1933 Act File No. 2-72277
1940 Act File No. 811-3181
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ___X___
-------
Pre-Effective Amendment No. .................... ______
-------- ------
Post-Effective Amendment No. __34_____.................. ___X___
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ___X___
Amendment No. __25_____................................. ___X___
FEDERATED SHORT-TERM MUNICIPAL TRUST
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) on ________________
pursuant to paragraph (b) 60 days after filing pursuant to paragraph (a) (i)
X on August 31, 1998 pursuant to paragraph (a) (i). 75 days after filing
pursuant to paragraph (a)(ii) on _________________ pursuant to paragraph
(a)(ii) of Rule 485.
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Copies to:
Matthew J. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037
<PAGE>
CROSS REFERENCE SHEET
This Amendment to the Registration Statement of FEDERATED SHORT-TERM
MUNICIPAL TRUST, which consists of one portfolio: Federated Short-Term Municipal
Trust, which is offered in two separate classes of shares, Institutional Shares
and Institutional Service Shares, is comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page....................Cover Page.
Item 2. Synopsis......................Summary of Trust Expenses.
Item 3. Condensed Financial
Information.................Financial Highlights; Performance
Information.
Item 4. General Description of
Registrant..................General Information; Investment
Information; Investment Objective;
Investment Policies; Municipal
Securities; Investment Risks;
Investment Limitations.
Item 5. Management of the Trust.......Trust Information; Management of the
Trust; Distribution of (Institutional
or Institutional Service) Shares;
Administration of the Trust;
Item 6. Capital Stock and Other
Securities..................Dividends; Capital Gains; Shareholder
Information; Voting Rights; Tax
Information; Federal Income
Tax; State and Local Taxes; Other
Classes of Shares.
Item 7. Purchase of Securities Being
Offered.....................Net Asset Value; Investing in
(Institutional or Institutional
Service) Shares; Share Purchases;
Minimum Investment Required; What
Shares Cost; Account Activity.
Item 8. Redemption or Repurchase......Redeeming (Institutional or
Institutional Service) Shares;
Telephone Redemption; Written
Requests; Accounts With Low Balances.
Item 9. Pending Legal Proceedings None.
<PAGE>
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page....................Cover Page.
Item 11. Table of Contents.............Table of Contents.
Item 12. General Information and
History.......................General Information About the Trust;
About Federated Investors, Inc.;
Economic and Market Information.
Item 13. Investment Objectives and
Policies......................Investment Objective and Policies;
Acceptable Investments; When Issued
and Delayed Delivery
Transactions; Portfolio Turnover;
Investment Limitations.
Item 14. Management of the Fund........Trust Management; Trust Ownership;
Trustees' Compensation; Trustee
Liability.
Item 15. Control Persons and Principal
Holders of Securities Not Applicable.
Item 16. Investment Advisory and Other
Services......................Investment Advisory Services;
Adviser to the Trust; Advisory Fees;
Other Related Services; Trust
Administration; Custodian and
Portfolio Accountant; Independent
Public Accountants; Transfer
Agent.
Item 17. Brokerage Allocation Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Massachusetts Partnership Law.
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered.......................Purchasing Shares; Distribution Plan
(Institutional Service Shares only)
and Shareholder Services
Agreement; Determining Net Asset
Value; Redeeming Shares; Valuing
Municipal Securities; Use of
Amortized Cost; Redemption In Kind.
Item 20. Tax Status Tax Status; The Trust's Tax Status.
Item 21. Underwriters Not applicable.
Item 22. Calculation of Performance
Data..........................Total Return; Yield; Tax-Equivalent
Yield; Performance Comparisons.
Item 23. Financial Statements..........To be filed by amendment.
