FEDERATED SHORT-TERM MUNICIPAL TRUST
(FORMERLY, SHORT-TERM MUNICIPAL TRUST)
INSTITUTIONAL SHARES
PROSPECTUS
The Institutional Shares offered by this prospectus represent interests in a
diversified portfolio of securities of Federated Short-Term Municipal Trust (the
"Trust"). The Trust is an open-end management investment company (a mutual
fund).
The investment objective of the Trust is to provide dividend income which is
exempt from federal regular income tax. The Trust pursues this investment
objective by investing in a portfolio of municipal securities with a
dollar-weighted average maturity of less than three years.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in Institutional Shares of the Trust. Keep this prospectus for future
reference.
The Trust has also filed a Combined Statement of Additional Information for
Institutional Shares and Institutional Service Shares dated August 31, 1995,
with the Securities and Exchange Commission. The information contained in the
Combined Statement of Additional Information is incorporated by reference into
this prospectus. You may request a copy of the Combined Statement of Additional
Information which is in paper form only, or a paper copy of this prospectus, if
you have received your prospectus electronically, free of charge by calling
1-800-235-4669. To obtain other information or to make inquiries about the
Trust, contact the Trust at the address listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated August 31, 1995
TABLE OF CONTENTS
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SUMMARY OF TRUST EXPENSES 1
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FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SHARES 2
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GENERAL INFORMATION 3
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INVESTMENT INFORMATION 3
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Investment Objective 3
Investment Policies 3
Municipal Securities 5
Investment Risks 6
Investment Limitations 6
TRUST INFORMATION 6
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Management of the Trust 6
Distribution of Institutional Shares 8
Administration of the Trust 8
NET ASSET VALUE 9
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INVESTING IN INSTITUTIONAL SHARES 9
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Share Purchases 9
Minimum Investment Required 9
What Shares Cost 10
Subaccounting Services 10
Certificates and Confirmations 10
Dividends 10
Capital Gains 10
REDEEMING INSTITUTIONAL SHARES 11
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Telephone Redemption 11
Written Requests 11
Accounts with Low Balances 12
SHAREHOLDER INFORMATION 12
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Voting Rights 12
Massachusetts Partnership Law 12
TAX INFORMATION 13
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Federal Income Tax 13
Pennsylvania Corporate and
Personal Property Taxes 14
Other State and Local Taxes 14
PERFORMANCE INFORMATION 14
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OTHER CLASSES OF SHARES 14
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FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SERVICE SHARES 16
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FINANCIAL STATEMENTS 17
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 32
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ADDRESSES 33
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SUMMARY OF TRUST EXPENSES
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<TABLE>
<S> <C>
<C>
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)........................................
None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)........................................
None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)......................
None
Redemption Fee (as a percentage of amount redeemed, if applicable)...........
None
Exchange Fee.................................................................
None
ANNUAL INSTITUTIONAL SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1).............................................
0.27%
12b-1 Fee....................................................................
None
Total Other Expenses.........................................................
0.19%
Shareholder Services Fee (after waiver)(2)................................. 0.00%
Total Institutional Shares Operating Expenses(3)........................
0.46%
</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 maximum shareholder services fee is 0.25%.
(3) The total Institutional Shares operating expenses in the table above are
based on expenses expected during the fiscal year ending June 30, 1996. The
total Institutional Shares operating expenses were 0.46% for the fiscal year
ended June 30, 1995 and would have been 0.59% absent the waiver of a portion of
the management fee.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF INSTITUTIONAL SHARES OF THE
TRUST WILL BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS
OF THE VARIOUS COSTS AND EXPENSES, SEE "INVESTING IN INSTITUTIONAL SHARES" AND
"TRUST INFORMATION." WIRE TRANSFERRED REDEMPTIONS OF LESS THAN $5,000 MAY BE
SUBJECT TO ADDITIONAL FEES.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
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<S> <C> <C> <C> <C>
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........ $ 5 $ 15 $ 26 $ 58
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FEDERATED SHORT-TERM MUNICIPAL TRUST
(FORMERLY, SHORT-TERM MUNICIPAL TRUST)
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants, on page 32.
<TABLE>
<CAPTION>
YEAR ENDED JUNE
30,
-------------------------------------------------------
- -----------------------------------------
1995 1994 1993 1992 1991 1990
1989 1988 1987 1986
------ ------ ------ ------ ------ -----
- - ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
<C> <C> <C> <C>
- -------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD $10.15 $10.37 $10.29 $10.18 $10.14
$10.10 $10.19 $10.24 $10.31 $10.22
- -------------------------------
INCOME FROM INVESTMENT
OPERATIONS
- -------------------------------
Net investment income 0.42 0.40 0.44 0.53 0.60
0.60 0.57 0.54 0.51 0.60
- -------------------------------
Net realized and unrealized
gain (loss) on investments 0.13 (0.22) 0.08 0.11 0.04
0.04 (0.09) (0.05) (0.07) 0.09
- ------------------------------- ---- ---- ---- ---- ---- ---
- - ---- ---- ---- ----
Total from investment
operations 0.55 0.18 0.52 0.64 0.64
0.64 0.48 0.49 0.44 0.69
- -------------------------------
LESS DISTRIBUTIONS
- -------------------------------
Distributions from net
investment income (0.42) (0.40) (0.44) (0.53) (0.60)
(0.60) (0.57) (0.54) (0.51) (0.60)
- ------------------------------- ---- ---- ---- ---- ---- ---
- - ---- ---- ---- ----
NET ASSET VALUE, END OF PERIOD $10.28 $10.15 $10.37 $10.29 $10.18
$10.14 $10.10 $10.19 $10.24 $10.31
- ------------------------------- ---- ---- ---- ---- ---- ---
- - ---- ---- ---- ----
TOTAL RETURN (A) 5.52% 1.76% 5.11% 6.40% 6.47%
6.54% 4.84% 4.89% 4.37% 7.55%
- -------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------
Expenses 0.46% 0.47% 0.46% 0.46% 0.46%
0.47% 0.46% 0.47% 0.47% 0.48%
- -------------------------------
Net investment income 4.09% 3.89% 4.21% 5.12% 5.89%
5.94% 5.59% 5.25% 4.95% 5.80%
- -------------------------------
SUPPLEMENTAL DATA
- -------------------------------
Net assets, end of period (000
omitted) $217,713 $316,810 $318,932 $205,101 $142,493
$139,113 $178,978 $315,154 $483,279 $341,294
- -------------------------------
Portfolio turnover 33% 36% 15% 42% 40%
69% 55% 63% 57% 16%
- -------------------------------
</TABLE>
(a) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(See Notes which are an integral part of the Financial Statements)
Further information about the Trust's performance is contained in the Trust's
annual report for the fiscal year ended June 30, 1995, which can be obtained
free of charge.
GENERAL INFORMATION
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The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated May 8, 1981. On December 15, 1994, the name of the Trust was
changed from Short-Term Municipal Trust to Federated Short-Term Municipal Trust.
The Declaration of Trust permits the Trust to offer separate series of shares of
beneficial interest representing interests in separate portfolios of securities.
The shares in any one portfolio may be offered in separate classes. As of the
date of this prospectus, the Board of Trustees (the "Trustees") has established
two classes of shares of the Trust, known as Institutional Shares and
Institutional Service Shares. This prospectus relates only to Institutional
Shares (the "Shares") of the Trust.
Shares of the Trust are sold primarily to accounts for which financial
institutions act in a fiduciary or agency capacity, or other accounts where the
financial institution maintains master accounts with an aggregate investment of
at least $400 million in certain funds which are advised or distributed by
affiliates of Federated Investors. An investment in the Trust serves as a
convenient means of accumulating an interest in a professionally managed,
diversified portfolio of municipal securities. A minimum initial investment of
$25,000 over a 90-day period is required. The Trust may not be a suitable
investment for retirement plans since it invests in municipal securities.
Shares are currently sold and redeemed at net asset value without a sales load
imposed by the Trust.
INVESTMENT INFORMATION
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INVESTMENT OBJECTIVE
The investment objective of the Trust is to provide dividend income which is
exempt from federal regular income tax. Interest income of the Trust that is
exempt from federal regular income tax retains its tax-free status when
distributed to the Trust's shareholders. The Trust attempts to achieve its
investment objective by investing at least 80% of its net assets in a
diversified portfolio of municipal securities or by investing its assets so that
at least 80% of its income will be tax-exempt. While there is no assurance that
the Trust will achieve its investment objective, it endeavors to do so by
following the investment policies described in this prospectus. The investment
objective, and the above investment policy, cannot be changed without approval
of shareholders.
INVESTMENT POLICIES
The investment policies described below may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The municipal securities in which the Trust invests
are:
- debt obligations issued by or on behalf of any state, territory, or
possession of the United States, including the District of Columbia, or
any political subdivision of any of these; and
- participation interests, as described below, in any of the above
obligations,
the interest from which is, in the opinion of bond counsel for the issuers or in
the opinion of officers of the Trust and/or the investment adviser to the Trust,
exempt from federal regular income tax.
AVERAGE MATURITY. The dollar-weighted average maturity of the Trust's portfolio
of municipal securities will be less than three years. For purposes of
determining the dollar-weighted average maturity of the Trust's portfolio, the
maturity of a municipal security will be its ultimate maturity, unless it is
probable that the issuer of the security will take advantage of
maturity-shortening devices such as a call, refunding, or redemption provision,
in which case the maturity date will be the date on which it is probable that
the security will be called, refunded, or redeemed. If the municipal security
includes the right to demand payment, the maturity of the security for purposes
of determining the Trust's dollar-weighted average maturity will be the period
remaining until the principal amount of the security can be recovered by
exercising the right to demand payment.
CHARACTERISTICS. The municipal securities in which the Trust invests are:
- rated within the three highest ratings for municipal securities by
Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa or A) or by Standard
& Poor's Ratings Group ("S&P") (AAA, AA, or A);
- guaranteed at the time of purchase by the U.S. government as to the
payment of principal and interest;
- fully collateralized by an escrow of U.S. government or other securities
acceptable to the Trust's adviser;
- rated at the time of purchase within Moody's highest short-term municipal
obligation rating (MIG1/VMIG1) or Moody's highest municipal commercial
paper rating (PRIME-1) or S&P's highest municipal commercial paper rating
(A-1);
- unrated if, at the time of purchase, longer term municipal securities of
the issuer are rated A or better by Moody's or S&P or
- determined by the Trust's investment adviser to be equivalent to
municipal securities which are rated A or better by Moody's or by S&P.
Downgraded securities will be evaluated on a case by case basis by the adviser.
The adviser will determine whether or not the security continues to be an
acceptable investment. If not, the security will be sold. The prices of fixed
income securities fluctuate inversely to the direction of interest rates. A
description of the rating categories is contained in the Appendix to the
Combined Statement of Additional Information.
PARTICIPATION INTERESTS. The Trust may purchase participation interests from
financial institutions such as commercial banks, savings and loan associations,
and insurance companies. These participation interests give the Trust an
undivided interest in municipal securities. The financial institutions from
which the Trust purchases participation interests frequently provide or secure
irrevocable letters of credit or guarantees to assure that the participation
interests are of high quality. The Trustees will determine that participation
interests meet the prescribed quality standards for the Trust.
VARIABLE RATE MUNICIPAL SECURITIES. Some of the municipal securities which the
Trust purchases may have variable interest rates. Variable interest rates are
ordinarily based on a published interest rate or interest rate index or some
similar standard, such as the 91-day U.S. Treasury bill rate. Variable rate
municipal securities will be treated as maturing on the date of the next
scheduled adjustment to the interest rate for purposes of determining the
dollar-weighted average maturity of the portfolio.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Trust may purchase municipal
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. Accordingly, the Trust may pay more/less than the market value of the
securities on the settlement date. 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 on a temporary basis, when the
investment adviser determines that market conditions call for a temporary
defensive posture, the Trust may invest in short-term temporary investments
which may or may not be exempt from federal income tax. Temporary investments
include: tax-exempt variable and floating rate demand notes; tax-free commercial
paper; other temporary municipal securities; obligations issued or guaranteed by
the U.S. government, its agencies or instrumentalities; other debt securities;
commercial paper; certificates of deposit of domestic branches of U.S. banks;
and repurchase agreements (arrangements in which the organization selling the
Trust a security agrees at the time of sale to repurchase it at a mutually
agreed upon time and price).
There are no rating requirements applicable to temporary investments with the
exception of temporary municipal securities which are subject to the same rating
requirements as all other municipal securities in which the Trust invests.
However, the investment adviser will limit temporary investments to those it
considers to be of comparable quality to the acceptable investments of the
Trust.
Although the Trust is permitted to make taxable, temporary investments, there is
no current intention of generating income subject to federal regular income tax.
MUNICIPAL SECURITIES
Municipal securities are generally issued to finance public works such as
airports, bridges, highways, housing, hospitals, mass transportation projects,
schools, streets, and water and sewer works. They are also issued to repay
outstanding obligations, to raise funds for general operating expenses, and to
make loans to other public institutions and facilities. Municipal securities
include industrial development bonds issued by or on behalf of public
authorities to provide financing aid to acquire sites or construct and equip
facilities for privately or publicly owned corporations. The availability of
this financing encourages these corporations to locate within the sponsoring
communities and thereby increases local employment. The two principal
classifications of municipal securities are "general obligation" and "revenue"
bonds. General obligation bonds are secured by the issuer's pledge of its full
faith and credit and taxing power for the payment of principal and interest.
Interest on and principal of revenue bonds, however, are payable only from the
revenue generated by the facility financed by the bond or other specified
sources of revenue. Revenue bonds do not represent a pledge of credit or create
any debt of or charge against the general revenues of a municipality or public
authority. Industrial development bonds are typically classified as revenue
bonds.
INVESTMENT RISKS
Yields on municipal securities depend on a variety of factors, including: the
general conditions of the money market and the taxable and municipal bond
markets; 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 guarantors of either, to meet
their obligations for the payment of interest and principal when due.
INVESTMENT LIMITATIONS
The Trust will not:
- invest more than 5% of its total assets in securities of one issuer
(except cash and cash items and U.S. government obligations); or
- 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 those assets to secure such borrowings.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, can be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.
The Trust will not:
- commit more than 15% of its net assets to illiquid obligations;
- invest more than 10% of its total assets in municipal securities subject
to restrictions on resale; or
- invest more than 5% of its total assets in industrial development bonds
of issuers that have a record of less than three years of continuous
operations.
TRUST INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders. The 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
Management, the Trust's investment adviser (the "Adviser"), subject to direction
by the Trustees. The Adviser continually conducts investment research and
supervision for the Trust and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the Trust.
ADVISORY FEES. The Trust's Adviser receives an annual investment advisory
fee equal to .40 of 1% of the Trust's average daily net assets. Under the
investment advisory contract, the Adviser will reimburse the Trust the
amount, limited to the amount of the advisory fee, by which the Trust's
aggregate annual operating expenses, including its investment advisory fee,
but excluding interest,
taxes, brokerage commissions, expenses of registering and qualifying the
Trust and its shares under federal and state laws and regulations, expenses
of withholding taxes, and extraordinary expenses, exceed .45 of 1% of its
average daily net assets. This does not include reimbursement to the Trust
of any expenses incurred by shareholders who use the transfer agent's
subaccounting facilities. The Adviser has also undertaken to reimburse the
Trust for operating expenses in excess of limitations established by
certain states.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940, as amended. It is a subsidiary of
Federated Investors. All of the Class A (voting) shares of Federated
Investors are owned by a trust, the trustees of which are John F. Donahue,
Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and Mr.
Donahue's son, J. Christopher Donahue, who is President and Trustee of
Federated Investors.
Jonathan C. Conley has been the Trust's portfolio manager since January
1984. Mr. Conley joined Federated Investors in 1979 and has been a Vice
President of the Trust's investment adviser since 1982. Mr. Conley is a
Chartered Financial Analyst and received his M.B.A. in Finance from the
University of Virginia.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private accounts.
Certain other subsidiaries also provide administrative services to a number of
investment companies. With over $72 billion invested across more than 260 funds
under management and/or administration by its subsidiaries, as of December 31,
1994, Federated Investors is one of the largest mutual fund investment managers
in the United States. With more than 1,750 employees, Federated continues to be
led by the management who founded the company in 1955. Federated funds are
presently at work in and through 4,000 financial institutions nationwide. More
than 100,000 investment professionals have selected Federated funds for their
clients.
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 interest. 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 Board of Trustees and
could result in severe penalties.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to periodic payments to
financial institutions for shareholder services, certain financial institutions
may be compensated by the Adviser or its affiliates for the continuing
investment of customers' assets in certain funds, including the Trust, advised
by those entities. These payments will be made directly by the distributor or
Adviser from their assets, and will not be made from the assets of the Trust or
by the assessment of a sales load on Shares.
DISTRIBUTION OF INSTITUTIONAL SHARES
Federated Securities Corp. is the principal distributor for Institutional
Shares. It is a Pennsylvania corporation organized on November 14, 1969, and is
the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
ADMINISTRATION OF THE TRUST
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Trust.
Federated Administrative Services provides these at an annual rate which relates
to the average aggregate daily net assets of all funds advised by subsidiaries
of Federated Investors ("Federated Funds") as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE FEDERATED FUNDS
- --------------------- ----------------------------------
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
on assets in excess of $750
0.075 of 1% million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
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 1.00% of the
average daily net asset value of the Trust to obtain certain personal services
for shareholders and to maintain shareholder accounts ("Shareholder Services").
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 fees will be paid will be
determined from time to time by the Trust and Federated Shareholder Services.
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 their performance
of sales services, distribution-related support services, or Shareholder
Services.
CUSTODIAN. State Street Bank and Trust Company ("State Street Bank"), Boston,
Massachusetts, is custodian for the securities and cash of the Trust.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Boston, Massachusetts, is transfer agent for the Shares of the Trust and
dividend disbursing agent for the Trust.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Trust
are Arthur Andersen LLP, Pittsburgh, Pennsylvania.
NET ASSET VALUE
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The Trust's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of the Shares in the market value of all
securities and other assets of the Trust, subtracting the interest of the Shares
in the liabilities of the Trust and those attributable to Shares, and dividing
the remainder by the total number of Shares outstanding. The net asset value for
Shares may differ from that of Institutional Service Shares due to the variance
in daily net income realized by each class. Such variance will reflect only
accrued net income to which the shareholders of a particular class are entitled.
INVESTING IN INSTITUTIONAL SHARES
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SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange and the Federal
Reserve wire system are open for business. Shares may be purchased either by
wire or by mail.
To purchase Shares, open an account by calling Federated Securities Corp.
Information needed to establish the account will be taken over the telephone.
The Trust reserves the right to reject any purchase request.
BY WIRE. To purchase Shares by Federal Reserve wire, call the Trust before 4:00
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) on the next business day following the order. Federal funds should be
wired as follows: Federated Services Company, c/o State Street Bank and Trust
Company, Boston, Massachusetts; Attention: EDGEWIRE; For Credit to: Federated
Short-Term Municipal Trust Institutional Shares; Trust Number (this number can
be found on the account statement or by contacting the Trust); Group Number or
Wire Order Number; Nominee or Institution Name; and ABA Number 011000028. Shares
cannot be purchased on days on which the New York Stock Exchange is closed and
on federal holidays restricting wire transfers.
BY MAIL. To purchase Shares by mail, send a check made payable to Federated
Short-Term Municipal Trust Institutional Shares to: Federated Services Company,
P.O. Box 8600, Boston, Massachusetts 02266-8600. Orders by mail are considered
received after payment by check is converted into federal funds. This is
normally the next business day after the check is received.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Shares is $25,000 plus any non-affiliated bank
or broker's fee, if applicable. However, an account may be opened with a smaller
amount as long as the $25,000 minimum is reached within 90 days. The minimum
investment for an institutional investor will be calculated by combining all
accounts it maintains with the Trust. Accounts established through a non-
affiliated bank or broker may be subject to a smaller minimum investment.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales load imposed by the Trust. Investors who purchase
Shares through a non-affiliated bank or broker may be charged an additional
service fee by that bank or broker.
