60 days. The
termination date for all original or after-added Investment companies which are,
or become, a party to this Agreement. shall be coterminous. Investment Companies
that merge or dissolve during the Term, shall cease to be a party on the
effective date of such merger or dissolution.
Should the Investment Company exercise its rights to terminate, all
out-of-pocket expenses associated with the movement of records and materials
will be borne by the Investment Company or the appropriate Fund. Additionally,
the Company reserves the right to charge for any other reasonable expenses
associated with such termination. The provisions of Articles 10 and 23 shall
survive the termination of this Agreement.
ARTICLE 25. AMENDMENT.
This Agreement may be amended or modified by a written agreement executed by
both parties.
ARTICLE 26. INTERPRETIVE AND ADDITIONAL PROVISIONS.
In connection with the operation of this Agreement, the Company and the
Investment Company may from time to time agree on such provisions interpretive
of or in addition to the provisions of this Agreement as may in their joint
opinion be consistent with the general tenor of this Agreement. Any such
interpretive or additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such interpretive or
additional provisions shall contravene any applicable federal or state
regulations or any provision of the Charter. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to be an
amendment of this Agreement.
ARTICLE 27. GOVERNING LAW.
This Agreement shall be construed and the provisions hereof interpreted under
and in accordance with the laws of the Commonwealth of Massachusetts
ARTICLE 28. NOTICES.
Except as otherwise specifically provided herein, Notices and other writings
delivered or mailed postage prepaid to the Investment Company at Federated
Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to the Company at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to such
other address as the Investment Company or the Company may hereafter specify,
shall be deemed to have been properly delivered or given hereunder to the
respective address.
ARTICLE 29. COUNTERPARTS.
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original. ARTICLE 30. LIMITATIONS OF LIABILITY
OF TRUSTEES AND SHAREHOLDERS OF THE COMPANY.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Company and signed by an authorized officer of the Company,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, and
the obligations of this Agreement are not binding upon any of the Trustees or
Shareholders of the Company, but bind only the appropriate property of the Fund,
or Class, as provided in the Declaration of Trust.
ARTICLE 31. MERGER OF AGREEMENT.
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof whether
oral or written.
ARTICLE 32. SUCCESSOR AGENT.
If a successor agent for the Investment Company shall be appointed by the
Investment Company, the Company shall upon termination of this Agreement deliver
to such successor agent at the office of the Company all properties of the
Investment Company held by it hereunder. If no such successor agent shall be
appointed, the Company shall at its office upon receipt of Proper Instructions
deliver such properties in accordance with such instructions.
In the event that no written order designating a successor agent or Proper
Instructions shall have been delivered to the Company on or before the date when
such termination shall become effective, then the Company shall have the right
to deliver to a bank or trust company, which is a "bank" as defined in the 1940
Act, of its own selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than $2,000,000, all
properties held by the Company under this Agreement. Thereafter, such bank or
trust company shall be the successor of the Company under this Agreement.
ARTICLE 33. FORCE MAJEURE.
The Company shall have no liability for cessation of services hereunder or
any damages resulting therefrom to the Fund as a result of work stoppage, power
or other mechanical failure, natural disaster, governmental action,
communication disruption or other impossibility of performance.
ARTICLE 34. ASSIGNMENT; SUCCESSORS.
This Agreement shall not be assigned by either party without the prior
written consent of the other party, except that either party may assign all of
or a substantial portion of its business to a successor, or to a party
controlling, controlled by, or under common control with such party. Nothing in
this Article 34 shall prevent the Company from delegating its responsibilities
to another entity to the extent provided herein.
ARTICLE 35. SEVERABILITY.
In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.
ARTICLE 36. LIMITATIONS OF LIABILITY OF TRUSTEES AND SHAREHOLDERS OF THE
INVESTMENT COMPANY.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Investment Company and signed by an authorized officer of the
Investment Company, acting as such, and neither such authorization by such
Trustees nor such execution and delivery by such officer shall be deemed to have
been made by any of them individually or to impose any liability on any of them
personally, and the obligations of this Agreement are not binding upon any of
the Trustees or Shareholders of the Investment Company, but bind only the
property of the Fund, or Class, as provided in the Declaration of Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
INVESTMENT COMPANIES
(LISTED ON EXHIBIT 1)
By: /s/ S. Elliott Cohan
S. Elliott Cohan
Assistant Secretary
FEDERATED SERVICES COMPANY
By: /s/ Thomas J. Ward
Thomas J. Ward
Secretary
<PAGE>
EXHIBIT 1
CONTRACT
DATE INVESTMENT COMPANY
Portfolios
Classes
March 1, 1996 Federated Tax-Free Trust
FEDERATED SERVICES COMPANY provides the following services:
Fund Accounting Services
Administrative Services
Transfer Agency Services
Custody Services
Exhibit 11 under Form N-1A
Exhibit 23 under Item 601/Reg. S-K
INDEPENDENT AUDITORS' CONSENT
To the Board of Trustees and Shareholders of FEDERATED TAX-FREE TRUST:
We consent to the use in Post-Effective Amendment No. 40 to Registration
Statement 2-63343 of Federated Tax Free Trust of our report dated January 16,
1998 appearing in the Prospectus, which is part of such Registration Statement,
and to the reference to us under the heading "Financial Highlights" in such
Prospectus.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
January 27, 1998
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> Federated Tax-Free
Trust
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Nov-30-1997
<PERIOD-END> Nov-30-1997
<INVESTMENTS-AT-COST> 640,465,042
<INVESTMENTS-AT-VALUE> 640,465,042
<RECEIVABLES> 5,130,406
<ASSETS-OTHER> 252,910
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 645,848,358
<PAYABLE-FOR-SECURITIES> 8,570,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,759,081
<TOTAL-LIABILITIES> 10,329,081
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 635,541,822
<SHARES-COMMON-STOCK> 635,549,681
<SHARES-COMMON-PRIOR> 689,427,645
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (22,545)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 635,519,277
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 26,900,405
<OTHER-INCOME> 0
<EXPENSES-NET> 3,300,534
<NET-INVESTMENT-INCOME> 23,599,871
<REALIZED-GAINS-CURRENT> (14,032)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 23,585,839
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 23,599,871
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,258,839,187
<NUMBER-OF-SHARES-REDEEMED> 2,372,855,710
<SHARES-REINVESTED> 1,764,863
<NET-CHANGE-IN-ASSETS> 112,265,692
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (10,296)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,902,993
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,575,475
<AVERAGE-NET-ASSETS> 725,751,847
<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>