Federated 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 Statement of Additional Information for Institutional
Shares and Institutional Service Shares dated August 31, 1998, with the
Securities and Exchange Commission ("SEC"). The information contained in the
Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information or
a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-341-7400. To obtain other
information, or make inquiries about the Trust, contact the Trust at the address
listed in the back of this prospectus. The Statement of Additional Information,
material incorporated by reference into this document, and other information
regarding the Trust is maintained electronically with the SEC at Internet Web
site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Prospectus dated August 31, 1998
<PAGE>
Financial Highlights--Institutional Shares 2
General Information.................. 3
Year 2000 Statement................................................... 3
Investment Information............... 3
Investment Objective............... 3
Investment Policies................ 3
Municipal Securities............... 5
Investment Risks................... 5
Investment Limitations............. 5
Trust Information.................... 5
Management of the Trust............ 5
Distribution of Institutional Shares 6
Administration of the Trust........ 6
Net Asset Value...................... 7
Investing in Institutional Shares.... 7
Share Purchases.................... 7
Minimum Investment Required........ 7
What Shares Cost................... 7
Account Activity................... 8
Dividends.......................... 8
Capital Gains...................... 8
Redeeming Institutional Shares....... 8
Telephone Redemption............... 8
Written Requests................... 8
Accounts with Low Balances......... 9
Shareholder Information.............. 9
Voting Rights...................... 9
Tax Information...................... 9
Federal Income Tax................. 9
State and Local Taxes.............. 10
Performance Information.............. 10
Other Classes of Shares.............. 11
Financial Highlights--Institutional Service Shares 12
Financial Statements................. 13
Report of Independent
Public Accountants Inside Back Cover
<PAGE>
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated May 8, 1981. 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, Inc.. 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 charge
imposed by the Trust.
Year 2000 Statement. Like other mutual funds and business organizations
worldwide, the Trust's service providers (among them, the adviser, distributor,
administrator and transfer agent) must ensure that their computer systems are
adjusted to properly process and calculate date-related information from and
after January 1, 2000. Many software programs and, to a lesser extent, the
computer hardware in use today cannot distinguish the year 2000 from the year
1900. Such a design flaw could have a negative impact in the handling of
securities trades, pricing and accounting services. The Trust and its service
providers are actively working on necessary changes to computer systems to deal
with the year 2000 issue and believe that systems will be year 2000 compliant
when required. Analysis continues regarding the financial impact of instituting
a year 2000 compliant program on the Trust's operations.
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:
n 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, including industrial development bonds, 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; and
n participation interests, as described below, in any of the above obligations.
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:
n rated within the four highest ratings for municipal securities by Moody's
Investors Service, Inc. ("Moody's") (Aaa, Aa, A, or Baa) or by
Standard & Poor's ("S&P") and Fitch IBCA, Inc. ("Fitch") (AAA, AA, A, or BBB);
n guaranteed at the time of purchase by the U.S. government as to the payment
of principal and interest;
n rated at the time of purchase within the two highest ratings categories of
Moody's short-term municipal securities ratings, (MIG1/VMIG1, MIG2/VMIG2) or
Moody's municipal commercial paper ratings, (P-1, P-2) or S&P's municipal note
rating, (SP-1, SP-2) or S&P's municipal commercial paper and short-term
ratings, (A-1, A-2); or
n unrated, if at the time of purchase, determined by the Trust's investment
adviser to be of comparable quality to municipal securities as stated above.
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
Statement of Additional Information.
Participation Interests
The Trust may purchase participation interests from financial institutions such
as commercial banks, savings 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. 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.
Inverse Floaters
The Fund may invest in securities known as "inverse floaters" which represent
interests in municipal securities. The Fund intends to purchase inverse floaters
to assist in duration management and to seek current income. These obligations
pay interest rates that vary inversely with changes in the interest rates of
specified short-term municipal securities or an index of short-term municipal
securities. The interest rates on inverse floaters will typically decline as
short-term market interest rates increase and increase as short-term market
rates decline. Inverse floaters will generally respond to changes in market
interest rates more rapidly than fixed-rate long-term securities (typically
twice as fast). As a result, the market values of inverse floaters will
generally be more volatile than the market values of fixed-rate municipal
securities. Typically, the portion of the portfolio invested in inverse floaters
will be subject to additional volatility.
Financial Futures
The Fund may purchase and sell interest rate and index financial futures
contracts. These financial futures contracts may be used to hedge all or a
portion of its portfolio against changes in the market value of portfolio
securities and interest rates, provide additional liquidity, and accomplish its
current strategies in a more expeditious fashion. Financial futures contracts
call for the delivery of particular debt instruments at a certain time in the
future. The seller of the contract agrees to make delivery of the type of
instrument called for in the contract and the buyer agrees to take delivery of
the instrument at the specified future time.