The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on (i) days on which there are not sufficient changes in the value of the
Trust's portfolio securities that its net asset value might be materially
affected; (ii) days during which no Shares are tendered for redemption and no
orders to purchase Shares are received; or (iii) the following holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, and Christmas Day.
SUBACCOUNTING SERVICES
Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. The transfer agent may
charge a fee based on the level of subaccounting services rendered. Institutions
holding Shares in a fiduciary, agency, custodial, or similar capacity may charge
or pass through subaccounting fees as part of or in addition to normal trust or
agency account fees. They may also charge fees for other services provided which
may be related to the ownership of Shares. This prospectus should, therefore, be
read together with any agreement between the customer and the institution with
regard to the services provided, the fees charged for those services, and any
restrictions and limitations imposed.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Trust, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Trust.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during that
month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are declared just prior
to determining net asset value. If an order for Shares is placed on the
preceding business day, Shares purchased by wire begin earning dividends on the
business day wire payment is received by State Street Bank. If the order for
Shares and payment by wire are received on the same day, Shares begin earning
dividends on the next business day. Shares purchased by check begin earning
dividends on the business day after the check is converted, upon instruction of
the transfer agent, into federal funds. Dividends are automatically reinvested
in additional Shares unless cash payments are requested by contacting the Trust.
CAPITAL GAINS
Distributions of net realized long-term capital gains realized by the Trust, if
any, will be made at least annually.
REDEEMING INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
The Trust redeems Shares at their net asset value next determined after the
Trust receives the redemption request. Redemptions may 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 by telephone request or by written request.
TELEPHONE REDEMPTION
Shareholders may redeem their Shares by telephoning the Trust before 4:00 p.m.
(Eastern time). The proceeds will normally be wired the following business day,
but in no event more than seven days, to the shareholder's account at a domestic
commercial bank that is a member of the Federal Reserve System. If at any time
the Trust shall determine it necessary to terminate or modify this method of
redemption, shareholders would be promptly notified.
An authorization form permitting the Trust to accept telephone requests must
first be completed. It is recommended that investors request this privilege at
the time of their initial application. If not completed at the time of initial
application, authorization forms and information on this service can be obtained
through Federated Securities Corp. Telephone redemption instructions may be
recorded. If reasonable procedures are not followed by the 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 such a case should occur, another
method of redemption, such as "Written Requests," should be considered.
WRITTEN REQUESTS
Shares may also be redeemed by sending a written request to Federated Services
Company, P.O. Box 8600, Boston, Massachusetts 02266-8600. Call the Trust for
specific instructions before redeeming by letter. The shareholder will be asked
to provide in the request his name, the Trust name and class of shares, his
account number, and the Share or dollar amount requested. If Share certificates
have been issued, they must be properly endorsed and should be sent by
registered or certified mail to Federated Services Company, 500 Victory
Road -- 2nd Floor, Quincy, Massachusetts 02171, with the written request.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, 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 signatures on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
- a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
- any other "eligible guarantor institution" as defined in the Securities
Exchange Act of 1934, as amended.
The Trust does not accept signatures guaranteed by a notary public.
The Trust and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Trust may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Trust and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.
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. This requirement does not apply, however, if the
balance falls below $25,000 because of changes in the Trust's net asset value.
Before Shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional Shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share of the Trust gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights except that in matters
affecting only a particular portfolio or class, only shares of that portfolio or
class are entitled to vote. As a Massachusetts business trust, the Trust is not
required to hold annual shareholder meetings. Shareholder approval will be
sought only for certain changes in the Trust's operation and for the election of
Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of shareholders shall be called for this purpose by the
Trustees upon written request of shareholders owning at least 10% of the
outstanding shares of the Trust entitled to vote.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust. To
protect shareholders, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of its shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument that the Trust or its
Trustees enter into or sign on behalf of the Trust.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required to use its property to protect or compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder for any act or obligation of the Trust.
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 from its assets.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Trust will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code of 1986, as amended, applicable to regulated
investment companies and to receive the special tax treatment afforded to such
companies.
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, dividends representing net interest earned on some
municipal bonds may be included in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for corporations.
The alternative minimum tax, equal to up to 28% of alternative minimum taxable
income for individuals and 20% for corporations, applies when it exceeds the
regular tax for the taxable year. Alternative minimum taxable income is equal to
the regular taxable income of the taxpayer increased by certain "tax preference"
items not included in regular taxable income and reduced by only a portion of
the deductions allowed in the calculation of the regular tax.
Interest on certain "private activity" bonds issued after August 7, 1986, is
treated as a tax preference item for both individuals and corporations. Unlike
traditional governmental purpose municipal bonds, which finance roads, schools,
libraries, prisons and other public facilities, private activity bonds provide
benefits to private parties. The Trust may purchase all types of municipal
bonds, including private activity bonds. Thus, while the Trust has no present
intention of purchasing any private activity bonds, should it purchase any such
bonds, a portion of the Trust's dividends may be treated as a tax preference
item.
In addition, in the case of a corporate shareholder, dividends of the Trust
which represent interest on municipal bonds may be subject to the 20% corporate
alternative minimum tax because the dividends are included in a corporation's
"adjusted current earnings." The corporate alternative minimum tax treats 75% of
the excess of a taxpayer's pre-tax "adjusted current earnings" over the
taxpayer's alternative minimum taxable income as a tax preference item.
"Adjusted current earnings" is based upon the concept of a corporation's
"earnings and profits." Since "earnings and profits" generally includes the full
amount of any Trust dividend, and alternative minimum taxable income does not
include the portion of the Trust's dividend attributable to municipal bonds
which are not private activity bonds, the difference will be included in the
calculation of the corporation's alternative minimum tax.
Dividends of the 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. Information on the tax status of dividends and distributions
is provided annually.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Trust:
- the Trust is not subject to Pennsylvania corporate or personal property
taxes; and
- 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.
OTHER STATE AND LOCAL TAXES
Distributions representing net interest received on tax-exempt municipal
securities are not necessarily free from income taxes of any state or local
taxing authority. State laws differ on this issue and shareholders are urged to
consult their own tax advisers.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Trust advertises its total return, yield, and
tax-equivalent yield for Institutional Shares.
Total return represents the change, over a specified period of time, in the
value of an investment in Shares of the Trust after reinvesting all income and
capital gain distributions. It is calculated by dividing that change by the
initial investment and is expressed as a percentage.
The yield of Shares of the Trust is calculated by dividing the net investment
income per share (as defined by the Securities and Exchange Commission) earned
by Shares over a thirty-day period by the maximum offering price per share of
Shares on the last day of the period. This number is then annualized using
semi-annual compounding. The tax-equivalent yield of Shares is calculated
similarly to the yield, but is adjusted to reflect the taxable yield that Shares
would have had to earn to equal its actual yield, assuming a specific tax rate.
The yield and the tax-equivalent yield do not necessarily reflect income
actually earned by Shares and, therefore, may not correlate to the dividends or
other distributions paid to shareholders.
The Trust is sold without any sales load or other similar non-recurring charges.
Total return, yield, and tax-equivalent yield will be calculated separately for
Shares and Institutional Service Shares.
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.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
The Trust also offers another class of shares called Institutional Service
Shares.
Institutional Service Shares are sold primarily to retail and private banking
customers of financial institutions at net asset value and are subject to a
minimum initial investment of $25,000.
Institutional Shares and Institutional Service Shares are subject to certain of
the same expenses; however, Institutional Service Shares are distributed
pursuant to a 12b-1 Plan adopted by the Trust whereby the distributor is paid a
fee of up to 0.25 of 1% of the Institutional Service Shares' average daily net
assets. Expense differences between Institutional Shares and Institutional
Service Shares may affect the performance of each class.
Financial institutions and brokers providing sales and/or administrative
services may receive different compensation depending upon which class of shares
of the Trust is sold.
The stated advisory fee is the same for both classes of shares.
To obtain more information and a prospectus for Institutional Service Shares,
investors may call 1-800-235-4669.
FEDERATED SHORT-TERM MUNICIPAL TRUST
(FORMERLY, SHORT-TERM MUNICIPAL TRUST)
FINANCIAL HIGHLIGHTS-INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants, on page 32.
<TABLE>
<CAPTION>
YEAR ENDED
JUNE
30,
----------
- ------
1995
1994(A)
------
- ------
<S> <C>
<C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.15
$10.35
- ---------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------
Net investment income 0.39
0.31
- ---------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.13
(0.20)
- --------------------------------------------------------------------------- ------
- ------
Total from investment operations 0.52
0.11
- ---------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------------------
Distributions from net investment income (0.39)
(0.31)
- --------------------------------------------------------------------------- ------
- ------
NET ASSET VALUE, END OF PERIOD $10.28
$10.15
- --------------------------------------------------------------------------- ------
- ------
TOTAL RETURN (B) 5.26%
1.08%
- ---------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------
Expenses 0.71%
0.72%(c)
- ---------------------------------------------------------------------------
Net investment income 3.69%
3.65%(c)
- ---------------------------------------------------------------------------
Expense waiver/reimbursement (d) 0.25%
0.18%(c)
- ---------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------
Net assets, end of period (000 omitted) $5,223
$31,459
- ---------------------------------------------------------------------------
Portfolio Turnover 33%
36%
- ---------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from August 31, 1993 (date of initial
public offering) to June 30, 1994.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease for the distribution services fee is
reflected in both the expense and net investment income ratios shown above
(See Notes which are an integral part of the Financial Statements)
Further information about the Trust's performance is contained in the Trust's
Annual Report for the fiscal year ended June 30, 1995, which can be obtained
free of charge.
FEDERATED SHORT-TERM MUNICIPAL TRUST
(FORMERLY, SHORT-TERM MUNICIPAL TRUST)
PORTFOLIO OF INVESTMENTS
JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P*
VALUE
- ----------- ------------------------------------------------------ ------- ----
- --------
<C> <S> <C> <C>
SHORT-INTERMEDIATE MUNICIPAL SECURITIES--98.2%
- ----------------------------------------------------------------------
ALABAMA--2.7%
------------------------------------------------------
$ 4,000,000 Alabama, 5.55% UT GO Refunding Bonds, 9/1/1997 AA $
4,129,880
------------------------------------------------------
1,850,000 Alabama, 5.70% UT GO Refunding Bonds, 9/1/1998 AA
1,932,528
------------------------------------------------------ ----
- --------
Total
6,062,408
------------------------------------------------------ ----
- --------
</TABLE>
<TABLE>
<C> <S> <C> <C>
ARIZONA--1.1%
------------------------------------------------------
2,500,000 Salt River Project, AZ Agricultural Improvement &
Power District, 4.00% Electric System Revenue
Refunding Bonds (Series A)/(Original Issue Yield:
4.05%), 1/1/1996 AA
2,505,550
------------------------------------------------------ ----
- --------
CALIFORNIA--14.3%
------------------------------------------------------
4,000,000 California State, 10.00% UT GO Bonds, 4/1/1998 Aa
4,567,560
------------------------------------------------------
7,500,000 California State, 6.50% UT GO Bonds, 11/1/1997 A1
7,882,875
------------------------------------------------------
1,250,000 Los Angeles County Transportation Commission, CA,
Proposition C, 4.30% Revenue Bonds (Series A)/(MBIA
Insured), 7/1/1995 Aaa
1,250,000
------------------------------------------------------
13,000,000 Los Angeles, CA Wastewater System, 6.70% Revenue Bonds
(Series D)/(MBIA Insured)/(United States Treasury
PRF)/(Original Issue Yield: 6.769%), 12/1/2000 (@102) Aaa
14,538,810
------------------------------------------------------
3,310,000 University of California, 8.00% Hospital Revenue
Refunding Bonds (UCLA Medical Center)/(MBIA Insured),
12/1/1998 Aaa
3,700,977
------------------------------------------------------ ----
- --------
Total
31,940,222
------------------------------------------------------ ----
- --------
COLORADO--1.4%
------------------------------------------------------
2,995,000 Denver, City & County, CO, 7.625% UT GO Bonds
(Series C), 8/1/1995 AA
3,005,123
------------------------------------------------------ ----
- --------
</TABLE>
FEDERATED SHORT-TERM MUNICIPAL TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P*
VALUE
- ----------- ------------------------------------------------------ ------- ----
- --------
<C> <S> <C> <C>
SHORT-INTERMEDIATE MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------
DISTRICT OF COLUMBIA--0.5%
------------------------------------------------------
$ 1,000,000 District of Columbia, 8.00% UT GO Bonds (Series
C)/(United States Treasury PRF)/(Original Issue Yield:
8.057%), 6/1/1996 (@102) Aaa $
1,057,800
------------------------------------------------------ ----
- --------
FLORIDA--0.6%
------------------------------------------------------
1,390,000 Miami Beach, FL Health Facilities Authority, 4.45%
Hospital Revenue Refunding Bonds (Mt. Sinai Medical
Center, FL)/(CGIC Insured), 11/15/1995 AAA
1,394,935
------------------------------------------------------ ----
- --------
GEORGIA--2.0%
------------------------------------------------------
4,060,000 Georgia State, 8.40% UT GO Bonds (Series D), 6/1/1997 Aaa
4,396,452
------------------------------------------------------ ----
- --------
HAWAII--9.7%
------------------------------------------------------
5,500,000 Hawaii State, 5.40% UT GO Refunding Bonds, (Series
BV)/(Original Issue Yield: 5.45%), 11/1/1997 AA
5,664,835
------------------------------------------------------
5,000,000 Hawaii State, 7.10% UT GO Bonds (Series BN)/(United
States Treasury PRF), 6/1/1998 (@101.5) Aaa
5,462,100
------------------------------------------------------
6,000,000 Honolulu, City & County, HI, 4.20% UT GO Refunding &
Improvement Bonds (Series B)/(Original Issue Yield:
4.30%), 10/1/1997 AA
6,031,680
------------------------------------------------------
4,500,000 Honolulu, City & County, HI, 4.80% UT GO Bonds (Series
B)/(Original Issue Yield: 4.90%), 6/1/1998 AA
4,569,570
------------------------------------------------------ ----
- --------
Total
21,728,185
------------------------------------------------------ ----
- --------
ILLINOIS--2.8%
------------------------------------------------------
3,000,000 Illinois, 5.50% UT GO Bonds, 8/1/1999 AA-
3,100,530
------------------------------------------------------
2,900,000 Illinois State Sales Tax, 5.625% Revenue Bonds (Series
V), 6/15/1998 AAA
2,999,093
------------------------------------------------------ ----
- --------
Total
6,099,623
------------------------------------------------------ ----
- --------
</TABLE>
FEDERATED SHORT-TERM MUNICIPAL TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P*
VALUE
- ----------- ------------------------------------------------------ ------- ----
- --------
<C> <S> <C> <C>
SHORT-INTERMEDIATE MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------
IOWA--1.0%
------------------------------------------------------
$ 1,095,000 Sioux City, IA, Hospital Authority, 4.15% Hospital
Revenue Refunding Bonds (Series O)/(Sisters of Mercy
Health System), 8/15/1996 A $
1,092,569
------------------------------------------------------
1,140,000 Sioux City, IA, Hospital Authority, 4.15% Hospital
Revenue Refunding Bonds (Sisters of Mercy Health
System)/(MBIA Insured), 8/15/1997 Aaa
1,141,322
------------------------------------------------------ ----
- --------
Total
2,233,891
------------------------------------------------------ ----
- --------
MICHIGAN--3.2%
------------------------------------------------------
5,000,000 Detroit, MI City School District, 5.30% UT GO
Refunding Bonds (Michigan State Guaranteed), 5/1/1999 AA
5,107,350
------------------------------------------------------
2,120,000 Michigan State Hospital Finance Authority, 4.00%
Revenue Refunding Bonds (Series P)/(Sisters of Mercy
Health System), 8/15/1996 A
2,111,266
------------------------------------------------------ ----
- --------
Total
7,218,616
------------------------------------------------------ ----
- --------
MINNESOTA--3.2%
------------------------------------------------------
5,000,000 Minnesota State, 4.70% UT GO Refunding Bonds, 8/1/1997 AA+
5,079,200
------------------------------------------------------
2,000,000 Southern Minnesota Municipal Power Agency, 9.125%
Power Supply Revenue Bonds (Series C)/ (United States
Treasury PRF)/(Original Issue Yield: 9.224%), 1/1/1996
(@102) Aaa
2,093,320
------------------------------------------------------ ----
- --------
Total
7,172,520
------------------------------------------------------ ----
- --------
NEVADA--7.2%
------------------------------------------------------
2,000,000 Clark County, NV School District, 7.10% LT GO Bonds
(Series A), 3/1/1997 A+
2,094,380
------------------------------------------------------
8,500,000 Nevada State Highway Improvement Authority, 4.75%
Motor Vehicle Fuel Tax Revenue Bonds (Original Issue
Yield: 4.90%), 4/1/1998 AA
8,606,505
------------------------------------------------------
</TABLE>
FEDERATED SHORT-TERM MUNICIPAL TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P*
VALUE
- ----------- ------------------------------------------------------ ------- ----
- --------
<C> <S> <C> <C>
SHORT-INTERMEDIATE MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------
NEVADA--CONTINUED
------------------------------------------------------
$ 5,000,000 Nevada State Highway Improvement Authority, 7.00%
Motor Vehicle Fuel Tax Revenue Bonds, 4/1/1999 AA $
5,415,950
------------------------------------------------------ ----
- --------
Total
16,116,835
------------------------------------------------------ ----
- --------
NEW HAMPSHIRE--5.4%
------------------------------------------------------
7,900,000 New Hampshire State Turnpike System, 8.25% Revenue
Bonds (United States Treasury PRF)/(Original Issue
Yield: 8.30%), 11/1/1997 (@102) Aaa
8,770,027
------------------------------------------------------
3,310,000 New Hampshire State, 4.20% UT GO Capital Improvement
Refunding Bonds, 9/1/1995 AA
3,313,840
------------------------------------------------------ ----
- --------
Total
12,083,867
------------------------------------------------------ ----
- --------
NEW JERSEY--6.8%
------------------------------------------------------
7,000,000 New Jersey State, 6.50% UT GO Refunding Bonds
(Series C), 1/15/2002 AA+
7,491,120
------------------------------------------------------
7,000,000 New Jersey State, 7.20% UT GO Bonds, 4/15/1999 AA+
7,682,080
------------------------------------------------------ ----
- --------
Total
15,173,200
------------------------------------------------------ ----
- --------
NEW MEXICO--4.9%
------------------------------------------------------
2,250,000 Albuquerque, NM 4.00% Joint Water & Sewer System
Revenue Refunding Bonds (Series A)/(Original Issue
Yield: 4.099%), 7/1/1999 AA
2,210,805
------------------------------------------------------
8,650,000 Albuquerque, NM, 4.60% UT GO Bonds (Series A & B),
7/1/1998 AA
8,753,886
------------------------------------------------------ ----
- --------
Total
10,964,691
------------------------------------------------------ ----
- --------
NEW YORK--7.3%
------------------------------------------------------
680,000 New York City, Municipal Water Finance Authority,
6.50% Water & Sewer System Revenue Bonds (Series C)/
(AMBAC Insured)/(United States Treasury PRF)/
(Original Issue Yield: 6.519%), 6/15/1997 (@101.5) Aaa
721,800
------------------------------------------------------
</TABLE>
FEDERATED SHORT-TERM MUNICIPAL TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P*
VALUE
- ----------- ------------------------------------------------------ ------- ----
- --------
<C> <S> <C> <C>
SHORT-INTERMEDIATE MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------
NEW YORK--CONTINUED
------------------------------------------------------
$ 5,000,000 New York City Municipal Water Finance Authority 7.20%
Water & Sewer System Revenue Bonds (Series A),
6/15/1999 A $
5,460,700
------------------------------------------------------
9,540,000 New York State, 5.75% UT GO Bonds, 9/15/1999 A
9,984,373
------------------------------------------------------ ----
- --------
Total
16,166,873
------------------------------------------------------ ----
- --------
OHIO--3.4%
------------------------------------------------------
3,600,000 Miami Valley Regional Transit Authority, OH, 4.75% LT
GO Bonds, 4/15/1997 MIG1
3,639,816
------------------------------------------------------
4,000,000 Ohio State Public Facilities Commission 4.25% Higher
Education Capital Facilities Revenue Bonds (Series
II-A)/ (AMBAC Insured), 12/1/1997 Aaa
4,023,640
------------------------------------------------------ ----
- --------
Total
7,663,456
------------------------------------------------------ ----
- --------
OREGON--1.9%
------------------------------------------------------
2,000,000 Oregon State Department of Transportation, 5.375%,
Regional Light Rail Revenue Bonds, Westside Project,
(MBIA Insured), 6/1/1999 Aaa
2,073,780
------------------------------------------------------
2,000,000 Oregon State Department of Transportation, 5.50%,
Regional Light Rail Revenue Bonds, Westside Project,
(MBIA Insured), 6/1/2000 Aaa
2,082,820
------------------------------------------------------ ----
- --------
Total
4,156,600
------------------------------------------------------ ----
- --------
PENNSYLVANIA--5.3%
------------------------------------------------------
1,155,000 Dauphin County, PA, General Authority, 4.35% Hospital
Revenue Refunding Bonds (Series A)/(Hapsco-Western PA
Hospital)/(MBIA Insured), 7/1/1995 Aaa
1,155,000
------------------------------------------------------
1,175,000 Dauphin County, PA, General Authority, 4.35% Hospital
Revenue Refunding Bonds (Hapsco-Western PA
Hospital)/(MBIA Insured), 7/1/1995 Aaa
1,175,000
------------------------------------------------------
</TABLE>
FEDERATED SHORT-TERM MUNICIPAL TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P*
VALUE
- ----------- ------------------------------------------------------ ------- ----
- --------
<C> <S> <C> <C>
SHORT-INTERMEDIATE MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
------------------------------------------------------
$ 5,000,000 Commonwealth of Pennsylvania, 4.75% UT GO Second
Series Refunding Bonds, 6/15/1998 AA- $
5,067,300
------------------------------------------------------
4,375,000 Pennsylvania Intergovernmental Cooperation Authority,
5.40% Special Tax Revenue Bonds (City of Philadelphia
Funding Program)/(FGIC Insured)/(Original Issue Yield:
5.50%), 6/15/1997 Aaa
4,476,719
------------------------------------------------------ ----
- --------
Total
11,874,019
------------------------------------------------------ ----
- --------
TENNESSEE--1.4%
------------------------------------------------------
3,000,000 Tennessee State, 6.75% UT GO Bonds (Series A) 7/1/1995 Aaa
3,000,000
------------------------------------------------------ ----
- --------
TEXAS--7.3%
------------------------------------------------------
3,000,000 Mesquite, TX Independent School District No 1, 7.00%
UT GO Refunding Bonds, 2/15/1997 A+
3,133,290
------------------------------------------------------
2,425,000 Texas State Public Property Finance Corp., 4.30%
Revenue Refunding Bonds (Mental Health &
Retardation)/(CGIC Insured), 9/1/1997 Aaa
2,429,850
------------------------------------------------------
4,440,000 Texas State, 8.00% UT GO Bonds, Public Finance
Authority (Series B), 10/1/1999 AA
5,060,712
------------------------------------------------------
3,000,000 Texas State, 6.50% UT GO Bonds, Public Finance
Authority (Series C), 10/1/1997 AA
3,159,120
------------------------------------------------------
2,500,000 Texas Water Development Board, 4.35% State Revolving
Senior Lien Revenue Bonds, 7/15/1995 AA
2,500,000
------------------------------------------------------ ----
- --------
Total
16,282,972
------------------------------------------------------ ----
- --------
</TABLE>
FEDERATED SHORT-TERM MUNICIPAL TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P*
VALUE
- ----------- ------------------------------------------------------ ------- ----
- --------
<C> <S> <C> <C>
SHORT-INTERMEDIATE MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------
WASHINGTON--4.8%
------------------------------------------------------
$ 3,000,000 Washington State, 5.00% UT GO Bonds (Series B)
5/1/1998 AA $
3,059,340
------------------------------------------------------
7,425,000 Washington State, 5.00% UT GO Bonds (Series B)
5/1/1999 AA
7,567,115
------------------------------------------------------ ----
- --------
Total
10,626,455
------------------------------------------------------ ----
- --------
TOTAL SHORT-INTERMEDIATE MUNICIPAL SECURITIES
(IDENTIFIED COST $216,467,714)
218,924,293
------------------------------------------------------ ----
- --------
SHORT-TERM MUNICIPAL SECURITIES--0.4%
- ----------------------------------------------------------------------
PUERTO RICO--0.1%
------------------------------------------------------
200,000 Puerto Rico Government Development Bank Weekly VRDNs
(Credit Suisse, Zurich and Sumitomo Bank Ltd., Osaka
LOCs) A-1+
200,000
------------------------------------------------------ ----
- --------
TENNESSEE--0.3%
------------------------------------------------------
600,000 Chattanooga-Hamilton County, TN Hospital Authority
Daily VRDNs (Erlanger Medical Center)/(Morgan Guaranty
Trust Co., New York LOC) A+
600,000
------------------------------------------------------ ----
- --------
TOTAL SHORT-TERM MUNICIPAL SECURITIES
(AT AMORTIZED COST)
800,000
------------------------------------------------------ ----
- --------
TOTAL INVESTMENTS (IDENTIFIED COST $217,267,714 )(A)
$219,724,293
------------------------------------------------------ ----
- --------
</TABLE>
(a) The cost of investments for federal tax purposes amounts to $217,267,714.
The net unrealized appreciation of investments on a federal tax cost basis
amounts to $2,456,579 , which is comprised of $2,691,375 appreciation and
$234,796 depreciation at June 30, 1995.
* Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings. Current credit ratings are unaudited.
Note: The catagories of investments are shown as a percentage of net assets
($222,935,732) at June 30, 1995.
The following abbreviations are used in this portfolio:
<TABLE>
<S> <C>
AMBAC --American Municipal Bond Assurance Corporation
CGIC --Capital Guaranty Insurance Corporation
FGIC --Financial Guaranty Insurance Company
GO --General Obligation
LOC --Letter of Credit
LOC(s) --Letter(s) of Credit
LT --Limited Tax
MBIA --Municipal Bond Investors Assurance
PRF --Prerefunded
UT --Utah/Unlimited Tax
VRDNs --Variable Rate Demand Notes
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED SHORT-TERM MUNICIPAL TRUST
(FORMERLY, SHORT-TERM MUNICIPAL TRUST)
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost $217,267,714)
$219,724,293
- -------------------------------------------------------------------------------
Cash
290,711
- -------------------------------------------------------------------------------
Income receivable
2,898,564
- -------------------------------------------------------------------------------
Receivable for shares sold
677,695
- ------------------------------------------------------------------------------- -----
- -------
Total assets
223,591,263
- -------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------
Payable for shares redeemed $ 68,410
- --------------------------------------------------------------------
Income distribution payable 569,213
- --------------------------------------------------------------------
Accrued expenses 17,908
- -------------------------------------------------------------------- --------
Total liabilities
655,531
- ------------------------------------------------------------------------------- -----
- -------
NET ASSETS for 21,684,185 shares outstanding
$222,935,732
- ------------------------------------------------------------------------------- -----
- -------
NET ASSETS CONSIST OF:
- -------------------------------------------------------------------------------
Paid in capital
229,422,233
- -------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments
2,456,579
- -------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments
(8,943,080)
- ------------------------------------------------------------------------------- -----
- -------
Total Net Assets
$222,935,732
- ------------------------------------------------------------------------------- -----
- -------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
Institutional Shares ($217,712,823 / 21,176,178 shares outstanding)
$10.28
- ------------------------------------------------------------------------------- -----
- -------
Institutional Service Shares ($5,222,909 / 508,007 shares outstanding)
$10.28
- ------------------------------------------------------------------------------- -----
- -------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED SHORT-TERM MUNICIPAL TRUST
(FORMERLY, SHORT-TERM MUNICIPAL TRUST)
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
<C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------
Interest
$12,342,393
- ----------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------
Investment advisory fee $1,084,312
- --------------------------------------------------------------------------
Administrative personnel and services fee 205,206
- --------------------------------------------------------------------------
Custodian fees 127,075
- --------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 34,101
- --------------------------------------------------------------------------
Directors'/Trustees' fees 11,976
- --------------------------------------------------------------------------
Auditing fees 18,564
- --------------------------------------------------------------------------
Legal fees 8,082
- --------------------------------------------------------------------------
Portfolio accounting fees 40,300
- --------------------------------------------------------------------------
Distribution services fee--Institutional Service Shares 25,694
- --------------------------------------------------------------------------
Shareholder services fee--Institutional Service Shares 25,362
- --------------------------------------------------------------------------
Share registration costs 35,913
- --------------------------------------------------------------------------
Printing and postage 22,269
- --------------------------------------------------------------------------
Insurance premiums 10,153
- --------------------------------------------------------------------------
Taxes 3,284
- --------------------------------------------------------------------------
Miscellaneous 4,258
- -------------------------------------------------------------------------- ----------
Total expenses 1,656,549
- --------------------------------------------------------------------------
Deduct--
- ---------------------------------------------------------------
Waiver of investment advisory fee $346,925
- ---------------------------------------------------------------
Waiver of distribution services fee 25,362
- --------------------------------------------------------------- --------
Total waivers 372,287
- -------------------------------------------------------------------------- ----------
Net expenses
1,284,262
- ----------------------------------------------------------------------------------------
- -----------
Net investment income
11,058,131
- ----------------------------------------------------------------------------------------
- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ----------------------------------------------------------------------------------------
Net realized gain (loss) on investments
(3,533,063)
- ----------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments
5,627,330
- ----------------------------------------------------------------------------------------
- -----------
Net realized and unrealized gain (loss) on investments
2,094,267
- ----------------------------------------------------------------------------------------
- -----------
Change in net assets resulting from operations
$13,152,398
- ----------------------------------------------------------------------------------------
- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED SHORT-TERM MUNICIPAL TRUST
(FORMERLY, SHORT-TERM MUNICIPAL TRUST)
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JUNE
30,
----------------------
- --------
1995
1994
------------- -----
- --------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------
Net investment income $ 11,058,131 $
13,727,553
- ---------------------------------------------------------------
Net realized gain/(loss) on investments ($1,189,491 and $0,
respectively, as computed for federal income tax purposes) (3,533,063)
(253,551)
- ---------------------------------------------------------------
Net change in unrealized appreciation/(depreciation) 5,627,330
(7,720,690)
- --------------------------------------------------------------- ------------- -----
- --------
Change in assets resulting from operations 13,152,398
5,753,312
- --------------------------------------------------------------- ------------- -----
- --------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------------
Distributions from net investment income:
- ---------------------------------------------------------------
Institutional Shares (10,679,008)
(13,167,119)
- ---------------------------------------------------------------
Institutional Service Shares (379,123)
(560,434)
- --------------------------------------------------------------- ------------- -----
- --------
Change in net assets resulting from distributions to
shareholders (11,058,131)
(13,727,553)
- --------------------------------------------------------------- ------------- -----
- --------
SHARE TRANSACTIONS--
- ---------------------------------------------------------------
Proceeds from sale of Shares 51,547,320
259,790,293
- ---------------------------------------------------------------
Net asset value of Shares issued to shareholders in payment of
distributions declared 2,700,836
3,549,886
- ---------------------------------------------------------------
Cost of Shares redeemed (181,676,422)
(226,027,733)
- --------------------------------------------------------------- ------------- -----
- --------
Change in net assets resulting from Share transactions (127,428,266)
37,312,446
- --------------------------------------------------------------- ------------- -----
- --------
Change in net assets (125,333,999)
29,338,205
- ---------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------
Beginning of period 348,269,731
318,931,526
- --------------------------------------------------------------- ------------- -----
- --------
End of period $ 222,935,732 $
348,269,731
- --------------------------------------------------------------- ------------- -----
- --------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED SHORT-TERM MUNICIPAL TRUST
(FORMERLY, SHORT-TERM MUNICIPAL TRUST)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Short-Term Municipal Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company.
The Trust offers two classes of shares, Institutional Shares and Institutional
Service Shares.
Effective December 15, 1994, the Trust changed its name from Short-Term
Municipal Trust to Federated Short-Term Municipal Trust.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Municipal bonds are valued by an independent pricing
service, taking into consideration yield, liquidity, risk, credit quality,
coupon, maturity, type of issue, and any other factors or market data the
pricing service deems relevant in determining valuations for normal
institutional size trading units of debt securities. The independent
pricing service does not rely exclusively on quoted prices. Short-term
securities with remaining maturities of sixty days or less at the time of
purchase may be valued at amortized cost, which approximates fair market
value.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS--Interest income and
expenses are accrued daily. Bond premium and discount, if applicable, are
amortized as required by the Internal Revenue Code, as amended (the
"Code"). Distributions to shareholders are recorded on the ex-dividend
date.
Income distributions and capital gains distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for expiring capital loss carryforwards. Accordingly,
amounts as of June 30, 1995, have been reclassified to reflect a decrease
in paid in capital and a decrease in accumulated net realized loss of
$1,449,467. Net investment income, net realized gains and net assets were
not affected by this change.
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 June 30, 1995, the Trust, for
federal tax purposes, had a capital loss carryforward of $6,345,635, which
will reduce the Trust's taxable income arising from future net realized
gain on investments, if any, to the extent permitted
FEDERATED SHORT-TERM MUNICIPAL TRUST
- --------------------------------------------------------------------------------
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 in 1996 ($2,255,334), 1997 ($1,097,445), 1998
($1,729,378), 1999 ($11,866), 2001 ($62,121) and 2002 ($1,189,491).
Additionally, net capital losses of $2,597,123 attributable to security
transactions incurred after October 31, 1994 are treated as arising on July
1, 1995, the first day of the Trust's next taxable year.
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.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------------
- ------------
1995 1994
---------------------------- -----------------
- -----------
INSTITUTIONAL SHARES SHARES DOLLARS SHARES
DOLLARS
- ------------------------------------- ------ ------- ------
- -------
<S> <C> <C> <C>
<C>
Shares Sold 4,823,992 $ 48,787,554 20,791,128
$ 215,505,746
- -------------------------------------
Shares issued to shareholders in
payment of distributions declared 234,548 2,373,194 292,960
3,013,260
- -------------------------------------
Shares redeemed (15,099,319) (152,318,952) (20,620,412)
(213,148,873)
- ------------------------------------- ----------- ------------- -----------
- -------------
Net change resulting from
Institutional Shares transactions (10,040,779) $(101,158,204) 463,676
$ 5,370,133
- ------------------------------------- ----------- ------------- -----------
- -------------
</TABLE>
FEDERATED SHORT-TERM MUNICIPAL TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------
- -------------
1995
1994*
---------------------------- --------------
- -------------
INSTITUTIONAL SERVICE SHARES SHARES DOLLARS SHARES
DOLLARS
- ------------------------------------- ------ ------- ------
- -------
<S> <C> <C> <C>
<C>
Shares Sold 272,110 $ 2,759,766 4,299,696
$ 44,284,547
- -------------------------------------
Shares issued to shareholders in
payment of distributions declared 32,358 327,642 52,512
536,626
- -------------------------------------
Shares redeemed (2,896,311) (29,357,470) (1,252,358)
(12,878,860)
- ------------------------------------- ----------- ------------- -----------
- -------------
Net change resulting from
Institutional Service Shares
transactions (2,591,843) (26,270,062) 3,099,850
31,942,313
- ------------------------------------- ----------- ------------- -----------
- -------------
Total net change resulting from
Share transactions (12,632,622) $(127,428,266) 3,563,526
$ 37,312,446
- ------------------------------------- ----------- ------------- -----------
- -------------
</TABLE>
*For the period from August 31, 1993 (date of initial public offering) to June
30, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
ADVISORY FEE--Federated Management, the Trust's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.40 of 1% 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 (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) exceeded .45 of 1% of average daily net assets of the
Trust.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Trust with administrative
personnel and services. The FAS fee 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.
DISTRIBUTION AND SHAREHOLDER SERVICES FEE--The Trust has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the
Plan, the Trust will compensate Federated Securities Corp. ("FSC"), the
principal distributor, from the net assets of the Trust to finance activities
intended to result in the sale of the Trust's Institutional Service Shares. The
Plan provides that the Trust may incur distribution expenses up to .25 of 1% of
the average daily net assets of the Institutional Service Shares, annually, to
compensate FSC. The distributor may voluntarily choose to waive a portion of its
fee. The distributor can modify or terminate this voluntary waiver at any time
at its sole discretion.
FEDERATED SHORT-TERM MUNICIPAL TRUST
- --------------------------------------------------------------------------------
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Trust will pay FSS up to .25 of 1% of average daily net
assets of the Trust for the period. This fee is to obtain certain services for
shareholders and to maintain shareholder accounts.
For the year ended June 30, 1995, the Institutional Shares did not incur a
Shareholder Services Fee.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Trust. This fee is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also 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 year ended June 30, 1995, 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 transactions were made at current market value pursuant
to Rule 17a-7 under the Act amounting to $65,650,000 and $99,158,028,
respectively.
GENERAL--Certain Officers and Trustees of the Trust are Officers and Directors
or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
year ended June 30, 1995, were as follows:
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------
Purchases $
88,595,509
- ------------------------------------------------------------------------------ -------
- -----
Sales
$216,945,935
- ------------------------------------------------------------------------------ -------
- -----
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
FEDERATED SHORT-TERM MUNICIPAL TRUST:
(formerly, Short-Term Municipal Trust)
We have audited the accompanying statement of assets and liabilities of
Federated Short-Term Municipal Trust (a Massachusetts business trust), including
the schedule of portfolio of investments as of June 30, 1995, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and the financial
highlights (see pages 2 and 16 of the prospectus) for each of the periods
presented. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1995, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated Short-Term Municipal Trust as of June 30, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the periods presented in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
August 10, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated Short-Term Municipal Trust
Institutional Shares Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- ----------------------------------------------------------------------------------------
- --------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- ----------------------------------------------------------------------------------------
- --------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- ----------------------------------------------------------------------------------------
- --------
Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, Massachusetts 02266-
8600
- ----------------------------------------------------------------------------------------
- --------
Transfer Agent & Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, Massachusetts 02266-
8600
- ----------------------------------------------------------------------------------------
- --------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, Pennsylvania
15222
- ----------------------------------------------------------------------------------------
- --------
</TABLE>
FEDERATED SHORT-TERM
MUNICIPAL TRUST
(FORMERLY, SHORT-TERM
MUNICIPAL TRUST)
INSTITUTIONAL SHARES
PROSPECTUS
A No-Load, Open-End, Diversified
Management Investment Company
Prospectus dated August 31, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
CUSIP 825253107
8072507A-IS (8/95)
FEDERATED SHORT-TERM MUNICIPAL TRUST
(FORMERLY, SHORT-TERM MUNICIPAL TRUST)
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
The Institutional Service Shares offered by this prospectus represent interests
in a diversified portfolio of securities of Federated Short-Term Municipal Trust
(the "Trust"). The Trust is an open-end management investment company (a mutual
fund).
The investment objective of the Trust is to provide dividend income which is
exempt from federal regular income tax. The Trust pursues this investment
objective by investing in a portfolio of municipal securities with a
dollar-weighted average maturity of less than three years.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in Institutional Service Shares of the Trust. Keep this prospectus for
future reference.