As a matter of investment policy, which may be changed without shareholder
approval, the Fund may not purchase or sell futures contracts if immediately
thereafter the sum of the amount of margin deposits on the Fund's existing
futures positions would exceed 5% of the market value of the Fund's total
assets. When the Fund purchases futures contracts, an amount of municipal
securities, cash or cash equivalents, equal to the underlying commodity value of
the futures contracts (less any related margin deposits), will be deposited in a
segregated account with the Fund's custodian (or the broker, if legally
permitted) to collateralize the position.
Risks
When the Fund uses financial futures, there is a risk that the prices of the
securities subject to the futures contracts may not correlate perfectly with
the prices of the securities in the Fund's portfolio. This may cause the
futures contract to react differently than the portfolio securities to market
changes. In addition, the Fund's investment adviser could be incorrect in its
expectations about the direction or extent of market factors such as interest
rate movements. In these events, the Fund may lose money on the futures
contract. It is not certain that a secondary market for positions in futures
contracts will exist at all times. Although the investment adviser will
consider liquidity before entering into futures transactions, there is no
assurance that a liquid secondary market on an exchange or otherwise will
exist for any particular futures contract at any particular time. The Fund's
ability to establish and close out futures positions depends on this secondary
market.
Temporary 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:
n Invest more than 5% of its total assets in securities of one issuer (except
cash and cash items and U.S. government obligations); or n 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:
n commit more than 15% of its net assets to illiquid obligations;
n 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.
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 0.40%
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 0.45% 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.
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. It is a subsidiary of Federated Investors, Inc.. All of the Class A
(voting) shares of Federated Investors Inc. are owned by a trust, the trustees
of which are John F. Donahue, Chairman and Director of Federated Investors,
Inc., Mr. Donahue's wife, and Mr. Donahue's son, J. Christopher Donahue, who
is President and Director of Federated Investors, Inc.
Jeff A. Kozemchak has been the Trust's portfolio manager since June 1996. Mr.
Kozemchak joined Federated Investors Inc. or its predecessor in 1987 and has
been a Vice President of the Trust's investment adviser since 1993. Mr.
Kozemchak served as an Assistant Vice President of the investment adviser from
1990 until 1992. Mr. Kozemchak is a Chartered Financial Analyst and received his
M.S. in Industrial Administration from Carnegie Mellon University in 1987.
Mary Jo Ochson has been the Trust's portfolio manager since January 1997. Ms.
Ochson joined Federated Investors Inc. or its predecessor in 1982 and has been a
Senior Vice President of the Trust's investment adviser since January 1996. From
1988 through 1995, Ms. Ochson served as a Vice president of the Trust's
investment adviser. Ms. Ochson is a Chartered Financial Analyst and received her
M.B.A. in Finance from the University of Pittsburgh.
Federated Management and other subsidiaries of Federated Investors, Inc. serve
as investment advisers to a number of investment companies and private accounts.
Certain other subsidiaries also provide administrative services to a number of
investment companies. With over $120 billion invested across more than 300 funds
under management and/or administration by its subsidiaries, as of December 31,
1997, Federated Investors Inc. is one of the largest mutual fund investment
managers in the United States. With more than 2,000 employees, Federated
continues to be led by the management who founded the company in 1955. Federated
funds are presently at work in and through approximately 4,000 financial
institutions nationwide.
Both the Trust and the Adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the 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.
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,
Inc..
Administration of the Trust
Administrative Services
Federated Services Company, a subsidiary of Federated Investors, Inc., provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Trust. Federated Services Company
provides these at an annual rate which relates to the average aggregate daily
net assets of all funds advised by subsidiaries of Federated Investors, Inc.
("Federated Funds") as specified below:
Maximum Average Aggregate
Fee Daily Net Assets
0.150%on the first $250 million 0.125%on the next $250 million 0.100%on the
next $250 million
0.075%on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Services Company may choose voluntarily to waive a portion of its fee.
Shareholder Services
The Trust has entered into a Shareholder Services Agreement with Federated
Shareholder Services, a subsidiary of Federated Investors, Inc., under which the
Trust may make payments up to 0.25% of the average daily net asset value of its
shares, computed at an annual rate, to obtain certain personal services for
shareholders and to maintain shareholder accounts. From time to time and for
such periods as deemed appropriate, the amount stated above may be reduced
voluntarily. Under the Shareholder Services Agreement, Federated Shareholder
Services will either perform shareholder services directly or will select
financial institutions to perform shareholder services. Financial institutions
will receive fees based upon shares owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Trust and Federated Shareholder Services.