The Trust has also filed a Combined Statement of Additional Information for
Institutional Shares and Institutional Service Shares dated August 31, 1995,
with the Securities and Exchange Commission. The information contained in the
Combined Statement of Additional Information is incorporated by reference into
this prospectus. You may request a copy of the Combined Statement of Additional
Information which is in paper form only, or a paper copy of this prospectus, if
you have received your prospectus electronically, free of charge by calling
1-800-235-4669. To obtain other information or to make inquiries about the
Trust, contact the Trust at the address listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated August 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF TRUST EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SERVICE SHARES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Municipal Securities 5
Investment Risks 6
Investment Limitations 6
TRUST INFORMATION 6
- ------------------------------------------------------
Management of the Trust 6
Distribution of Institutional
Service Shares 7
Administration of the Trust 8
NET ASSET VALUE 9
- ------------------------------------------------------
INVESTING IN INSTITUTIONAL SERVICE SHARES 9
- ------------------------------------------------------
Share Purchases 9
Minimum Investment Required 10
What Shares Cost 10
Subaccounting Services 10
Certificates and Confirmations 10
Dividends 11
Capital Gains 11
REDEEMING INSTITUTIONAL SERVICE SHARES 11
- ------------------------------------------------------
Telephone Redemption 11
Written Requests 11
Accounts with Low Balances 12
SHAREHOLDER INFORMATION 12
- ------------------------------------------------------
Voting Rights 12
Massachusetts Partnership Law 13
TAX INFORMATION 13
- ------------------------------------------------------
Federal Income Tax 13
Pennsylvania Corporate and
Personal Property Taxes 14
Other State and Local Taxes 14
PERFORMANCE INFORMATION 14
- ------------------------------------------------------
OTHER CLASSES OF SHARES 15
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SHARES 16
- ------------------------------------------------------
FINANCIAL STATEMENTS 17
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 32
- ------------------------------------------------------
ADDRESSES 33
- ------------------------------------------------------
SUMMARY OF TRUST EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
<C>
INSTITUTIONAL SERVICE SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)........................................
None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)........................................
None
Contingent Deferred Sales Charge (as a percentage of original purchase price
or redemption proceeds, as applicable).....................................
None
Redemption Fee (as a percentage of amount redeemed, if applicable)...........
None
Exchange Fee.................................................................
None
ANNUAL INSTITUTIONAL SERVICE SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1).............................................
0.27%
12b-1 Fee (after waiver)(2)..................................................
0.01%
Total Other Expenses.........................................................
0.43%
Shareholder Services Fee (after waiver)(3)................................. 0.24%
Total Institutional Service Shares Operating Expenses(4)................
0.71%
</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 maximum 12b-1 fee is 0.25%.
(3) The maximum shareholder services fee is 0.25%.
(4) The total Institutional Service Shares operating expenses in the table above
are based on expenses expected during the fiscal year ending June 30, 1996. The
total Institutional Service Shares operating expenses were 0.71% for the fiscal
year ended June 30, 1995 and would have been 1.09% absent the waivers of a
portion of the management fee and a portion of the 12b-1 fee.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF INSTITUTIONAL SERVICE SHARES OF
THE TRUST WILL BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE
DESCRIPTIONS OF THE VARIOUS COSTS AND EXPENSES, SEE "INVESTING IN INSTITUTIONAL
SERVICE SHARES" AND "TRUST INFORMATION". WIRE TRANSFERRED REDEMPTIONS OF LESS
THAN $5,000 MAY BE SUBJECT TO ADDITIONAL FEES.
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales loads permitted under the rules of the National
Association of Securities Dealers, Inc.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- ----------------------------------------------------------------------------------------
- -
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period........... $ 7 $ 23 $ 40 $ 88
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FEDERATED SHORT-TERM MUNICIPAL TRUST
(FORMERLY, SHORT-TERM MUNICIPAL TRUST)
FINANCIAL HIGHLIGHTS-INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants, on page 32.
<TABLE>
<CAPTION>
YEAR ENDED
JUNE
30,
----------
- ------
1995
1994(A)
------
- ------
<S> <C>
<C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.15
$10.35
- ---------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------
Net investment income 0.39
0.31
- ---------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.13
(0.20)
- --------------------------------------------------------------------------- ------
- ------
Total from investment operations 0.52
0.11
- ---------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------------------
Distributions from net investment income (0.39)
(0.31)
- --------------------------------------------------------------------------- ------
- ------
NET ASSET VALUE, END OF PERIOD $10.28
$10.15
- --------------------------------------------------------------------------- ------
- ------
TOTAL RETURN (B) 5.26%
1.08%
- ---------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------
Expenses 0.71%
0.72%(c)
- ---------------------------------------------------------------------------
Net investment income 3.69%
3.65%(c)
- ---------------------------------------------------------------------------
Expense waiver/reimbursement (d) 0.25%
0.18%(c)
- ---------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------
Net assets, end of period (000 omitted) $5,223
$31,459
- ---------------------------------------------------------------------------
Portfolio Turnover 33%
36%
- ---------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from August 31, 1993 (date of initial
public offering) to June 30, 1994.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease for the distribution services fee is
reflected in both the expense and net investment income ratios shown above
(See Notes which are an integral part of the Financial Statements)
Further information about the Trust's performance is contained in the Trust's
Annual Report for the fiscal year ended June 30, 1995, which can be obtained
free of charge.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated May 8, 1981. On December 15, 1994, the name of the Trust was
changed from Short-Term Municipal Trust to Federated Short-Term Municipal Trust.
The Declaration of Trust permits the Trust to offer separate series of shares of
beneficial interest representing interests in separate portfolios of securities.
The shares in any one portfolio may be offered in separate classes. As of the
date of this prospectus, the Board of Trustees (the "Trustees") has established
two classes of shares of the Trust, known as Institutional Service Shares and
Institutional Shares. This prospectus relates only to Institutional Service
Shares (the "Shares") of the Trust.
Shares of the Trust are sold primarily to retail and private banking customers
of financial institutions as a convenient means of accumulating an interest in a
professionally managed, diversified portfolio of municipal securities. A minimum
initial investment of $25,000 over a 90-day period is required. The Trust may
not be a suitable investment for retirement plans since it invests in municipal
securities.
Shares are currently sold and redeemed at net asset value without a sales load
imposed by the Trust.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Trust is to provide dividend income which is
exempt from federal regular income tax. Interest income of the Trust that is
exempt from federal regular income tax retains its tax-free status when
distributed to the Trust's shareholders. The Trust attempts to achieve its
investment objective by investing at least 80% of its net assets in a
diversified portfolio of municipal securities or by investing its assets so that
at least 80% of its income will be tax-exempt. While there is no assurance that
the Trust will achieve its investment objective, it endeavors to do so by
following the investment policies described in this prospectus. The investment
objective, and the above investment policy, cannot be changed without approval
of shareholders.
INVESTMENT POLICIES
The investment policies described below may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The municipal securities in which the Trust invests
are:
- - debt obligations issued by or on behalf of any state, territory, or
possession of the United States, including the District of Columbia, or
any political subdivision of any of these; and
- - participation interests, as described below, in any of the above
obligations,
the interest from which is, in the opinion of bond counsel for the issuers or in
the opinion of officers of the Trust and/or the investment adviser to the Trust,
exempt from federal regular income tax.
AVERAGE MATURITY. The dollar-weighted average maturity of the Trust's portfolio
of municipal securities will be less than three years. For purposes of
determining the dollar-weighted average
maturity of the Trust's portfolio, the maturity of a municipal security will be
its ultimate maturity, unless it is probable that the issuer of the security
will take advantage of maturity-shortening devices such as a call, refunding, or
redemption provision, in which case the maturity date will be the date on which
it is probable that the security will be called, refunded, or redeemed. If the
municipal security includes the right to demand payment, the maturity of the
security for purposes of determining the Trust's dollar-weighted average
maturity will be the period remaining until the principal amount of the security
can be recovered by exercising the right to demand payment.
CHARACTERISTICS. The municipal securities in which the Trust invests are:
- - rated within the three highest ratings for municipal securities by
Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa or A) or by Standard
& Poor's Ratings Group ("S&P") (AAA, AA, or A);
- - guaranteed at the time of purchase by the U.S. government as to the
payment of principal and interest;
- - fully collateralized by an escrow of U.S. government or other securities
acceptable to the Trust's adviser;
- - rated at the time of purchase within Moody's highest short-term municipal
obligation rating (MIG1/VMIG1) or Moody's highest municipal commercial
paper rating (PRIME-1) or S&P's highest municipal commercial paper rating
(A-1);
- - unrated if, at the time of purchase, longer term municipal securities of
the issuer are rated A or better by Moody's or S&P; or
- - determined by the Trust's investment adviser to be equivalent to
municipal securities which are rated A or better by Moody's or by S&P.
Downgraded securities will be evaluated on a case by case basis by the adviser.
The adviser will determine whether or not the security continues to be an
acceptable investment. If not, the security will be sold. The prices of fixed
income securities fluctuate inversely to the direction of interest rates. A
description of the rating categories is contained in the Appendix to the
Combined Statement of Additional Information.
PARTICIPATION INTERESTS. The Trust may purchase participation interests from
financial institutions such as commercial banks, savings and loan associations,
and insurance companies. These participation interests give the Trust an
undivided interest in municipal securities. The financial institutions from
which the Trust purchases participation interests frequently provide or secure
irrevocable letters of credit or guarantees to assure that the participation
interests are of high quality. The Trustees will determine that participation
interests meet the prescribed quality standards for the Trust.
VARIABLE RATE MUNICIPAL SECURITIES. Some of the municipal securities which the
Trust purchases may have variable interest rates. Variable interest rates are
ordinarily based on a published interest rate or interest rate index or some
similar standard, such as the 91-day U.S. Treasury bill rate. Variable rate
municipal securities will be treated as maturing on the date of the next
scheduled adjustment to the interest rate for purposes of determining the
dollar-weighted average maturity of the portfolio.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Trust may purchase municipal
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. Accordingly, the Trust may pay
more/less than the market value of the securities on the settlement date. 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 on a temporary basis, when the
investment adviser determines that market conditions call for a temporary
defensive posture, the Trust may invest in short-term temporary investments
which may or may not be exempt from federal income tax. Temporary investments
include: tax-exempt variable and floating rate demand notes; tax-free commercial
paper; other temporary municipal securities; obligations issued or guaranteed by
the U.S. government, its agencies or instrumentalities; other debt securities;
commercial paper; certificates of deposit of domestic branches of U.S. banks;
and repurchase agreements (arrangements in which the organization selling the
Trust a security agrees at the time of sale to repurchase it at a mutually
agreed upon time and price).
There are no rating requirements applicable to temporary investments with the
exception of temporary municipal securities which are subject to the same rating
requirements as all other municipal securities in which the Trust invests.
However, the investment adviser will limit temporary investments to those it
considers to be of comparable quality to the acceptable investments of the
Trust.
Although the Trust is permitted to make taxable, temporary investments, there is
no current intention of generating income subject to federal regular income tax.
MUNICIPAL SECURITIES
Municipal securities are generally issued to finance public works such as
airports, bridges, highways, housing, hospitals, mass transportation projects,
schools, streets, and water and sewer works. They are also issued to repay
outstanding obligations, to raise funds for general operating expenses, and to
make loans to other public institutions and facilities. Municipal securities
include industrial development bonds issued by or on behalf of public
authorities to provide financing aid to acquire sites or construct and equip
facilities for privately or publicly owned corporations. The availability of
this financing encourages these corporations to locate within the sponsoring
communities and thereby increases local employment. The two principal
classifications of municipal securities are "general obligation" and "revenue"
bonds. General obligation bonds are secured by the issuer's pledge of its full
faith and credit and taxing power for the payment of principal and interest.
Interest on and principal of revenue bonds, however, are payable only from the
revenue generated by the facility financed by the bond or other specified
sources of revenue. Revenue bonds do not represent a pledge of credit or create
any debt of or charge against the general revenues of a municipality or public
authority. Industrial development bonds are typically classified as revenue
bonds.
INVESTMENT RISKS
Yields on municipal securities depend on a variety of factors, including: the
general conditions of the money market and the taxable and municipal bond
markets; 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 guarantors of either, to meet
their obligations for the payment of interest and principal when due.
INVESTMENT LIMITATIONS
The Trust will not:
- - invest more than 5% of its total assets in securities of one issuer
(except cash and cash items and U.S. government obligations); or
- - 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 those assets to secure such borrowings.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, can be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.
The Trust will not:
- - commit more than 15% of its net assets to illiquid obligations;
- - invest more than 10% of its total assets in municipal securities subject
to restrictions on resale; or
- - invest more than 5% of its total assets in industrial development bonds
of issuers that have a record of less than three years of continuous
operations.
TRUST INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders. The Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Trust are made by Federated
Management, the Trust's investment adviser (the "Adviser"), subject to direction
by the Trustees. The Adviser continually conducts investment research and
supervision for the Trust and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the Trust.
ADVISORY FEES. The Trust's Adviser receives an annual investment advisory fee
equal to .40 of 1% of the Trust's average daily net assets. Under the investment
advisory contract, the Adviser will reimburse the Trust the amount, limited to
the amount of the advisory fee, by which the Trust's aggregate annual operating
expenses, including its investment advisory fee, but excluding interest, taxes,
brokerage commissions, expenses of registering and qualifying the Trust and its
shares under federal and state
laws and regulations, expenses of withholding taxes, and extraordinary expenses,
exceed .45 of 1% of its average daily net assets. This does not include
reimbursement to the Trust of any expenses incurred by shareholders who use the
transfer agent's subaccounting facilities. The Adviser has also undertaken to
reimburse the Trust for operating expenses in excess of limitations established
by certain states.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust organized
on April 11, 1989, is a registered investment adviser under the Investment
Advisers Act of 1940, as amended. It is a subsidiary of Federated Investors. All
of the Class A (voting) shares of Federated Investors are owned by a trust, the
trustees of which are John F. Donahue, Chairman and Trustee of Federated
Investors, Mr. Donahue's wife, and Mr. Donahue's son, J. Christopher Donahue,
who is President and Trustee of Federated Investors.
Jonathan C. Conley has been the Trust's portfolio manager since January 1984.
Mr. Conley joined Federated Investors in 1979 and has been a Vice President of
the Trust's investment adviser since 1982. Mr. Conley is a Chartered Financial
Analyst and received his M.B.A. in Finance from the University of Virginia.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private accounts.
Certain other subsidiaries also provide administrative services to a number of
investment companies. With over $72 billion invested across more than 260 funds
under management and/or administration by its subsidiaries, as of December 31,
1994, Federated Investors is one of the largest mutual fund investment managers
in the United States. With more than 1,750 employees, Federated continues to be
led by the management who founded the company in 1955. Federated funds are
presently at work in and through 4,000 financial institutions nationwide. More
than 100,000 investment professionals have selected Federated funds for their
clients.
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 interest. 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 Board of Trustees and
could result in severe penalties.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to periodic payments to
financial institutions under the Distribution Plan and Shareholder Services
Agreement, certain financial institutions may be compensated by the Adviser or
its affiliates for the continuing investment of customers' assets in certain
funds, including the Trust, advised by those entities. These payments will be
made directly by the distributor or Adviser from their assets, and will not be
made from the assets of the Trust or by the assessment of a sales load on
Shares.
DISTRIBUTION OF INSTITUTIONAL SERVICE SHARES
Federated Securities Corp. is the principal distributor for Institutional
Service Shares. 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.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
the Trust may pay to the distributor an amount, computed at an annual rate of
0.25 of 1.00% of the average daily net asset value of Shares, to finance any
activity which is principally intended to result in the sale of Shares subject
to the Distribution Plan. The distributor may select financial institutions such
as banks, fiduciaries, custodians for public funds, investment advisers, and
broker/dealers to provide sales services or distribution-related support
services as agents for their clients or customers.
The Distribution Plan is a compensation-type plan. As such, the Trust makes no
payments to the distributor except as described above. Therefore, the Trust does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Trust, interest,
carrying, or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by the Trust
under the Distribution Plan.
In addition, 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 1.00% of the average daily net asset
value of the Trust to obtain certain personal services for shareholders and to
maintain shareholder accounts ("Shareholder Services"). 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 fees will be paid will be determined from time to time by the Trust
and Federated Shareholder Services.
In addition to payments made pursuant to the Distribution Plan and Shareholder
Services Agreement, Federated Securities Corp. and Federated Shareholder
Services, from their own assets, may pay financial institutions for the
performance of sales services, distribution-related support services, or
Shareholder Services.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or savings association) from being an underwriter or distributor of most
securities. In the event the Glass- Steagall Act is deemed to prohibit
depository institutions from acting in the capacities described above or should
Congress relax current restrictions on depository institutions, Trustees will
consider appropriate changes in the services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state laws.
The distributor may, from time to time and for such periods as it deems
appropriate, voluntarily reduce its compensation under the Plans.
ADMINISTRATION OF THE TRUST
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Trust.
Federated Administrative Services provides these at an annual
rate which relates to the average aggregate daily net assets of all funds
advised by subsidiaries of Federated Investors ("Federated Funds") as specified
below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE FEDERATED FUNDS
- --------------------- ----------------------------------
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
on assets in excess of $750
0.075 of 1% million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
CUSTODIAN. State Street Bank and Trust Company ("State Street Bank"), Boston,
Massachusetts, is custodian for the securities and cash of the Trust.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Boston, Massachusetts, is transfer agent for the Shares of the Trust and
dividend disbursing agent for the Trust.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the
Trust are Arthur Andersen LLP, Pittsburgh, Pennsylvania.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Trust's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of the Shares in the market value of all
securities and other assets of the Trust, subtracting the interest of the Shares
in the liabilities of the Trust and those attributable to Shares, and dividing
the remainder by the total number of Shares outstanding. The net asset value for
Shares may differ from that of Institutional Shares due to the variance in daily
net income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.
INVESTING IN INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
SHARE PURCHASE
Shares are sold on days on which the New York Stock Exchange and the Federal
Reserve wire system are open for business. Shares may be purchased either by
wire or by mail.
To purchase Shares, open an account by calling Federated Securities Corp.
Information needed to establish the account will be taken over the telephone.
The Trust reserves the right to reject any purchase request.
BY WIRE. To purchase Shares by Federal Reserve wire, call the Trust before 4:00
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) on the next business day following the order. Federal funds
should be wired as follows: Federated Services Company, c/o State Street Bank
and Trust Company, Boston, Massachusetts; Attention: EDGEWIRE; For Credit to:
Federated Short-Term Municipal Trust Institutional Service Shares; Trust Number
(this number can be found on the account statement or by contacting the Trust);
Group Number or Wire Order Number; Nominee or Institution Name; and ABA Number
011000028. Shares cannot be purchased on days on which the New York Stock
Exchange is closed and on federal holidays restricting wire transfers.
BY MAIL. To purchase Shares by mail, send a check made payable to Federated
Short-Term Municipal Trust Institutional Service Shares to: Federated Services
Company, P.O. Box 8600, Boston, Massachusetts 02266-8600. Orders by mail are
considered received when payment by check is converted into federal funds. This
is normally the next business day after the check is received.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Shares is $25,000 plus any non-affiliated bank
or broker's fee, if applicable. However, an account may be opened with a smaller
amount as long as the $25,000 minimum is reached within 90 days. The minimum
investment for an institutional investor will be calculated by combining all
accounts it maintains with the Trust. Accounts established through a non-
affiliated bank or broker may be subject to a smaller minimum investment.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales load imposed by the Trust. Investors who purchase
Shares through a non-affiliated bank or broker may be charged an additional
service fee by that bank or broker.
The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange Monday through Friday, except
on (i) days on which there are not sufficient changes in the value of the
Trust's portfolio securities that its net asset value might be materially
affected; (ii) days during which no Shares are tendered for redemption and no
orders to purchase Shares are received; or (iii) the following holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, and Christmas Day.
SUBACCOUNTING SERVICES
Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. The transfer agent may
charge a fee based on the level of subaccounting services rendered. Institutions
holding Shares in a fiduciary, agency, custodial, or similar capacity may charge
or pass through subaccounting fees as part of or in addition to normal trust or
agency account fees. They may also charge fees for other services provided which
may be related to the ownership of Shares. This prospectus should, therefore, be
read together with any agreement between the customer and the institution with
regard to the services provided, the fees charged for those services, and any
restrictions and limitations imposed.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Trust, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Trust.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during that
month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are declared just prior
to determining net asset value. If an order for Shares is placed on the
preceding business day, Shares purchased by wire begin earning dividends on the
business day wire payment is received by State Street Bank. If the order for
Shares and payment by wire are received on the same day, Shares begin earning
dividends on the next business day. Shares purchased by check begin earning
dividends on the business day after the check is converted, upon instruction of
the transfer agent, into federal funds. Dividends are automatically reinvested
in additional Shares unless cash payments are requested by contacting the Trust.
CAPITAL GAINS
Distributions of net realized long-term capital gains realized by the Trust, if
any, will be made at least annually.
REDEEMING INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
The Trust redeems Shares at their net asset value next determined after the
Trust receives the redemption request. Redemptions may 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 by telephone request or by written request.
TELEPHONE REDEMPTION
Shareholders may redeem their Shares by telephoning the Trust before 4:00 p.m.
(Eastern time). The proceeds will normally be wired the following business day,
but in no event more than seven days, to the shareholder's account at a domestic
commercial bank that is a member of the Federal Reserve System. If at any time
the Trust shall determine it necessary to terminate or modify this method of
redemption, shareholders would be promptly notified.
An authorization form permitting the Trust to accept telephone requests must
first be completed. It is recommended that investors request this privilege at
the time of their initial application. If not completed at the time of initial
application, authorization forms and information on this service can be obtained
through Federated Securities Corp. Telephone redemption instructions may be
recorded. If reasonable procedures are not followed by the 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 such a case should occur, another
method of redemption, such as "Written Requests," should be considered.
WRITTEN REQUESTS
Shares may also be redeemed by sending a written request to Federated Services
Company, P.O. Box 8600, Boston, Massachusetts 02266-8600. Call the Trust for
specific instructions before redeeming by
letter. The shareholder will be asked to provide in the request his name, the
Trust name and class of shares, his account number, and the share or dollar
amount requested. If Share certificates have been issued, they must be properly
endorsed and should be sent by registered or certified mail to Federated
Services Company, 500 Victory Road - 2nd Floor, Quincy, Massachusetts 02171 with
the written request.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, 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 signatures on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
- a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
- any other "eligible guarantor institution" as defined in the Securities
Exchange Act of 1934, as amended.
The Trust does not accept signatures guaranteed by a notary public.
The Trust and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Trust may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Trust and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.
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. This requirement does not apply, however, if the
balance falls below $25,000 because of changes in the Trust's net asset value.
Before Shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional Shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share of the Trust gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights except that in matters
affecting only a particular portfolio or class only shares of that portfolio or
class are entitled to vote. As a Massachusetts business trust, the Trust is not
required to hold annual shareholder meetings. Shareholder approval will be
sought only for certain changes in the Trust's operation and for the election of
Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of shareholders shall be called for this purpose by the
Trustees upon written request of shareholders owning at least 10% of the
outstanding shares of the Trust entitled to vote.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust. To
protect shareholders, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of its shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument that the Trust or its
Trustees enter into or sign on behalf of the Trust.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required to use its property to protect or compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder for any act or obligation of the Trust.
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 from its assets.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Trust will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code of 1986, as amended, applicable to regulated
investment companies and to receive the special tax treatment afforded to such
companies.
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, dividends representing net interest earned on some
municipal bonds may be included in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for corporations.
The alternative minimum tax, equal to up to 28% of alternative minimum taxable
income for individuals and 20% for corporations, applies when it exceeds the
regular tax for the taxable year. Alternative minimum taxable income is equal to
the regular taxable income of the taxpayer increased by certain "tax preference"
items not included in regular taxable income and reduced by only a portion of
the deductions allowed in the calculation of the regular tax.
Interest on certain "private activity" bonds issued after August 7, 1986, is
treated as a tax preference item for both individuals and corporations. Unlike
traditional governmental purpose municipal bonds, which finance roads, schools,
libraries, prisons and other public facilities, private activity bonds provide
benefits to private parties. The Trust may purchase all types of municipal
bonds, including private activity bonds. Thus, while the Trust has no present
intention of purchasing any private activity bonds, should it purchase any such
bonds, a portion of the Trust's dividends may be treated as a tax preference
item.
In addition, in the case of a corporate shareholder, dividends of the Trust
which represent interest on municipal bonds may be subject to the 20% corporate
alternative minimum tax because the dividends are included in a corporation's
"adjusted current earnings." The corporate alternative minimum tax treats 75% of
the excess of a taxpayer's pre-tax "adjusted current earnings" over the
taxpayer's alternative minimum taxable income as a tax preference item.
"Adjusted current earnings" is based upon the concept of a corporation's
"earnings and profits." Since "earnings and profits" generally includes the full
amount of any Trust dividend, and alternative minimum taxable income does not
include the portion of the Trust's dividend attributable to municipal bonds
which are not private activity bonds, the difference will be included in the
calculation of the corporation's alternative minimum tax.
Dividends of the 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. Information on the tax status of dividends and distributions
is provided annually.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Trust:
- - the Trust is not subject to Pennsylvania corporate or personal property
taxes; and
- - 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.
OTHER STATE AND LOCAL TAXES
Distributions representing net interest received on tax-exempt municipal
securities are not necessarily free from income taxes of any state or local
taxing authority. State laws differ on this issue and shareholders are urged to
consult their own tax advisers.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Trust advertises its total return, yield, and
tax-equivalent yield for Institutional Service Shares.
Total return represents the change, over a specific period of time, in the value
of an investment in Shares of the Trust after reinvesting all income and capital
gain distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of Shares of the Trust is calculated by dividing the net investment
income per share (as defined by the Securities and Exchange Commission) earned
by Shares over a thirty-day period by the maximum offering price per share of
Shares on the last day of the period. This number is then annualized using
semi-annual compounding. The tax-equivalent yield of Shares is calculated
similarly to the yield, but is adjusted to reflect the taxable yield that Shares
would have had to earn to equal its actual yield, assuming a specific tax rate.
The yield and the tax-equivalent yield do not necessarily
reflect income actually earned by Shares and, therefore, may not correlate to
the dividends or other distributions paid to shareholders.
The Trust is sold without any sales load or other similar non-recurring charges.
Total return, yield, and tax-equivalent yield will be calculated separately for
Shares and Institutional Shares.
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.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
The Trust also offers another class of shares called Institutional Shares.
Institutional Shares are sold primarily to accounts for which financial
institutions act in a fiduciary or agency capacity, or other accounts where the
financial institution maintains master accounts with an aggregate investment of
at least $400 million in certain funds which are advised or distributed by
affiliates of Federated Investors.
Institutional Service Shares and Institutional Shares are subject to certain of
the same expenses; however, Institutional Shares are sold at net asset value,
distributed without a 12b-1 Plan, and are subject to a minimum initial
investment of $25,000. Expense differences between Institutional Service Shares
and Institutional Shares may affect the performance of each class.
Financial institutions and brokers providing sales and/or administrative
services may receive different compensation depending upon which class of shares
of the Trust is sold.
The stated advisory fee is the same for both classes of shares.
To obtain more information and a prospectus for Institutional Shares, investors
may call 1-800-235-4669.
FEDERATED SHORT-TERM MUNICIPAL TRUST
(FORMERLY, SHORT-TERM MUNICIPAL TRUST)
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants, on page 32.
<TABLE>
<CAPTION>
YEAR ENDED JUNE
30,
-------------------------------------------------------
- -----------------------------------------
1995 1994 1993 1992 1991 1990
1989 1988 1987 1986
------ ------ ------ ------ ------ -----
- - ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
<C> <C> <C> <C>
- -------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD $10.15 $10.37 $10.29 $10.18 $10.14
$10.10 $10.19 $10.24 $10.31 $10.22
- -------------------------------
INCOME FROM INVESTMENT
OPERATIONS
- -------------------------------
Net investment income 0.42 0.40 0.44 0.53 0.60
0.60 0.57 0.54 0.51 0.60
- -------------------------------
Net realized and unrealized
gain (loss) on investments 0.13 (0.22) 0.08 0.11 0.04
0.04 (0.09) (0.05) (0.07) 0.09
- ------------------------------- ---- ---- ---- ---- ---- ---
- - ---- ---- ---- ----
Total from investment
operations 0.55 0.18 0.52 0.64 0.64
0.64 0.48 0.49 0.44 0.69
- -------------------------------
LESS DISTRIBUTIONS
- -------------------------------
Distributions from net
investment income (0.42) (0.40) (0.44) (0.53) (0.60)
(0.60) (0.57) (0.54) (0.51) (0.60)
- ------------------------------- ---- ---- ---- ---- ---- ---
- - ---- ---- ---- ----
NET ASSET VALUE, END OF PERIOD $10.28 $10.15 $10.37 $10.29 $10.18
$10.14 $10.10 $10.19 $10.24 $10.31
- ------------------------------- ---- ---- ---- ---- ---- ---
- - ---- ---- ---- ----
TOTAL RETURN (A) 5.52% 1.76% 5.11% 6.40% 6.47%
6.54% 4.84% 4.89% 4.37% 7.55%
- -------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------
Expenses 0.46% 0.47% 0.46% 0.46% 0.46%
0.47% 0.46% 0.47% 0.47% 0.48%
- -------------------------------
Net investment income 4.09% 3.89% 4.21% 5.12% 5.89%
5.94% 5.59% 5.25% 4.95% 5.80%
- -------------------------------
SUPPLEMENTAL DATA
- -------------------------------
Net assets, end of period (000
omitted) $217,713 $316,810 $318,932 $205,101 $142,493
$139,113 $178,978 $315,154 $483,279 $341,294
- -------------------------------
Portfolio turnover 33% 36% 15% 42% 40%
69% 55% 63% 57% 16%
- -------------------------------
</TABLE>
(a) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(See Notes which are an integral part of the Financial Statements)
Further information about the Trust's performance is contained in the Trust's
annual report for the fiscal year ended June 30, 1995, which can be obtained
free of charge.
FEDERATED SHORT-TERM MUNICIPAL TRUST
(FORMERLY, SHORT-TERM MUNICIPAL TRUST)
PORTFOLIO OF INVESTMENTS
JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P*
VALUE
- ----------- ------------------------------------------------------ ------- ----
- --------
<C> <S> <C> <C>
SHORT-INTERMEDIATE MUNICIPAL SECURITIES--98.2%
- ----------------------------------------------------------------------
ALABAMA--2.7%
------------------------------------------------------
$ 4,000,000 Alabama, 5.55% UT GO Refunding Bonds, 9/1/1997 AA $
4,129,880
------------------------------------------------------
1,850,000 Alabama, 5.70% UT GO Refunding Bonds, 9/1/1998 AA
1,932,528
------------------------------------------------------ ----
- --------
Total
6,062,408
------------------------------------------------------ ----
- --------
</TABLE>
<TABLE>
<C> <S> <C> <C>
ARIZONA--1.1%
------------------------------------------------------
2,500,000 Salt River Project, AZ Agricultural Improvement &
Power District, 4.00% Electric System Revenue
Refunding Bonds (Series A)/(Original Issue Yield:
4.05%), 1/1/1996 AA
2,505,550
------------------------------------------------------ ----
- --------
CALIFORNIA--14.3%
------------------------------------------------------
4,000,000 California State, 10.00% UT GO Bonds, 4/1/1998 A1
4,567,560
------------------------------------------------------
7,500,000 California State, 6.50% UT GO Bonds, 11/1/1997 A1
7,882,875
------------------------------------------------------
1,250,000 Los Angeles County Transportation Commission, CA,
Proposition C, 4.30% Revenue Bonds (Series A)/(MBIA
Insured), 7/1/1995 Aaa
1,250,000
------------------------------------------------------
13,000,000 Los Angeles, CA Wastewater System, 6.70% Revenue Bonds
(Series D)/(MBIA Insured)/ (United States Treasury
PRF)/ (Original Issue Yield: 6.769%), 12/1/2000 (@102) Aaa
14,538,810
------------------------------------------------------
3,310,000 University of California, 8.00% Hospital Revenue
Refunding Bonds (UCLA Medical Center)/(MBIA Insured),
12/1/1998 Aaa
3,700,977
------------------------------------------------------ ----
- --------
Total
31,940,222
------------------------------------------------------ ----
- --------
COLORADO--1.4%
------------------------------------------------------
2,995,000 Denver, City & County, CO, 7.625% UT GO Bonds
(Series C), 8/1/1995 AA
3,005,123
------------------------------------------------------ ----
- --------
</TABLE>
FEDERATED SHORT-TERM MUNICIPAL TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P*
VALUE
- ----------- ------------------------------------------------------ ------- ----
- --------
<C> <S> <C> <C>
SHORT-INTERMEDIATE MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------
DISTRICT OF COLUMBIA--0.5%
------------------------------------------------------
$ 1,000,000 District of Columbia, 8.00% UT GO Bonds (Series
C)/(United States Treasury PRF)/(Original Issue Yield:
8.057%), 6/1/1996 (@102) Aaa $
1,057,800
------------------------------------------------------ ----
- --------
FLORIDA--0.6%
------------------------------------------------------
1,390,000 Miami Beach, FL Health Facilities Authority, 4.45%
Hospital Revenue Refunding Bonds (Mt. Sinai Medical
Center, FL)/(CGIC Insured), 11/15/1995 AAA
1,394,935
------------------------------------------------------ ----
- --------
GEORGIA--2.0%
------------------------------------------------------
4,060,000 Georgia State, 8.40% UT GO Bonds (Series D), 6/1/1997 Aaa
4,396,452
------------------------------------------------------ ----
- --------
HAWAII--9.7%
------------------------------------------------------
5,500,000 Hawaii State, 5.40% UT GO Refunding Bonds, (Series
BV)/(Original Issue Yield: 5.45%), 11/1/1997 AA
5,664,835
------------------------------------------------------
5,000,000 Hawaii State, 7.10% UT GO Bonds (Series BN)/(United
States Treasury PRF), 6/1/1998 (@101.5) Aaa
5,462,100
------------------------------------------------------
6,000,000 Honolulu, City & County, HI, 4.20% UT GO Refunding &
Improvement Bonds (Series B)/(Original Issue Yield:
4.30%), 10/1/1997 AA
6,031,680
------------------------------------------------------
4,500,000 Honolulu, City & County, HI, 4.80% UT GO Bonds (Series
B)/(Original Issue Yield: 4.90%), 6/1/1998 AA
4,569,570
------------------------------------------------------ ----
- --------
Total
21,728,185
------------------------------------------------------ ----
- --------
ILLINOIS--2.8%
------------------------------------------------------
3,000,000 Illinois, 5.50% UT GO Bonds, 8/1/1999 AA-
3,100,530
------------------------------------------------------
2,900,000 Illinois State Sales Tax, 5.625% Revenue Bonds (Series
V), 6/15/1998 AAA
2,999,093
------------------------------------------------------ ----
- --------
Total
6,099,623
------------------------------------------------------ ----
- --------
</TABLE>
FEDERATED SHORT-TERM MUNICIPAL TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P*
VALUE
- ----------- ------------------------------------------------------ ------- ----
- --------
<C> <S> <C> <C>
SHORT-INTERMEDIATE MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------
IOWA--1.0%
------------------------------------------------------
$ 1,095,000 Sioux City, IA, Hospital Authority, 4.15% Hospital
Revenue Refunding Bonds (Series O)/ (Sisters of Mercy
Health System), 8/15/1996 A $
1,092,569
------------------------------------------------------
1,140,000 Sioux City, IA, Hospital Authority, 4.15% Hospital
Revenue Refunding Bonds (Sisters of Mercy Health
System)/(MBIA Insured), 8/15/1997 Aaa
1,141,322
------------------------------------------------------ ----
- --------
Total
2,233,891
------------------------------------------------------ ----
- --------
MICHIGAN--3.2%
------------------------------------------------------
5,000,000 Detroit, MI City School District, 5.30% UT GO
Refunding Bonds (Michigan State Guaranteed), 5/1/1999 AA
5,107,350
------------------------------------------------------
2,120,000 Michigan State Hospital Finance Authority, 4.00%
Revenue Refunding Bonds (Series P)/(Sisters of Mercy
Health System), 8/15/1996 A
2,111,266
------------------------------------------------------ ----
- --------
Total
7,218,616
------------------------------------------------------ ----
- --------
MINNESOTA--3.2%
------------------------------------------------------
5,000,000 Minnesota State, 4.70% UT GO Refunding Bonds, 8/1/1997 AA+
5,079,200
------------------------------------------------------
2,000,000 Southern Minnesota Municipal Power Agency, 9.125%
Power Supply Revenue Bonds (Series C)/ (United States
Treasury PRF)/(Original Issue Yield: 9.224%), 1/1/1996
(@102) Aaa
2,093,320
------------------------------------------------------ ----
- --------
Total
7,172,520
------------------------------------------------------ ----
- --------
NEVADA--7.2%
------------------------------------------------------
2,000,000 Clark County, NV School District, 7.10% LT GO Bonds
(Series A), 3/1/1997 A+
2,094,380
------------------------------------------------------
8,500,000 Nevada State Highway Improvement Authority, 4.75%
Motor Vehicle Fuel Tax Revenue Bonds (Original Issue
Yield: 4.90%), 4/1/1998 AA
8,606,505
------------------------------------------------------
</TABLE>
FEDERATED SHORT-TERM MUNICIPAL TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P*
VALUE
- ----------- ------------------------------------------------------ ------- ----
- --------
<C> <S> <C> <C>
SHORT-INTERMEDIATE MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------
NEVADA--CONTINUED
------------------------------------------------------
$ 5,000,000 Nevada State Highway Improvement Authority, 7.00%
Motor Vehicle Fuel Tax Revenue Bonds, 4/1/1999 AA $
5,415,950
------------------------------------------------------ ----
- --------
Total
16,116,835
------------------------------------------------------ ----
- --------
NEW HAMPSHIRE--5.4%
------------------------------------------------------
7,900,000 New Hampshire State Turnpike System, 8.25% Revenue
Bonds (United States Treasury PRF)/(Original Issue
Yield: 8.30%), 11/1/1997 (@102) Aaa
8,770,027
------------------------------------------------------
3,310,000 New Hampshire State, 4.20% UT GO Capital Improvement
Refunding Bonds, 9/1/1995 AA
3,313,840
------------------------------------------------------ ----
- --------
Total
12,083,867
------------------------------------------------------ ----
- --------
NEW JERSEY--6.8%
------------------------------------------------------
7,000,000 New Jersey State, 6.50% UT GO Refunding Bonds
(Series C), 1/15/2002 AA+
7,491,120
------------------------------------------------------
7,000,000 New Jersey State, 7.20% UT GO Bonds, 4/15/1999 AA+
7,682,080
------------------------------------------------------ ----
- --------
Total
15,173,200
------------------------------------------------------ ----
- --------
NEW MEXICO--4.9%
------------------------------------------------------
2,250,000 Albuquerque, NM 4.00% Joint Water & Sewer System
Revenue Refunding Bonds (Series A)/(Original Issue
Yield: 4.099%), 7/1/1999 AA
2,210,805
------------------------------------------------------
8,650,000 Albuquerque, NM, 4.60% UT GO Bonds (Series A & B),
7/1/1998 AA
8,753,886
------------------------------------------------------ ----
- --------
Total
10,964,691
------------------------------------------------------ ----
- --------
NEW YORK--7.3%
------------------------------------------------------
680,000 New York City, Municipal Water Finance Authority,
6.50% Water & Sewer System Revenue Bonds (Series
C)/(AMBAC Insured)/(United States Treasury PRF)/
(Original Issue Yield: 6.519%), 6/15/1997 (@101.5) Aaa
721,800
------------------------------------------------------
</TABLE>
FEDERATED SHORT-TERM MUNICIPAL TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P*
VALUE
- ----------- ------------------------------------------------------ ------- ----
- --------
<C> <S> <C> <C>
SHORT-INTERMEDIATE MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------
NEW YORK--CONTINUED
------------------------------------------------------
$ 5,000,000 New York City Municipal Water Finance Authority 7.20%
Water & Sewer System Revenue Bonds (Series A),
6/15/1999 A $
5,460,700
------------------------------------------------------
9,540,000 New York State, 5.75% UT GO Bonds, 9/15/1999 A
9,984,373
------------------------------------------------------ ----
- --------
Total
16,166,873
------------------------------------------------------ ----
- --------
OHIO--3.4%
------------------------------------------------------
3,600,000 Miami Valley Regional Transit Authority, OH, 4.75% LT
GO Bonds, 4/15/1997 MIG1
3,639,816
------------------------------------------------------
4,000,000 Ohio State Public Facilities Commission 4.25% Higher
Education Capital Facilities Revenue Bonds (Series
II-A)/ (AMBAC Insured), 12/1/1997 Aaa
4,023,640
------------------------------------------------------ ----
- --------
Total
7,663,456
------------------------------------------------------ ----
- --------
OREGON--1.9%
------------------------------------------------------
2,000,000 Oregon State Department of Transportation, 5.375%,
Regional Light Rail Revenue Bonds, Westside Project,
(MBIA Insured), 6/1/1999 Aaa
2,073,780
------------------------------------------------------
2,000,000 Oregon State Department of Transportation, 5.50%,
Regional Light Rail Revenue Bonds, Westside Project,
(MBIA Insured), 6/1/2000 Aaa
2,082,820