Supplemental Payments to Financial Institutions
In addition to payments made pursuant to the Distribution Plan and Shareholder
Services Agreement, Federated Securities Corp. and Federated Shareholder
Services, from their own assets, may pay financial institutions supplemental
fees for the performance of substantial sales services, distribution-related
support services, or shareholder services. The support may include sponsoring
sales, educational and training seminars for their employees, providing sales
literature, and engineering computer software programs that emphasize the
attributes of the Trust. Such assistance will be predicated upon the amount of
shares the financial institution sells or may sell, and/or upon the type and
nature of sales or marketing support furnished by the financial institution. Any
payments made by the distributor may be reimbursed by the Trust's investment
adviser or its affiliates.
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.
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 Shareholder 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. Questions on wire purchases should be
directed to your shareholder services representative at the telephone number
listed on your account statement.
By Mail
To purchase Shares by mail, send a check made payable to Federated Short-Term
Municipal Trust--Institutional Shares to: Federated Shareholder 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 financial
intermediary'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
financial intermediary may be subject to a smaller minimum investment.
What Shares Cost
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Trust. Investors who purchase
Shares through a financial intermediary may be charged a service fee by that
financial intermediary.
The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on (i) days on which there are not sufficient changes in the value of the
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, Martin Luther King Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Account Activity
Shareholders will receive periodic statements reporting all account activity,
including dividends paid. The Trust will not issue share
certificates.
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.
The Trust redeems Shares at their net asset value next determined after the
Trust receives the redemption request. Investors who redeem Shares through a
financial intermediary may be charged a service fee by that financial
intermediary. 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
Shareholder 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 should be sent unendorsed with the
written request by registered or certified mail to the address noted above.
Signatures
Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Trust, or a redemption payable other than to
the shareholder of record must have their signatures guaranteed by:
n a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund, which is administered by the Federal Deposit Insurance
Corporation ("FDIC");
n a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
n a savings bank or savings association whose deposits are insured by the
Savings Association Insurance Fund, which is administered by the FDIC; or
n 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.
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.
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. State and Local Taxes Because interest received by the Trust may
not be exempt from all state and local taxes, shareholders may be required to
pay state and local taxes on dividends received from the Trust. Shareholders are
urged to consult their own tax advisers regarding the status of their accounts
under state and local tax laws.
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 charge 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.
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 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 1-800-341-7400.
<PAGE>
Federated Short-Term
Municipal Trust
Institutional Shares
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Management
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and
Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent
and Dividend
Disbursing Agent
Federated Shareholder
Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Public Accountants
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222
Federated Short-Term Municipal Trust
Institutional Shares
Prospectus
August 31, 1998
A No-Load, Open-End, Diversified
Management Investment Company
Federated Securities Corp., Distributor
Cusip 313907107
8072507A-IS (8/98)
Federated Short-Term Municipal Trust
Institutional Shares
Institutional Service Shares
Statement of Additional Information
This Statement of Additional Information should be read with the prospectuses
for Institutional Shares and Institutional Service Shares of Federated
Short-Term Municipal Trust (the "Trust"), dated August 31, 1998. This Statement
is not a prospectus. You may request a copy of a prospectus or a paper copy of
this Statement, if you have received it electronically, free of charge by
calling 1-800-341-7400.
Federated Short-Term Municipal Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
Statement dated August 31, 1998 Cusip 313907107 Cusip 313907206 8072507B (8/98)
<PAGE>
General Information About the Trust.1
Investment Objective and Policies...1
Acceptable Investments............1
When-Issued and Delayed Delivery Transactions 1
Portfolio Turnover................2
Investment Limitations............2
Federated Short-Term Municipal Trust Management 4
Trust Ownership...................7
Trustee Compensation..............8
Trustee Liability.................8
Investment Advisory Services........8
Adviser to the Trust..............8
Advisory Fees.....................9
Other Related Services............9
Brokerage Transactions..............9
Other Services......................9
Trust Administration..............9
Custodian and Portfolio Accountant9
Transfer Agent....................9
Independent Public Accountants...10
Purchasing Shares..................10
Distribution Plan (Institutional Service
Shares only) and Shareholder Services
Agreement......................10
Determining Net Asset Value........10
Valuing Municipal Securities.....10
Use of Amortized Cost............10
Redeeming Shares...................10
Redemption in Kind...............11
Massachusetts Partnership Law......11
Tax Status.........................11
The Trust's Tax Status...........11
Total Return.......................11
Yield..............................11
Tax-Equivalent Yield.............12
Tax-Equivalency Table............12
Performance Comparisons..........13
Economic and Market Information..13
About Federated Investors, Inc.....13
Mutual Fund Market...............14
Institutional Clients............14
Bank Marketing...................14
Broker/Dealers and Bank Broker/Dealer
Subsidiaries.....................14
Appendix...........................15
<PAGE>
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 Statement of Additional Information
relates to the above-mentioned Shares of the Trust.