------------------------------------------------------ ----
- --------
Total
4,156,600
------------------------------------------------------ ----
- --------
PENNSYLVANIA--5.3%
------------------------------------------------------
1,155,000 Dauphin County, PA, General Authority, 4.35% Hospital
Revenue Refunding Bonds (Series A)/(Hapsco-Western PA
Hospital)/(MBIA Insured), 7/1/1995 Aaa
1,155,000
------------------------------------------------------
1,175,000 Dauphin County, PA, General Authority, 4.35% Hospital
Revenue Refunding Bonds (Hapsco-Western PA
Hospital)/(MBIA Insured), 7/1/1995 Aaa
1,175,000
------------------------------------------------------
</TABLE>
FEDERATED SHORT-TERM MUNICIPAL TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P*
VALUE
- ----------- ------------------------------------------------------ ------- ----
- --------
<C> <S> <C> <C>
SHORT-INTERMEDIATE MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
------------------------------------------------------
$ 5,000,000 Commonwealth of Pennsylvania, 4.75% UT GO Second
Series Refunding Bonds, 6/15/1998 AA- $
5,067,300
------------------------------------------------------
4,375,000 Pennsylvania Intergovernmental Cooperation Authority,
5.40% Special Tax Revenue Bonds (City of Philadelphia
Funding Program)/(FGIC Insured)/(Original Issue Yield:
5.50%), 6/15/1997 Aaa
4,476,719
------------------------------------------------------ ----
- --------
Total
11,874,019
------------------------------------------------------ ----
- --------
TENNESSEE--1.4%
------------------------------------------------------
3,000,000 Tennessee State, 6.75% UT GO Bonds (Series A) 7/1/1995 Aaa
3,000,000
------------------------------------------------------ ----
- --------
TEXAS--7.3%
------------------------------------------------------
3,000,000 Mesquite, TX Independent School District No 1, 7.00%
UT GO Refunding Bonds, 2/15/1997 A+
3,133,290
------------------------------------------------------
2,425,000 Texas State Public Property Finance Corp., 4.30%
Revenue Refunding Bonds (Mental Health &
Retardation)/(CGIC Insured), 9/1/1997 Aaa
2,429,850
------------------------------------------------------
4,440,000 Texas State, 8.00% UT GO Bonds, Public Finance
Authority (Series B), 10/1/1999 AA
5,060,712
------------------------------------------------------
3,000,000 Texas State, 6.50% UT GO Bonds, Public Finance
Authority (Series C), 10/1/1997 AA
3,159,120
------------------------------------------------------
2,500,000 Texas Water Development Board, 4.35% State Revolving
Senior Lien Revenue Bonds, 7/15/1995 AA
2,500,000
------------------------------------------------------ ----
- --------
Total
16,282,972
------------------------------------------------------ ----
- --------
</TABLE>
FEDERATED SHORT-TERM MUNICIPAL TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P*
VALUE
- ----------- ------------------------------------------------------ ------- ----
- --------
<C> <S> <C> <C>
SHORT-INTERMEDIATE MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------
WASHINGTON--4.8%
------------------------------------------------------
$ 3,000,000 Washington State, 5.00% UT GO Bonds (Series B)
5/1/1998 AA $
3,059,340
------------------------------------------------------
7,425,000 Washington State, 5.00% UT GO Bonds (Series B)
5/1/1999 AA
7,567,115
------------------------------------------------------ ----
- --------
Total
10,626,455
------------------------------------------------------ ----
- --------
TOTAL SHORT-INTERMEDIATE MUNICIPAL SECURITIES
(IDENTIFIED COST $216,467,714)
218,924,293
------------------------------------------------------ ----
- --------
SHORT-TERM MUNICIPAL SECURITIES--0.4%
- ----------------------------------------------------------------------
PUERTO RICO--0.1%
------------------------------------------------------
200,000 Puerto Rico Government Development Bank Weekly VRDNs
(Credit Suisse, Zurich and Sumitomo Bank Ltd., Osaka
LOCs) A-1+
200,000
------------------------------------------------------ ----
- --------
TENNESSEE--0.3%
------------------------------------------------------
600,000 Chattanooga-Hamilton County, TN Hospital Authority
Daily VRDNs (Erlanger Medical Center)/(Morgan Guaranty
Trust Co., New York LOC) A+
600,000
------------------------------------------------------ ----
- --------
TOTAL SHORT-TERM MUNICIPAL SECURITIES
(AT AMORTIZED COST)
800,000
------------------------------------------------------ ----
- --------
TOTAL INVESTMENTS (IDENTIFIED COST $217,267,714 )(A)
$219,724,293
------------------------------------------------------ ----
- --------
</TABLE>
(a) The cost of investments for federal tax purposes amounts to $217,267,714.
The net unrealized appreciation of investments on a federal tax cost basis
amounts to $2,456,579 , which is comprised of $2,691,375 appreciation and
$234,796 depreciation at June 30, 1995.
* Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings. Current credit ratings are unaudited.
Note: The catagories of investments are shown as a percentage of net assets
($222,935,732) at June 30, 1995.
The following abbreviations are used in this portfolio:
<TABLE>
<S> <C>
AMBAC --American Municipal Bond Assurance Corporation
CGIC --Capital Guaranty Insurance Corporation
FGIC --Financial Guaranty Insurance Company
GO --General Obligation
LOC --Letter of Credit
LOC(s) --Letter(s) of Credit
LT --Limited Tax
MBIA --Municipal Bond Investors Assurance
PRF --Prerefunded
UT --Utah/Unlimited Tax
VRDNs --Variable Rate Demand Notes
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED SHORT-TERM MUNICIPAL TRUST
(FORMERLY, SHORT-TERM MUNICIPAL TRUST)
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost $217,267,714)
$219,724,293
- -------------------------------------------------------------------------------
Cash
290,711
- -------------------------------------------------------------------------------
Income receivable
2,898,564
- -------------------------------------------------------------------------------
Receivable for shares sold
677,695
- ------------------------------------------------------------------------------- -----
- -------
Total assets
223,591,263
- -------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------
Payable for shares redeemed $ 68,410
- --------------------------------------------------------------------
Income distribution payable 569,213
- --------------------------------------------------------------------
Accrued expenses 17,908
- -------------------------------------------------------------------- --------
Total liabilities
655,531
- ------------------------------------------------------------------------------- -----
- -------
NET ASSETS for 21,684,185 shares outstanding
$222,935,732
- ------------------------------------------------------------------------------- -----
- -------
NET ASSETS CONSIST OF:
- -------------------------------------------------------------------------------
Paid in capital
229,422,233
- -------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments
2,456,579
- -------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments
(8,943,080)
- ------------------------------------------------------------------------------- -----
- -------
Total Net Assets
$222,935,732
- ------------------------------------------------------------------------------- -----
- -------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
Institutional Shares ($217,712,823 / 21,176,178 shares outstanding)
$10.28
- ------------------------------------------------------------------------------- -----
- -------
Institutional Service Shares ($5,222,909 / 508,007 shares outstanding)
$10.28
- ------------------------------------------------------------------------------- -----
- -------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED SHORT-TERM MUNICIPAL TRUST
(FORMERLY, SHORT-TERM MUNICIPAL TRUST)
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
<C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------
Interest
$12,342,393
- ----------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------
Investment advisory fee $1,084,312
- --------------------------------------------------------------------------
Administrative personnel and services fee 205,206
- --------------------------------------------------------------------------
Custodian fees 127,075
- --------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 34,101
- --------------------------------------------------------------------------
Directors'/Trustees' fees 11,976
- --------------------------------------------------------------------------
Auditing fees 18,564
- --------------------------------------------------------------------------
Legal fees 8,082
- --------------------------------------------------------------------------
Portfolio accounting fees 40,300
- --------------------------------------------------------------------------
Distribution services fee--Institutional Service Shares 25,694
- --------------------------------------------------------------------------
Shareholder services fee--Institutional Service Shares 25,362
- --------------------------------------------------------------------------
Share registration costs 35,913
- --------------------------------------------------------------------------
Printing and postage 22,269
- --------------------------------------------------------------------------
Insurance premiums 10,153
- --------------------------------------------------------------------------
Taxes 3,284
- --------------------------------------------------------------------------
Miscellaneous 4,258
- -------------------------------------------------------------------------- ----------
Total expenses 1,656,549
- --------------------------------------------------------------------------
Deduct--
- ---------------------------------------------------------------
Waiver of investment advisory fee $346,925
- ---------------------------------------------------------------
Waiver of distribution services fee 25,362
- --------------------------------------------------------------- --------
Total waivers 372,287
- -------------------------------------------------------------------------- ----------
Net expenses
1,284,262
- ----------------------------------------------------------------------------------------
- -----------
Net investment income
11,058,131
- ----------------------------------------------------------------------------------------
- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ----------------------------------------------------------------------------------------
Net realized gain (loss) on investments
(3,533,063)
- ----------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments
5,627,330
- ----------------------------------------------------------------------------------------
- -----------
Net realized and unrealized gain (loss) on investments
2,094,267
- ----------------------------------------------------------------------------------------
- -----------
Change in net assets resulting from operations
$13,152,398
- ----------------------------------------------------------------------------------------
- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED SHORT-TERM MUNICIPAL TRUST
(FORMERLY, SHORT-TERM MUNICIPAL TRUST)
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JUNE
30,
----------------------
- --------
1995
1994
------------- -----
- --------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------
Net investment income $ 11,058,131 $
13,727,553
- ---------------------------------------------------------------
Net realized gain/(loss) on investments ($1,189,491 and $0,
respectively, as computed for federal income tax purposes) (3,533,063)
(253,551)
- ---------------------------------------------------------------
Net change in unrealized appreciation/(depreciation) 5,627,330
(7,720,690)
- --------------------------------------------------------------- ------------- -----
- --------
Change in assets resulting from operations 13,152,398
5,753,312
- --------------------------------------------------------------- ------------- -----
- --------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------------
Distributions from net investment income:
- ---------------------------------------------------------------
Institutional Shares (10,679,008)
(13,167,119)
- ---------------------------------------------------------------
Institutional Service Shares (379,123)
(560,434)
- --------------------------------------------------------------- ------------- -----
- --------
Change in net assets resulting from distributions to
shareholders (11,058,131)
(13,727,553)
- --------------------------------------------------------------- ------------- -----
- --------
SHARE TRANSACTIONS--
- ---------------------------------------------------------------
Proceeds from sale of Shares 51,547,320
259,790,293
- ---------------------------------------------------------------
Net asset value of Shares issued to shareholders in payment of
distributions declared 2,700,836
3,549,886
- ---------------------------------------------------------------
Cost of Shares redeemed (181,676,422)
(226,027,733)
- --------------------------------------------------------------- ------------- -----
- --------
Change in net assets resulting from Share transactions (127,428,266)
37,312,446
- --------------------------------------------------------------- ------------- -----
- --------
Change in net assets (125,333,999)
29,338,205
- ---------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------
Beginning of period 348,269,731
318,931,526
- --------------------------------------------------------------- ------------- -----
- --------
End of period $ 222,935,732 $
348,269,731
- --------------------------------------------------------------- ------------- -----
- --------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED SHORT-TERM MUNICIPAL TRUST
(FORMERLY, SHORT-TERM MUNICIPAL TRUST)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Short-Term Municipal Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company.
The Trust offers two classes of shares, Institutional Shares and Institutional
Service Shares.
Effective December 15, 1994, the Trust changed its name from Short-Term
Municipal Trust to Federated Short-Term Municipal Trust.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Municipal bonds are valued by an independent pricing
service, taking into consideration yield, liquidity, risk, credit quality,
coupon, maturity, type of issue, and any other factors or market data the
pricing service deems relevant in determining valuations for normal
institutional size trading units of debt securities. The independent
pricing service does not rely exclusively on quoted prices. Short-term
securities with remaining maturities of sixty days or less at the time of
purchase may be valued at amortized cost, which approximates fair market
value.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS--Interest income and
expenses are accrued daily. Bond premium and discount, if applicable, are
amortized as required by the Internal Revenue Code, as amended (the
"Code"). Distributions to shareholders are recorded on the ex-dividend
date.
Income distributions and capital gains distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for expiring capital loss carryforwards. Accordingly,
amounts as of June 30, 1995, have been reclassified to reflect a decrease
in paid in capital and a decrease in accumulated net realized loss of
$1,449,467. Net investment income, net realized gains, and net assets were
not affected by this change.
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 June 30, 1995, the Trust, for
federal tax purposes, had a capital loss carryforward of $6,345,635, which
will reduce the Trust's taxable income arising from future net realized
gain on investments, if any, to the extent permitted
FEDERATED SHORT-TERM MUNICIPAL TRUST
- --------------------------------------------------------------------------------
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 in 1996 ($2,255,334), 1997 ($1,097,445), 1998
($1,729,378), 1999 ($11,866), 2001 ($62,121) and 2002 ($1,189,491).
Additionally, net capital losses of $2,597,123 attributable to security
transactions incurred after October 31, 1994 are treated as arising on July
1, 1995, the first day of the Trust's next taxable year.
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.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------
- -------------
1995 1994
---------------------------- -----------------
- -------------
INSTITUTIONAL SHARES SHARES DOLLARS SHARES
DOLLARS
- ------------------------------------- ------ ------- ------
- -------
<S> <C> <C> <C>
<C>
Shares Sold 4,823,992 $ 48,787,554 20,791,128
$ 215,505,746
- -------------------------------------
Shares issued to shareholders in
payment of distributions declared 234,548 2,373,194 292,960
3,013,260
- -------------------------------------
Shares redeemed (15,099,319) (152,318,952) (20,620,412)
(213,148,873)
- ------------------------------------- ----------- ------------- -----------
- -------------
Net change resulting from
Institutional Shares transactions (10,040,779) $(101,158,204) 463,676
$ 5,370,133
- ------------------------------------- ----------- ------------- -----------
- -------------
</TABLE>
FEDERATED SHORT-TERM MUNICIPAL TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------
- -------------
1995
1994*
---------------------------- ---------------
- -------------
INSTITUTIONAL SERVICE SHARES SHARES DOLLARS SHARES
DOLLARS
- ------------------------------------- ------ ------- ------
- -------
<S> <C> <C> <C>
<C>
Shares Sold 272,110 $ 2,759,766 4,299,696
$ 44,284,547
- -------------------------------------
Shares issued to shareholders in
payment of distributions declared 32,358 327,642 52,512
536,626
- -------------------------------------
Shares redeemed (2,896,311) (29,357,470) (1,252,358)
(12,878,860)
- ------------------------------------- ----------- ------------- -----------
- -------------
Net change resulting from
Institutional Service Shares
transactions (2,591,843) (26,270,062) 3,099,850
31,942,313
- ------------------------------------- ----------- ------------- -----------
- -------------
Total net change resulting from
Share transactions (12,632,622) $(127,428,266) 3,563,526
$ 37,312,446
- ------------------------------------- ----------- ------------- -----------
- -------------
</TABLE>
*For the period from August 31, 1993 (date of initial public offering) to June
30, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
ADVISORY FEE--Federated Management, the Trust's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.40 of 1% 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 (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) exceeded .45 of 1% of average daily net assets of the
Trust.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Trust with administrative
personnel and services. The FAS fee 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.
DISTRIBUTION AND SHAREHOLDER SERVICES FEE--The Trust has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the
Plan, the Trust will compensate Federated Securities Corp. ("FSC"), the
principal distributor, from the net assets of the Trust to finance activities
intended to result in the sale of the Trust's Institutional Service Shares. The
Plan provides that the Trust may incur distribution expenses up to .25 of 1% of
the average daily net assets of the Institutional Service Shares, annually, to
compensate FSC. The distributor may voluntarily choose to waive a portion of its
fee. The distributor can modify or terminate this voluntary waiver at any time
at its sole discretion.
FEDERATED SHORT-TERM MUNICIPAL TRUST
- --------------------------------------------------------------------------------
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Trust will pay FSS up to .25 of 1% of average daily net
assets of the Trust for the period. This fee is to obtain certain services for
shareholders and to maintain shareholder accounts.
For the year ended June 30, 1995, the Institutional Shares did not incur a
Shareholder Services Fee.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Trust. This fee is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also 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 year ended June 30, 1995, 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 transactions were made at current market value pursuant
to Rule 17a-7 under the Act amounting to $65,650,000 and $99,158,028,
respectively.
GENERAL--Certain Officers and Trustees of the Trust are Officers and Directors
or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
year ended June 30, 1995, were as follows:
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------
Purchases $
88,595,509
- ------------------------------------------------------------------------------ -------
- -----
Sales
$216,945,935
- ------------------------------------------------------------------------------ -------
- -----
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
FEDERATED SHORT-TERM MUNICIPAL TRUST:
(formerly, Short-Term Municipal Trust)
We have audited the accompanying statement of assets and liabilities of
Federated Short-Term Municipal Trust (a Massachusetts business trust), including
the schedule of portfolio of investments as of June 30, 1995, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and the financial
highlights (see pages 2 and 16 of the prospectus) for each of the periods
presented. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1995, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated Short-Term Municipal Trust as of June 30, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the periods presented in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
August 10, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated Short-Term Municipal Trust
Institutional Service Shares Pittsburgh, Pennsylvania
15222-3779
- ----------------------------------------------------------------------------------------
- --------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- ----------------------------------------------------------------------------------------
- --------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- ----------------------------------------------------------------------------------------
- --------
Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, Massachusetts 02266-
8600
- ----------------------------------------------------------------------------------------
- --------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, Massachusetts 02266-
8600
- ----------------------------------------------------------------------------------------
- --------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, Pennsylvania
15222
- ----------------------------------------------------------------------------------------
- --------
</TABLE>
FEDERATED SHORT-TERM
MUNICIPAL TRUST
(FORMERLY, SHORT-TERM
MUNICIPAL TRUST)
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
A No-Load, Open-End, Diversified,
Management Investment Company
Prospectus dated August 31, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
CUSIP 825253206
8072507 A-SS (8/95)
FEDERATED SHORT-TERM MUNICIPAL TRUST
(FORMERLY, SHORT-TERM MUNICIPAL TRUST)
INSTITUTIONAL SHARES
INSTITUTIONAL SERVICE SHARES
Combined Statement of Additional Information
The Institutional Shares and Institutional Service Shares represent
interests in a diversified portfolio of securities of Federated Short-Term
Municipal Trust (the "Trust"). This Combined Statement of Additional
Information should be read with the respective prospectuses for
Institutional Shares and Institutional Service Shares dated August 31,
1995. This Statement is not a prospectus itself. To receive a copy of
either prospectus, write or call Federated Short-Term Municipal Trust.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated August 31, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of Federated Investors
GENERAL INFORMATION ABOUT THE REDEEMING SHARES 12
TRUST 1 Redemption in Kind 12
INVESTMENT OBJECTIVE AND POLICIES1 TAX STATUS 12
Acceptable Investments 1 The Trust's Tax Status 12
When-Issued and Delayed TOTAL RETURN 12
Delivery Transactions 1 YIELD 12
Portfolio Turnover 2 TAX-EQUIVALENT YIELD 13
Investment Limitations 2 PERFORMANCE COMPARISONS 14
TRUST MANAGEMENT 4 ABOUT FEDERATED INVESTORS 14
Officers and Trustees 4 Mutual Fund Market 15
Trust Ownership 8 APPENDIX 16
Trustees' Compensation 8
Trustee Liability 9
INVESTMENT ADVISORY SERVICES 9
Adviser to the Trust 9
Advisory Fees 9
State Expense Limitations 9
Other Related Services 9
ADMINISTRATIVE SERVICES 10
SHAREHOLDER SERVICES AGREEMENT 10
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT 10
BROKERAGE TRANSACTIONS 10
PURCHASING SHARES 11
Distribution Plan
(Institutional Service Shares
only) and Shareholder Services
Agreement 11
DETERMINING NET ASSET VALUE 11
Valuing Municipal Securities 11
Use of Amortized Cost 11
GENERAL INFORMATION ABOUT THE TRUST
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated May 8, 1981. The name of the Trust was Federated Short-
Intermediate Municipal Trust prior to August 23, 1993. On August 23, 1993, the
shareholders of the Trust voted to change the name of the Trust to Short-Term
Municipal Trust. On December 15, 1994, the name of the Trust was changed from
Short-Term Municipal Trust to Federated Short-Term Municipal Trust.
Shares of the Trust are offered in two classes, known as Institutional Shares
and Institutional Service Shares (individually and collectively referred to as
"Shares," as the context may require). This Combined Statement of Additional
Information relates to the above-mentioned Shares of the Trust.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Trust is to provide dividend income which is
exempt from federal regular income tax.
ACCEPTABLE INVESTMENTS
The Trust invests in a portfolio of municipal securities with a dollar-weighted
average maturity of less than three years. The investment objective stated above
cannot be changed without the approval of shareholders. The investment policies
described below may be changed without shareholder approval.
Characteristics
The municipal securities in which the Trust invests have the
characteristics set forth in the prospectuses. The Trust may use similar
services or ratings other than Moody's Investors Service, Inc. ("Moody's")
or Standard & Poor's Ratings Group ("S&P"). If a security's rating is
reduced below the required minimum after the Trust has purchased it, the
Trust is not required to sell the security, but may consider doing so. If
ratings made by Moody's or S&P change because of changes in those
organizations or in their rating systems, the Trust will try to use
comparable ratings as standards in accordance with the investment policies
described in the Shares' prospectuses.
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). These
financial institutions may charge certain fees in connection with their
repurchase commitments, including a fee equal to the excess of the interest
paid on the municipal securities over the negotiated yield at which the
participation interests were purchased by the Trust. By purchasing
participation interests having a seven day demand feature, the Trust is
buying a security meeting the quality requirements of the Trust and also is
receiving the tax-free benefits of the underlying securities.
Variable Rate Municipal Securities
Variable interest rates generally reduce changes in the market value of
municipal securities from their original purchase prices. Accordingly, as
interest rates decrease or increase, the potential for capital appreciation
or depreciation is less for variable rate municipal securities than for
fixed income obligations. Many municipal securities with variable interest
rates purchased by the Trust are subject to repayment of principal (usually
within seven days) on the Trust's demand. For purposes of determining the
Trust's average maturity, the maturities of these variable rate demand
municipal securities (including participation interests) are the longer of
the periods remaining until the next readjustment of their interest rates
or the periods remaining until their principal amounts can be recovered by
exercising the right to demand payment. The terms of these variable rate
demand instruments require payment of principal and accrued interest from
the issuer of the municipal obligations, the issuer of the participation
interests, or a guarantor of either issuer.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price and yield for the Trust. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of the Trust
sufficient to make payment for the securities to be purchased are segregated on
the Trust's records at the trade date. These securities are 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 the extent that
would cause the segregation of more than 20% of the total value of its assets.
PORTFOLIO TURNOVER
The Trust will not attempt to set or meet a portfolio turnover rate since any
turnover would be incidental to transactions undertaken in an attempt to achieve
the Trust's investment objective. During the fiscal years ended June 30, 1995
and 1994, the portfolio turnover rates were 33% and 36%, respectively.
INVESTMENT 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 percent 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 its own assets and revenues. In the case of an industrial
development bond, if the security is backed only by the assets and revenues
of a non-governmental user, then such non-governmental user will be deemed
to be the sole issuer. If, however, in the case of an industrial
development bond or governmental issued security, a governmental or other
entity guarantees the security, such guarantee would be considered a
separate security issued by the guarantor as well as the other issuer (as
above defined) subject to limited exclusions allowed by the Investment
Company Act of 1940.
Borrowing Money
The Trust will not borrow money except as a temporary measure for
extraordinary or emergency purposes and then (a) only in amounts not in
excess of 5% of the value of its total assets or (b) in an amount up to
one-third of the value of its total assets, including the amount borrowed.
(This borrowing provision is not for investment leverage but solely to
facilitate management of the portfolio by enabling the Trust to meet
redemption requests when the liquidation of portfolio securities would 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
borrowings, the Trust will reduce its borrowings within three business
days. To do this, the Trust may have to sell a portion of its investments
at a time when it may be disadvantageous to do so.
Pledging Assets
The Trust will not mortgage, pledge, or hypothecate its assets except to
secure permitted borrowings. In those cases, it may mortgage, pledge, or
hypothecate assets having a market value not exceeding 10% of the value of
total assets at the time of the borrowing.
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.
Investing in Real Estate
The Trust will not buy or sell real estate, although it may invest in
municipal securities secured by real estate or interests in real estate.
Investing in Commodities or Minerals
The Trust will not buy or sell commodities, commodity contracts, or oil,
gas, or other mineral exploration or development programs.
Making Loans
The Trust will not make loans, but may acquire publicly or nonpublicly
issued municipal securities as permitted by its investment objective,
policies, and limitations.
Selling Short And Buying On Margin
The Trust will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as may be necessary for
clearance of purchases and sales of securities.
Issuing Senior Securities
The Trust will not issue senior securities, except as permitted by its
investment objective and policies.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.
Investing in Issuers Whose Securities are Owned by Officers and Trustees of
the Trust
The Trust will not purchase or retain the securities of any issuer if the
officers and Trustees of the Trust or its investment adviser owning
individually more than 1/2 of 1% of the issuer's securities together own
more than 5% of the issuer's securities.
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 restrictions on resale under federal
securities laws, except for securities which meet the criteria for
liquidity, as established by the Trustees.
Acquiring Securities
The Trust will not acquire voting securities, except as part of a merger,
consolidation, reorganization, or acquisition of assets. The Trust will
not invest in securities issued by any other investment company or
investment trust.
Investing in New Issuers
The Trust will not invest more than 5% of its total assets in industrial
development bonds where the payment of principal and interest are the
responsibility of companies with less than three years of operating
history.
Investing in Illiquid Securities
The Trust will not invest more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements providing for
settlement in more than seven days after notice and certain restricted
securities.
Investing in Puts, Calls, Straddles, and Spreads
The Trust will not purchase or sell puts, calls, straddles, spreads, or any
combination thereof except that the Trust may purchase 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.
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 the
securities of governmental subdivisions located in any one state, territory, or
possession of the United States.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of the investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in violation of
such restriction.
The Trust did not borrow money, pledge securities or invest in illiquid
securities or restricted securities in excess of 5% of the value of its total
assets during the last fiscal year and has no present intent to do so in the
coming fiscal year.
For purposes of this limitation, the Trust considers cash instruments and items
to be instruments 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 the investment.
TRUST MANAGEMENT
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations
during the past five years, birthdates and present positions, including any
affiliation with Federated Management, Federated Investors, Federated
Securities Corp., Federated Services Company, Federated Administrative
Services, Federated Shareholder Services, and the Funds (as defined below).
John F. Donahue@*
Federated Investors Tower
Pittsburgh, Pennsylvania
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.; Chairman, Passport Research, Ltd.; Chief Executive Officer and Director,
Trustee, or Managing General Partner of the Funds. Mr. Donahue is the father of
J. Christopher Donahue, Executive Vice President of the Company.
Glen R. Johnson *
Federated Investors Tower
Pittsburgh, Pennsylvania
Birthdate: May 2, 1929
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Administrative Services.
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, Pennsylvania
Birthdate: February 3, 1934
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's Hospital of
Pittsburgh; Director, Trustee, or Managing General Partner of the Funds;
formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, Florida
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate ventures in Southwest
Florida; Director, Trustee, or Managing General Partner of the Funds; formerly,
President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, Pennsylvania
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice Chairman and
Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, Massachusetts
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, Pennsylvania
Birthdate: October 11, 1932
Trustee
Professor of Medicine and Member, Board of Trustees, 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, Trustee, or Managing General Partner of the Funds.
Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, Pennsylvania
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
Peter E. Madden
70 Westcliff Road
Westin, Massachusetts
Birthdate: March 16, 1942
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President, State
Street Bank and Trust Company and State Street Boston Corporation.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, Pennsylvania
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Partner, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, Pennsylvania
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, Pennsylvania
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director, Trustee, or Managing General Partner of the Funds; President Emeritus,
University of Pittsburgh; founding Chairman, National Advisory Council for
Environmental Policy and Technology and Federal Emergency Management Advisory
Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, Pennsylvania
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, Pennsylvania
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.; President, Passport Research, Ltd.; Trustee, Federated Administrative
Services, Federated Services Company, and Federated Shareholder Services;
President or Vice President of the Funds; Director, Trustee, or Managing General
Partner 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, Pennsylvania
Birthdate: October 22, 1930
Executive Vice President
Vice President, Treasurer, and Trustee, Federated Investors; Vice President and
Treasurer, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Executive Vice President,
Treasurer, and Director, Federated Securities Corp.; Trustee, Federated Services
Company and Federated Shareholder Services; Chairman, Treasurer, and Trustee,
Federated Administrative Services; Trustee or Director of some of the Funds;
Executive Vice President or President of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, Pennsylvania
Birthdate: October 26, 1938
Executive Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated Investors;
Vice President, Secretary, and Trustee, Federated Advisers, Federated
Management, and Federated Research; Vice President and Secretary, Federated
Research Corp. and Passport Research, Ltd.; Trustee, Federated Services Company;
Executive Vice President, Secretary, and Trustee, Federated Administrative
Services; Secretary and Trustee, Federated Shareholder Services; Executive Vice
President and Director, Federated Securities Corp.; Vice President and Secretary
of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, Pennsylvania
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Director, Federated
Research Corp.; Chairman and Director, Federated Securities Corp.; President or
Vice President of some of the Funds; Director or Trustee of some of the Funds.
David M. Taylor *
Federated Investors Tower
Pittsburgh, Pennsylvania
Birthdate: January 13, 1947
Treasurer
Senior Vice President, Controller, and Trustee, Federated Investors; Controller,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., and Passport Research, Ltd.; Senior Vice President, Federated
Shareholder Services; Senior Vice President, Federated Administrative Services;
Treasurer of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the Board
of Trustee handles the responsibilities of the Board of Trustee between
meetings of the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Cash Management Trust; Automated Government Money Trust;
California Municipal Cash Trust; Cash Trust Series II; Cash Trust Series, Inc.;
DG Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
ARMs Fund; Federated Exchange Fund, Ltd.; Federated GNMA Trust; Federated
Government Trust; Federated Growth Trust; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Master Trust; Federated Municipal
Trust; Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; 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: 3-5 Years; First Priority Funds; Fixed Income Securities, Inc.; Fortress
Adjustable Rate U.S. Government Fund, Inc.; Fortress Municipal Income Fund,
Inc.; Fortress Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.;
Government Income Securities, Inc.; High Yield Cash Trust; Insurance Management
Series; Intermediate Municipal Trust; International Series, Inc.; Investment
Series Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.;
Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.;
Liberty U.S. Government Money Market Trust; Liberty Term Trust, Inc. - 1999;
Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Money
Market Management, Inc.; Money Market Obligations Trust; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; New York Municipal Cash
Trust; 111 Corcoran Funds; Peachtree Funds; The Planters Funds; RIMCO Monument
Funds; The Shawmut Funds; Star Funds; The Starburst Funds; The Starburst Funds
II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; Trademark Funds; Trust for Financial Institutions; Trust For
Government Cash Reserves; Trust for Short-Term U.S. Government Securities; Trust
for U.S. Treasury Obligations; The Virtus Funds; and World Investment Series,
Inc.
TRUST OWNERSHIP
Officers and Trustees own less than 1% of the Trust's outstanding shares.
As of August 2, 1995 the following shareholders of record owned 5% or more of
the outstanding Institutional Service Shares of the Trust: Jay Matthews,
Morrison, Colorado, owned approximately 28,106 Shares (5.36%); Carroll R.
Wetzel, Clinton, Missouri, owned approximately 38,270 Shares (7.30%); John H.
Seale, Jaspar, Texas, owned approximately 61,213 Shares (11.68%);
As of August 2, 1995, the following shareholders of record owned 5% or more of
the outstanding Institutional Shares of the Trust: Charles Schwab & Co., Inc.,
San Francisco, California owned approximately 1,243,005 Shares (5.94%);
TRUSTEES' COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST * FROM FUND COMPLEX +
John F. Donahue $0 $ 0 for the Trust and
Trustee 68 other investment companies in the
Fund Complex
Thomas G. Bigley $973 $ 20,688 for the Trust and
Trustee 49 other investment companies of the
Fund Complex
John T. Conroy, Jr. $ 1,447 $ 117,202 for the Trust and
Trustee 64 other investment companies in the
Fund Complex
William J. Copeland $ 1,447 $ 117,202 for the Trust and
Trustee 64 other investment companies in the
Fund Complex
James E. Dowd $ 1,447 $ 117,202 for the Trust and
Trustee 64 other investment companies in the
Fund Complex
Lawrence D. Ellis, M.D.$ 1,319 $ 106,460 for the Trust and
Trustee 64 other investment companies in the
Fund Complex
Edward L. Flaherty, Jr. $ 1,447 $ 117,202 for the Trust and
Trustee 64 other investment companies in the
Fund Complex
Glen R. Johnson $ 0 $ 0 for the Trust and
Trustee 8 other investment companies in the
Fund Complex
Peter E. Madden $1,116 $ 90,563 for the Trust and
Trustee 64 other investment companies in the
Fund Complex
Gregor F. Meyer $ 1,319 $ 106,460 for the Trust and
Trustee 64 other investment companies in the
Fund Complex
John E. Murray, Jr. $ 635 $ 0 for the Trust and
Trustee 69 other investment companies in the
Fund Complex
Wesley W. Posvar $ 1,319 $ 106,460 for the Trust and
Trustee 64 other investment companies in the
Fund Complex
Marjorie P. Smuts $ 1,319 $ 106,460 for the Trust and
Trustee 64 other investment companies in the
Fund Complex
*Information is furnished for the fiscal year ended June 30, 1995.
+The information provided is for the last calendar year.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
ADVISER TO THE TRUST
The Trust's investment adviser is Federated Management (the "Adviser"). It is a
subsidiary of Federated Investors. All of the 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 its shareholders for any losses
that may be sustained in the purchase, holding, or sale of any security, 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 Management receives an annual investment
advisory fee as described in the prospectuses. During the fiscal years ended
June 30, 1995, 1994, and 1993, the Trust's adviser earned $1,084,312,
$1,414,365, and $1,009,339, respectively, which were reduced by $346,925,
$452,665 and $357,415, respectively, because of undertakings to limit the
Trust's expenses.
STATE EXPENSE LIMITATIONS
The Adviser has undertaken to comply with the expense limitations established by
certain states for investment companies whose shares are registered for sale in
those states. If the Trust's normal operating expenses (including the investment
advisory fee, but not including brokerage commissions, interest, taxes and
extraordinary expenses) exceed 2.5% per year of the first $30 million of average
net assets, 2% per year of the next $70 million of average net assets, and 1.5%
per year of the remaining average net assets, the Adviser will reimburse the
Trust for its expenses over the limitation.
If the Trust's monthly projected operating expenses exceed this expense
limitation, the investment advisory fee paid will be reduced by the amount of
the excess, subject to an annual adjustment. If the expense limitation is
exceeded, the amount to be reimbursed by the Adviser will be limited, in any
single fiscal year, by the amount of the investment advisory fee.
This arrangement is not part of the advisory contract and may be amended or
rescinded in the future.
OTHER RELATED SERVICES
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of shares of funds offered by Federated Securities Corp.
ADMINISTRATIVE SERVICES
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Trust for a fee as described in the
prospectuses. (Prior to March 1, 1994, Federated Administrative Services, Inc.,
also a subsidiary of Federated Investors, served as the Trust's administrator.
For purposes of this Statement of Additonal Information, Federated
Administrative Services and Federated Administrative Services, Inc., may
hereinafter collectively be referred to as the "Administrators"). For the fiscal
year ended June 30, 1995, the Administrators collectively earned $205,206. For
the fiscal years ended June 30, 1994, and 1993, Federated Administrative
Services, Inc. earned $346,714 and $300,002, respectively. Dr. Henry J.
Gailliot, an officer of Federated Management, the Adviser to the Trust, holds
approximately 20% of the outstanding common stock and serves as director of
Commercial Data Services, Inc., a company which provides computer processing
services to Federated Administrative Services.
SHAREHOLDER SERVICES AGREEMENT
This arrangement permits the payment of fees to Federated Shareholder Services
and, indirectly, to financial institutions, to cause services to be provided 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.
For the fiscal periods ending June 30, 1995, and 1994, the Trust paid
shareholder service fees in the amounts of $25,362 and $27,051, respectively,
all of which were paid to financial institutions.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company serves as transfer agent and dividend disbursing
agent for the Trust. The fee paid to the transfer agent is based upon the size,
type and number of accounts and transactions made by shareholders.
Federated Services Company also maintains the Trust's accounting records. 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.
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
review by the Board of 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.
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.
Research services provided by brokers may be used by the Adviser or by
affiliates of Federated Investors in advising Federated Funds 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.
PURCHASING SHARES
Shares are sold at their net asset value without a sales load on days the New
York Stock Exchange is open for business. The procedure for purchasing Shares is
explained in the respective prospectus under "Investing in Institutional Shares"
or "Investing in Institutional Service Shares."
DISTRIBUTION PLAN (INSTITUTIONAL SERVICE SHARES ONLY) AND SHAREHOLDER SERVICES
AGREEMENT
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services to stimulate distribution
activities and to cause services to be provided 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,
marketing efforts; 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.
With respect to the Institutional Service Shares, by adopting the Distribution
Plan, the Board of Trustees expects that the Trust will be able to achieve a
more predictable flow of cash for investment purposes and to meet redemptions.
This will facilitate more efficient portfolio management and assist the Trust in
pursuing its investment objectives. By identifying potential investors whose
needs are served by the Trust's objectives, and properly servicing these
accounts, it may be possible to curb sharp fluctuations in rates of redemptions
and sales.
Other benefits, which may be realized under either arrangement, may include: (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 period from August 31, 1993 (date of initial public offering) to June
30, 1994, payments in the amount of $38,361 were made pursuant to the
Distribution Plan (Institutional Service Shares only), of which $27,051 was
waived. In addition, for this period, the Trust made payments in the amount of
$27,051 pursuant to the Shareholder Services Plan.