The investment objective of the Trust is to provide dividend income which is
exempt from federal regular income tax.
Acceptable Investments
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. The
investment objective and the policy 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") Standard & Poor's
("S&P"), or Fitch IBCA, Inc. ("Fitch"). 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, S&P, or Fitch 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.
Futures Transactions
A futures contract is a firm commitment by two parties: the seller who agrees to
make delivery of the specific type of security called for in the contract
("going short") and the buyer who agrees to take delivery of the security
("going long") at a certain time in the future. In the fixed income securities
market, price moves inversely to interest rates. A rise in rates means a drop in
price. Conversely, a drop in rates means a rise in price. In order to hedge its
holdings of fixed income securities against a rise in market interest rates, the
Fund could enter into contracts to deliver securities at a predetermined price
(i.e., "go short") to protect itself against the possibility that the prices of
its fixed income securities may decline during the Fund's anticipated holding
period. The Fund would agree to purchase securities in the future at a
predetermined price (i.e., "go long") to hedge against a decline in market
interest rates.
"Margin" in Futures Transactions
Unlike the purchase or sale of a security, the Fund does not pay or receive
money upon the purchase or sale of a futures contract. Rather, the Fund is
required to deposit an amount of "initial margin" in liquid securities with
its custodian (or the broker, if legally permitted). The nature of initial
margin in futures transactions is different from that of margin in securities
transactions in that futures contract initial margin does not involve the
borrowing of funds by the Fund to finance the transactions. Initial margin is
in the nature of a performance bond or good faith deposit on the contract
which is returned to the Fund upon termination of the futures contract,
assuming all contractual obligations have been satisfied.
A futures contract held by the Fund is valued daily at the official settlement
price of the exchange on which it is traded. Each day the Fund pays or
receives cash, called "variation margin," equal to the daily change in value
of the futures contract. This process is known as "marking to market."
Variation margin does not represent a borrowing or loan by the Fund but is
instead settlement between the Fund and the broker of the amount one would owe
the other if the futures contract expired. In computing its daily net asset
value ("NAV"), the Fund will mark-to-market its open futures positions.
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, 1997
and 1996, the portfolio turnover rates were 50% and 20%, 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 some 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.
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 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.
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.
<PAGE>
Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Short-Term Municipal Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director or Trustee of the Funds. Mr. Donahue is the
father of J. Christopher Donahue, Executive Vice President of the Company.
Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Director, Member of
Executive Committee, University of Pittsburgh; Director or Trustee of the Funds.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; Partner or Trustee in private real estate
ventures in Southwest Florida; formerly, President, Naples Property Management,
Inc. and Northgate Village Development Corporation; Director or Trustee of the
Funds.
William J. Copeland
One PNC Plaza--23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.; Director, Ryan
Homes, Inc.; Director or Trustee of the Funds.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or Trustee
of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine, University of Pittsburgh; Medical Director, University of
Pittsburgh Medical Center - Downtown; Member, Board of Directors, University of
Pittsburgh Medical Center; formerly, Hematologist, Oncologist, and Internist,
Presbyterian and Montefiore Hospitals; Director or Trustee of the Funds.
Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western Region;
Director or Trustee of the Funds.
Glen R. Johnson*
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp.
Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Trustee
Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica &
Murray; Director or Trustee of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Director or Trustee of the Funds; President, World Society for Ekistics, Athens;
Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University and U.S. Space Foundation; President
Emeritus, University of Pittsburgh; Founding Chairman, National Advisory Council
for Environmental Policy and Technology, Federal Emergency Management Advisory
Board and Czech Management Center, Prague; formerly, Professor, United States
Military Academy; Professor, United States Air Force Academy.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Director or Trustee of the Funds; Public Relations/Marketing/Conference
Planning; formerly, National Spokesperson, Aluminum Company of America; business
owner..