For the fiscal year ended June 30, 1995 payments in the amount of $25,694 were
made pursuant to the Distribution Plan (Institutional Service Shares only) of
which $25,362 was waived. In addition, for this period, the Trust paid
shareholder service fees in the amount of $25,362 , all of which were paid to
financial institutions.
DETERMINING NET ASSET VALUE
Net asset value generally changes each day. The days on which the net asset
value is calculated by the Trust are described in each respective prospectus.
VALUING MUNICIPAL SECURITIES
The Trustees use an independent pricing service to value municipal securities.
The independent pricing service takes into consideration: yield; stability;
risk; quality; coupon rate; maturity; type of issue; trading characteristics;
special circumstances of a security or trading market; and any other factors or
market data it considers relevant in determining valuations for normal
institutional size trading units of debt securities and does not rely
exclusively on quoted prices.
USE OF AMORTIZED COST
The Trustees have decided that the fair value of municipal securities authorized
to be purchased by the Trust with remaining maturities of 60 days or less at the
time of purchase shall be their amortized cost value, unless the particular
circumstances of the security indicate otherwise. Under this method, portfolio
instruments and assets are valued at the acquisition cost as adjusted for
amortization of premium or accumulation of discount rather than at current
market value. The Executive Committee continually assesses this method of
valuation and recommends changes where necessary to assure that the Trust's
portfolio instruments are valued at their fair value as determined in good faith
by the Trustees.
REDEEMING SHARES
The Trust redeems Shares at the next computed net asset value after the Trust
receives the redemption request. Redemption procedures are explained in each
respective prospectus under "Redeeming Institutional Shares" or "Redeeming
Institutional Service Shares." Although State Street Bank does not charge for
telephone redemptions, it reserves the right to charge a fee for the cost of
wire-transferred redemptions of less than $5,000.
REDEMPTION IN KIND
Although the Trust intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the Trust's portfolio.
Redemption in kind will be made in conformity with applicable Securities and
Exchange Commission rules, taking such securities at the same value employed in
determining net asset value and selecting the securities in a manner the
Trustees determine to be fair and equitable.
The Trust has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940, as amended under which the Trust is obligated to redeem shares for any
one shareholder in cash only up to a lesser of $250,000 or 1% of a class's net
asset value during any 90-day period.
TAX STATUS
THE TRUST'S TAX STATUS
The Trust will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code of 1986, as amended,
applicable to regulated investment companies and to receive the special tax
treatment afforded to such companies. To qualify for this treatment, the Trust
must, among other requirements:
- derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
- derive less than 30% of its gross income from the sale of securities held
less than three months;
- invest in securities within certain statutory limits; and
- distribute to its shareholders at least 90% of its net income earned during
the year.
TOTAL RETURN
The Trust's average annual total returns for Institutional Shares for the one-
year, five-year, and ten-year periods ended June 30, 1995, were 5.52%, 5.04%,
and 5.33%, respectively.
The average annual total return for each class of shares of the Trust 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 monthly reinvestment of all dividends and
distributions.
The Trust's average annual total return for Institutional Service Shares for the
fiscal year ended June 30, 1995 and for the period since inception (August 31,
1993, date of initial public offering), to June 30, 1995 was 5.26% and 3.44%
respectively.
YIELD
The Trust's yields for the thirty-day period ended June 30, 1995, for
Institutional Shares and Institutional Service Shares were 3.89% and 3.64%,
respectively.
The yield for both classes of shares of the Trust is determined by dividing the
net investment income per share (as defined by the Securities and Exchange
Commission) earned by either class of shares over a thirty-day period by the
maximum offering price per share of either class on the last day of the period.
This value is then annualized using semi-annual compounding. This means that the
amount of income generated during the thirty-day period is assumed to be
generated each month over a twelve-month period and is reinvested every six
months. The yield does not necessarily reflect income actually earned by the
Trust because of certain adjustments required by the Securities and Exchange
Commission and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in either
class of shares, performance will be reduced for those shareholders paying those
fees.
TAX-EQUIVALENT YIELD
The Trust's tax-equivalent yields for the thirty-day period ended June 30, 1995,
for Institutional Shares and Institutional Service Shares were 5.40% and 5.06%,
respectively.
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 the shareholder is in the 28% tax-bracket
and that income is 100% tax-exempt.
Tax-Equivalency Table
The Trust may also use a tax-equivalency table in advertising and sales
literature. The interest earned by the municipal bonds 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 is an attractive choice for investors,
particularly in times of narrow spreads between tax-free and taxable
yields.
TAXABLE YIELD EQUIVALENT FOR 1995
MULTISTATE MUNICIPAL FUNDS
FEDERAL INCOME TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%
JOINT $1- $39,001- $94,251- $143,601- OVER
RETURN 39,000 94,250 143,600 256,500 256,500
SINGLE $1- $23,351- $56,551- $117,951- OVER
RETURN 23,350 56,550 117,950 256,500 256,500
Tax-Exempt
Yield Taxable Yield Equivalent
1.00% 1.18% 1.39% 1.45% 1.56% 1.66%
1.50% 1.76% 2.08% 2.17% 2.34% 2.48%
2.00% 2.35% 2.78% 2.90% 3.13% 3.31%
2.50% 2.94% 3.47% 3.62% 3.91% 4.14%
3.00% 3.53% 4.17% 4.35% 4.69% 4.97%
3.50% 4.12% 4.86% 5.07% 5.47% 5.79%
4.00% 4.71% 5.56% 5.80% 6.25% 6.62%
4.50% 5.29% 6.25% 6.52% 7.03% 7.45%
5.00% 5.88% 6.94% 7.25% 7.81% 8.28%
5.50% 6.47% 7.64% 7.97% 8.59% 9.11%
6.00% 7.06% 8.33% 8.70% 9.38% 9.93%
6.50% 7.65% 9.03% 9.42% 10.16% 10.76%
7.00% 8.24% 9.72% 10.14% 10.94% 11.59%
7.50% 8.82% 10.42% 10.87% 11.72% 12.42%
8.00% 9.41% 11.11% 11.59% 12.50% 13.25%
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional state and
local taxes paid on comparable taxable investments were not used to
increase federal deductions. The chart above is for illustrative purposes
only. It is not an indicator of past or future performance of Trust
shares.
* Some portion of the Trust's income may be subject to the federal
alternative minimum tax and state and local income taxes.
PERFORMANCE COMPARISONS
The performance of both classes of Shares depends upon such variables as:
- portfolio quality;
- average portfolio maturity;
- type of instruments in which the portfolio is invested;
- changes in interest rates and market value of portfolio securities;
- changes in the Trust's expenses or either class of Shares' expenses; and
- various other factors.
Either class of Shares' performance fluctuates on a daily basis largely because
net earnings and offering price per share fluctuate daily. Both net earnings and
offering price per share are factors in the computation of yield and total
return.
Investors may use financial publications and/or indices to obtain a more
complete view of the 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 by
making comparative calculations using total return. Total return assumes
the reinvestment of all capital gains distributions and income dividends
and takes into account any change in offering price over a specific period
of time. From time to time, the Trust will quote its Lipper ranking in the
"intermediate municipal bond funds" category in advertising and sales
literature.
- THE LEHMAN BROTHERS STATE 5-YEAR G.O. BOND INDEX is a composite measure of
total return performance for the municipal bond market on those municipal
bonds with maturities of five years. The securities on this index include
ratings categories of A and Aaa. Total returns are calculated twice monthly
as well as for one month, three month, and twelve month periods. Total
returns are also calculated as of the beginning of the index inception on
December 31, 1979.
- THE LEHMAN BROTHERS STATE 3-YEAR G.O. BOND INDEX is a total return
performance benchmark for the short-term general obligation sector of the
tax-exempt bond market. Returns and attributes for the index are calculated
semi-monthly.
- MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly MUTUAL FUND VALUES. MUTUAL FUND VALUES rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Advertisements and other sales literature for both classes of Shares may quote
total returns which are calculated on non-standardized base periods. The total
returns represent the historic change in the value of an investment in either
class of Shares based on monthly reinvestment of dividends over a specified
period of time.
ABOUT FEDERATED INVESTORS
Federated 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.
In the municipal sector, as of December 31, 1994, Federated managed 18 bond
funds with approximately $1.9 billion in assets and 18 money market funds with
approximately $6.6 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities.
J. Thomas Madden, Executive Vice President, oversees Federated's equity and high
yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federated's domestic fixed income management. Henry A.
Frantzen, Executive Vice President, oversees the management of Federated's
international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $2 trillion to the more than 5,500 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
Institutional
Federated 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.
Trust Organizations
Other institutional clients include close relationships with more than
1,500 banks and trust organizations. Virtually all of the trust divisions
of the top 100 bank holding companies use Federated funds in their clients'
portfolios. The marketing effort to trust clients is headed by Mark R.
Gensheimer, Executive Vice President, Bank Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated mutual funds are available to consumers through major brokerage
firms nationwide--including 200 New York Stock Exchange firms--supported
by more wholesalers than any other mutual fund distributor. The marketing
effort to these firms is headed by James F. Getz, President, Broker/Dealer
Division.
* SOURCE: Investment Company Institute
APPENDIX
STANDARD AND POOR'S RATINGS GROUP ("S&P") MUNICIPAL BOND RATINGS
AAA--Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
NR--Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
Plus (+) or minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
MOODY'S INVESTORS SERVICE, INC. MUNICIPAL BOND RATINGS
AAA--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
NR--Not rated by Moody's.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate or municipal bond rating
system. The modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
STANDARD AND POOR'S RATINGS GROUP MUNICIPAL NOTE RATINGS
SP-1--Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
sign (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
MOODY'S INVESTORS SERVICE, INC. SHORT-TERM LOAN RATINGS
MIG1/VMIG1--This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad based access to the market for refinancing.
MIG2/VMIG2--This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
STANDARD AND POOR'S RATINGS GROUP COMMERCIAL PAPER RATINGS
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high for issues
designated A-1.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS
PRIME-1--Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. PRIME-1
repayment capacity will normally be evidenced by the following characteristics:
- leading market positions in well-established industries;
- high rates of return on funds employed;
- conservative capitalization structure with moderate reliance on debt and
ample asset protection;
- broad margins in earning coverage of fixed financial charges and high
internal cash generation; and
- well-established access to a range of financial markets and assured sources
of alternative liquidity.
PRIME-2--Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
Cusip 825253107
Cusip 825253206
8072507B(8/95)
FEDERATED SHORT-TERM MUNICIPAL TRUST
- --------------------------------------------------------------------------------
ANNUAL REPORT FOR FISCAL YEAR ENDED JUNE 30, 1995
MANAGEMENT DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
Interest rates in the short-term fixed income markets exhibited
considerable volatility during the twelve months ending June 30, 1995. Yields
for three-year "Aa" general obligation municipal bonds stood at 4.60% on June
30, 1994; rose to the period peak of 5.35% on November 22, 1994; fell to the
period low of 4.15% on June 6, 1995; and climbed modestly to 4.40% by June 30,
1995.
In comparison, three-year U.S. Treasury note yields were 6.50% on June 30,
1994; escalated to the period maximum of 7.85% by January 9, 1995; descended to
5.65% as of June 5, 1995; and closed the period at 5.90%.
The lesser overall percentage decline in short-term municipal yields
reflected investor concern over the likelihood of passage of "flat tax"
legislation, with its diminished or eliminated preferential tax treatment of
municipal issues, and over the bankruptcy filing on December 6, 1994, by Orange
County, California.
During the twelve months ending June 30, 1995, management extended the
average age maturity and modified duration of the Trust, mostly in the first
several months of 1995. Over the period, the average maturity was increased from
2.49 years to 2.84 years, while the modified duration was lengthened from 2.18
years to 2.57 years. The average coupon rate of the issues in the portfolio fell
from 6.10% to 5.95%, due to the overall decline in market yields and to the
maturing at the calendar year end of several high-coupon issues in the Trust.
The average market price for the issues in the Trust rose from 102.95% of face
value to 104.75% of face value.
The credit quality of the issues purchased for the Trust was tilted
modestly lower to mitigate coupon erosion by market yield declines during the
first half of calendar year 1995. From June 30, 1994, to June 30, 1995, assets
of the Trust invested in "Aaa" issues fell from 47.5% to 35.2%; in "Aa" issues,
the allocation rose from 43.3% to 50.4%; and in "A" issues, the exposure grew
from 9.1% to 14.4%. These percentages are based on the market value plus accrued
interest on Trust holdings.
Upper-medium and high-grade issues tend to outperform the highest-grade
issues during periods of economic recovery. As state and local governments
receive greater tax revenue--from sales, income, business use and property--and
as corporations, on the whole, increase profitability and cash flow generation,
the potential for credit rating upgrades increases. The Trust has been investing
in what management considers rating upgrade candidates. Over the twelve months
ending June 30, 1995, the Trust has avoided investment in California local
issues, except those which have been prefunded, multi-family housing issues of
state and local housing agencies, and tax allocation or special assessment
issues.
An investor in Federated Short-Term Municipal Trust during the twelve
months ending June 30, 1995 experienced a total return of 5.52% for
Institutional Shares and of 5.26% for Institutional Service Shares. These
results are attributable to an increase in the net asset value per share of
1.28% (from $10.15 to $10.28) and to income and reinvestment returns, net of
share expenses, of 4.24% and 3.98%, respectively. Meanwhile, the Lipper
Analytical Services Short Municipal Debt Fund Category achieved a total return
of 4.89% for the period. Past investment performance is neither indicative nor
predictive of future investment performance.
FEDERATED SHORT-TERM MUNICIPAL TRUST
INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
GROWTH OF $25,000 INVESTED IN FEDERATED SHORT-TERM MUNICIPAL TRUST
INSTITUTIONAL SHARES
The graph below illustrates the hypothetical investment of $25,000 in the
Federated Short-Term Municipal Trust (Institutional Shares) (the "Trust") from
June 30, 1985, to June 30, 1995, compared to the Lehman Brothers 3 Year State GO
Index (LB3YRSGOI)+ and the Lehman Brothers 5 Year State GO Index (LB5YRSGOI).+
<TABLE>
<CAPTION>
Federated
Short-Term
Income Fund
Measurement Period (Institutional
(Fiscal Year Covered) Shares) LB3YRSGOI LB5YRSGOI
<S> <C> <C> <C>
6/30/85 25000 25000 25000
6/30/86 26887 27335 27835
6/30/87 28061 28934 30020
6/30/88 29434 30314 31605
6/30/89 30860 31945 33577
6/30/90 32879 34101 35918
6/30/91 35007 36809 39111
6/30/92 37246 40155 43135
6/30/93 39150 43030 47121
6/30/94 39838 42996 46998
6/30/95 42038 45645 50445
</TABLE>
AVERAGE ANNUAL TOTAL RETURN** FOR THE
PERIODS ENDED JUNE 30, 1995
1 Year..................................................5.52%
5 Year..................................................5.04%
10 Year.................................................5.33%
Start of Performance (8/20/81)......................... 5.96%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
THIS REPORT MUST BE PRECEDED OR ACCOMPANIED BY THE TRUST'S PROSPECTUS DATED
AUGUST 31, 1995, AND, TOGETHER WITH FINANCIAL STATEMENTS CONTAINED THEREIN,
CONSTITUTES THE TRUST'S ANNUAL REPORT.
* The Trust's performance assumes the reinvestment of all dividends and
distributions. The LB3YRSGOI and the LB5YRSGOI have been adjusted to reflect
reinvestment of dividends on securities in the indices.
** Total return quoted reflects all applicable sales loads and contingent
deferred sales charges.
+ The LB3YRSGOI and the LB5YRSGOI are not adjusted to reflect sales loads,
expenses, or other fees that the SEC requires to be reflected in the Trust's
performance. The indices are unmanaged.
FEDERATED SHORT-TERM MUNICIPAL TRUST
INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
GROWTH OF $25,000 INVESTED IN FEDERATED SHORT-TERM MUNICIPAL TRUST
INSTITUTIONAL SERVICE SHARES
The graph below illustrates the hypothetical investment of $25,000 in the
Federated Short-Term Municipal Trust (Institutional Service Shares) (the
"Trust") from August 31, 1993 (start of performance), to June 30, 1995, compared
to the Lehman Brothers 3 Year State GO Index (LB3YRSGOI)+ and the Lehman
Brothers 5 Year State GO Index (LB5YRSGOI).+
<TABLE>
<CAPTION>
Federated
Short-Term
Municipal
Trust (Insti-
Measurement Period tutional Ser- LB3YRSGOI
(Fiscal Year Covered) vice Shares) a]LB5YRSGOI
<S> <C> <C> <C>
8/31/93 25000 25000 25000
6/30/94 25270 25582 25351
6/30/95 26600 27158 27210
AVERAGE ANNUAL TOTAL RETURN** FOR THE
PERIODS ENDED JUNE 30, 1995
1 Year.................................................5.26%
Start of Performance (8/31/93).........................3.44%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
THIS REPORT MUST BE PRECEDED OR ACCOMPANIED BY THE TRUST'S PROSPECTUS DATED
AUGUST 31, 1995, AND, TOGETHER WITH FINANCIAL STATEMENTS CONTAINED THEREIN,
CONSTITUTES THE FUND'S ANNUAL REPORT.
* The Trust's performance assumes the reinvestment of all dividends and
distributions. The LB3YRSGOI and the LB5YRSGOI have been adjusted to reflect
reinvestment of dividends on securities in the indices.
** Total return quoted reflects all applicable sales loads and contingent
deferred sales charges.
+ The LB3YRSGOI and the LB5YRSGOI are not adjusted to reflect sales loads,
expenses, or other fees that the SEC requires to be reflected in the Trust's
performance. The indices are unmanaged.
FEDERATED SECURITIES CORP.
(LOGO)
- --------------------------------------------------------------------------------
Distributor
Cusip 825253107
Cusip 825253206
8072507ARS (8/95)
APPENDIX
A1. The graphic presentation here displayed consists of a line graph titled
"Growth of $25,000 Invested in Federated Short-Term Municipal Trust
(Institutional Shares)." The corresponding components of the line graph are
listed underneath. The Federated Short-Term Municipal Trust (Institutional
Shares) (the "Trust") is represented by a solid line. The Lehman Brothers 3-
Year State G.O. Index (the "LB3YRSGOI") is represented by a dotted line. The
Lehman Brothers 5 Year State G.O. Index (the "LB5YRSGOI") is represented by a
broken line. The line graph is a visual representation of a comparison of
change in value of a hypothetical $25,000 investment in the Trust and the
LB3YRSGOI and the LB5YRSGOI. The "x" axis reflects computation periods from the
start of performance (August 20, 1981) to June 30, 1995. The "y" axis
reflects the cost of the investment, ranging from $20,000 to $55,000. The right
margin reflects the ending value of the hypothetical investment in the Trust as
compared to the LB3YRSGOI, and the LB5YRSGOI. The ending values are $42,038,
$45,645 and $50,445, respectively.
A2 The graphic presentation here displayed consists of a line graph titled
"Growth of $25,000 Invested in Federated Short-Term Municipal Trust
(Institutional Service Shares)." The corresponding components of the line
graph are listed underneath. The Federated Short-Term Municipal Trust
(Institutional Service Shares) (the "Trust") is represented by a solid line.
The Lehman Brothers 3-Year State G.O. Index (the "LB3YRSGOI") is represented by
a dotted line. The Lehman Brothers 5 Year State G.O. Index (the "LB5YRSGOI") is
represented by a broken line. The line graph is a visual representation of a
comparison of change in value of a hypothetical $25,000 investment in the Trust
and the LB3YRSGOI and the LB5YRSGOI. The "x" axis reflects computation periods
from the start of performance (August 31, 1993) to June 30, 1995. The "y"
axis reflects the cost of the investment, ranging from $24,000 to $28,000. The
right margin reflects the ending value of the hypothetical investment in the
Trust as compared to the LB3YRSGOI, and the LB5YRSGOI. The ending values are
$26,600, $27,158 and $27,210, respectively.