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President or Executive Vice President of the Funds; President and Director,
Federated Investors, Inc.; Federated Advisers, Federated Management, and
Federated Research; President and Director, Federated Research Corp. and
Federated Global Research Corp.; President, Passport Research, Ltd.; Trustee,
Federated Shareholder Services Company, and Federated Shareholder Services;
Director, Federated Services Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Trustee or Director of some of the Funds; President, Executive Vice President
and Treasurer of some of the Funds; Vice Chairman, Federated Investors, Inc.;
Vice President, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President, Secretary and Treasurer
Executive Vice President and Secretary of the Funds; Treasurer of some of the
Funds; Executive Vice President, Secretary, and Director, Federated Investors,
Inc.; Trustee, Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.; Trustee,
Federated Shareholder Services Company; Director, Federated Services Company;
President and Trustee, Federated Shareholder Services; Director, Federated
Securities Corp..
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
President or Vice President of some of the Funds; Director or Trustee of some of
the Funds; Executive Vice President, Federated Investors, Inc.; Chairman and
Director, Federated Securities Corp..
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board between meetings of the
Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies:
111 Corcoran Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
Adjustable Rate U.S. Government Fund, Inc.; Federated American Leaders Fund,
Inc.; Federated ARMs Fund; Federated Core Trust; Federated Equity Funds;
Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Investment Portfolios; Federated Investment Trust; Federated
Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated Stock and Bond
Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; Fixed Income Securities, Inc.; High Yield Cash
Trust; Intermediate Municipal Trust; International Series, Inc.; Investment
Series Funds, Inc.; Investment Series Trust; Liberty Term Trust, Inc. - 1999;
Liberty U.S. Government Money Market Trust; Liquid Cash Trust; Managed Series
Trust; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Obligations Trust II; Money Market Trust; Municipal Securities Income
Trust; Newpoint Funds; Regions Funds; RIMCO Monument Funds; Targeted Duration
Trust; Tax-Free Instruments Trust; The Planters Funds; The Virtus Funds; Trust
for Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations;
WesMark Funds; WCT Funds; and World Investment Series, Inc.
Trust Ownership
As of June 27, 1998, Officers and Trustees as a group owned 373,954 (2.14%) of
the outstanding Institutional Shares of the Trust. As of the same date, Officers
and Trustees owned less than 1% of the Institutional Service Shares of the
Trust.
As of June 27, 1998 the following shareholders of record owned 5% or more of the
outstanding Institutional Service Shares of the Trust: John H. Seale, Jaspar,
Texas, owned approximately 68,544 Shares (6.22%);CPB Trust Division Fiduciary
Account, Honolulu, Hawaii, owned approximately 117,281 Shares (10.64%);FAM &
Co., Logansport, Indiana, owned approximately 56,517 Shares (5.13%); and
Donaldson Lufkin Jenrette Securities Corporation, Inc, Jersey City, New Jersey,
owned approximately 68,027 Shares (6.17%).
As of June 27, 1998, 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 2,324,904 Shares (13.29%).
<TABLE>
<CAPTION>
<S> <C> <C>
Trustee Compensation
AGGREGATE
NAME, COMPENSATION...
POSITION WITH FROM.......TOTAL COMPENSATION PAID
Trust Trust*#.....FROM FUND COMPLEX
John F. Donahue, $0 $0 for the Trust and
Chairman and Trustee 56 other investment companies in the Fund Complex
Thomas G. Bigley, $______ $111,222 for the Trust and
Trustee 56 other investment companies in the Fund Complex
John T. Conroy, $______ $122,362 for the Trust and
Trustee 56 other investment companies in the Fund Complex
William J. Copeland, $______ $122,362 for the Trust and
Trustee 56 other investment companies in the Fund Complex
James E. Dowd, $______ $122,362 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D.,$______ $111,222 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Edward L. Flaherty, Jr.,$______ $122,362 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Glen R. Johnson, $0 $-0- for the Trust and
President and Trustee 8 other investment companies in the Fund Complex
Peter E. Madden, $_____ $111,222 for the Trust and
Trustee 56 other investment companies in the Fund Complex
John E. Murray, Jr., $_____ $111,222 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Wesley W. Posvar, $_____ $111,222 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Marjorie P. Smuts, $_____ $111,222 for the Trust and
Trustee 56 other investment companies in the Fund Complex
</TABLE>
* Information is furnished for the fiscal year ended June 30, 1998.
# The aggregate compensation is provided for the Trust which is comprised of
one portfolio.
The information is provided for the last calendar year.
Trustee Liability
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
Adviser to the Trust
The Trust's investment adviser is Federated Management (the "Adviser"). It is
a subsidiary of Federated Investors, Inc. All of the securities of Federated
Investors, Inc. are owned by a trust, the trustees of which are John F. Donahue,
his wife, and his son, J. Christopher Donahue. The Adviser shall not be liable
to the Trust 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, 1998, 1997, and 1996, the Trust's adviser earned $_____, $866,632, and
$837,213, respectively, which were reduced by $______, $293,339, and $266,026,
respectively, because of undertakings to limit the Trust's expenses.
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.
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the order at a
favorable price. In working with dealers, the adviser will generally use those
who are recognized dealers in specific portfolio instruments, except when a
better price and execution of the order can be obtained elsewhere. The adviser
makes decisions on portfolio transactions and selects brokers and dealers
subject to guidelines established by the Trustees. The adviser may select
brokers and dealers who offer brokerage and research services. These services
may be furnished directly to the Trust or to the adviser and may include: advice
as to the advisability of investing in securities; security analysis and
reports; economic studies; industry studies; receipt of quotations for portfolio
evaluations; and similar services. Research services provided by brokers and
dealers may be used by the adviser or its affiliates in advising the Trust and
other accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The adviser and its affiliates exercise
reasonable business judgment in selecting brokers who offer brokerage and
research services to execute securities transactions. They determine in good
faith that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided. During the fiscal
years ended June 30, 1998, 1997 and 1996, the Trust paid ___brokerage
commissions. Although investment decisions for the Trust are made independently
from those of the other accounts managed by the adviser, investments of the type
the Trust may make may also be made by those other accounts. When the Trust and
one or more other accounts managed by the adviser are prepared to invest in, or
desire to dispose of, the same security, available investments or opportunities
for sales will be allocated in a manner believed by the adviser to be equitable
to each. In some cases, this procedure may adversely affect the price paid or
received by the Trust or the size of the position obtained or disposed of by the
Trust. In other cases, however, it is believed that coordination and the ability
to participate in volume transactions will be to the benefit of the Trust.
Trust Administration
Federated Services Company, a subsidiary of Federated Investors, Inc., provides
administrative personnel and services to the Trust for a fee as described in the
prospectus. From March 1, 1994 to March 1, 1996, Federated Administrative
Services, a subsidiary of Federated Investors, Inc., served as the Trust's
Administrator. For purposes of this Statement of Additional Information,
Federated Services Company and Federated Administrative Services may hereinafter
collectively be referred to as the "Administrators." For the fiscal years ended
June 30, 1998, 1997, and 1996, the Administrators earned $_____, $163,655, and
$158,326, respectively.
Custodian and Portfolio Accountant
State Street Bank and Trust Company, Boston, MA, is custodian for the securities
and cash of the Trust. Federated Services Company, Pittsburgh, PA, provides
certain accounting and recordkeeping services with respect to the Trust's
portfolio investments. The fee paid for this service is based upon the level of
the Trust's average net assets for the period plus out-of-pocket expenses.
Transfer Agent
Federated Services Company, through its registered transfer agent, Federated
Shareholder Services Company, maintains all necessary shareholder records. For
its services, the transfer agent receives a fee based on size, type, number of
accounts and transactions made by shareholders.
Independent Public Accountants
The independent auditors for the Trust are Arthur Andersen LLP, Pittsburgh, PA.
Shares are sold at their net asset value without a sales charge on days the New
York Stock Exchange is open for business. The procedure for purchasing Shares is
explained in the respective prospectuses 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 fiscal year ended June 30, 1997 payments in the amount of $19,226 were
made pursuant to the Distribution Plan (Institutional Service Shares only) of
which $18,457 was waived. In addition, for this period, the Trust paid
shareholder service fees in the amount of $541,645, of which $523,188 was
waived.
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.
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 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.
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.
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:
o derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned during
the year.
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 returns for Institutional Shares for the
one-year, five-year, and ten-year periods ended June 30, 1997, were 4.59%,
4.15%, and 4.99%, respectively. The Trust's average annual total return for
Institutional Service Shares for the fiscal year ended June 30, 1997 and for the
period since inception (August 31, 1993, date of initial public offering), to
June 30, 1997 was 4.33% and 3.70% respectively.
The Trust's yields for the thirty-day period ended June 30, 1997, for
Institutional Shares and Institutional Service Shares were 3.93% and 3.68%,
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 intermediaries 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, 1997,
for Institutional Shares and Institutional Service Shares were 5.46% and 5.11%,
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 1998
MULTISTATE MUNICIPAL FUND
FEDERAL INCOME TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%
JOINT $1- $42,351- $102,301- $155,951- OVER
RETURN 42,350 102,300 155,950 278,450 $278,450
SINGLE $1- $25,351- $61,401- $128,101- OVER
RETURN 25,350 61,400 128,100 278,450 $278,450
Tax-Exempt
Yield Taxable Yield Equivalent
1.00% 1.18% 1.39% 1.45% 1.56% 1.66%
1.50% 1.76% 2.08% 2.17% 2.34% 2.48%
2.00% 2.35% 2.78% 2.90% 3.13% 3.31%
2.50% 2.94% 3.47% 3.62% 3.91% 4.14%
3.00% 3.53% 4.17% 4.35% 4.69% 4.97%
3.50% 4.12% 4.86% 5.07% 5.47% 5.79%
4.00% 4.71% 5.56% 5.80% 6.25% 6.62%
4.50% 5.29% 6.25% 6.52% 7.03% 7.45%
5.00% 5.88% 6.94% 7.25% 7.81% 8.28%
5.50% 6.47% 7.64% 7.97% 8.59% 9.11%
6.00% 7.06% 8.33% 8.70% 9.38% 9.93%
6.50% 7.65% 9.03% 9.42% 10.16% 10.76%
7.00% 8.24% 9.72% 10.14% 10.94% 11.59%
7.50% 8.82% 10.42% 10.87% 11.72% 12.42%
8.00% 9.41% 11.11% 11.59% 12.50% 13.25%
Note:The maximum marginal tax rate for each bracket was used in calculating the
taxable yield equivalent.
The performance of both classes of Shares depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in the Trust's expenses or either class of Shares' expenses; and
o 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:
o Lipper Analytical Services, Inc., ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and
takes into account any change in offering price over a specific period of
time. From time to time, the Trust will quote its Lipper ranking in the
"intermediate municipal bond funds" category in advertising and sales
literature.
o The Lehman Brothers 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.
o The Lehman Brothers 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.
o The Lehman Brothers 1-Year G.O. Bond Index has a maturity of 1 to 2 years
and includes State and Local General Obligation bonds. Total returns for the
index are calculated semi-monthly.
o Morningstar, Inc., An independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Trust's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Trust can
compare its performance, or performance for the types of securities in which it
invests, to a variety of other investments, such as bank savings accounts,
certificates of deposit, and Treasury bills.
Economic and Market Information
Advertising and sales literature for the Trust may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by the Trust portfolio managers and their views and analysis on how
such developments could affect the Trust. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute.
Federated Investors, Inc. is dedicated to meeting investor needs which is
reflected in its investment decision making--structured, straightforward, and
consistent. This has resulted in a history of competitive performance with a
range of competitive investment products that have gained the confidence of
thousands of clients and their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment decisions
are made and executed by teams of portfolio managers, analysts, and traders
dedicated to specific market sectors. These traders handle trillions of dollars
in annual trading volume.
In the municipal sector, as of December 31, 1997, Federated Investors, Inc.
managed 11 bond funds with approximately $2.1 billion in assets and 22 money
market funds with approximately $10.9 billion in total assets. In 1976,
Federated introduced one of the first municipal bond mutual funds in the
industry and is now one of the largest institutional buyers of municipal
securities. The Funds may quote statistics from organizations including The Tax
Foundation and the National Taxpayers Union regarding the tax obligations of
Americans.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated Investors, Inc. are: U.S. equity and high
yield - J. Thomas Madden; U.S. fixed income -William D. Dawson, III; and
International - Henry A. Frantzen. The Chief Investment Officers are Executive
Vice Presidents of the Federated advisory companies.
Mutual Fund Market
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $4.4 trillion to the more than 6,700 funds available.*
Federated Investors, Inc., through its subsidiaries, distributes mutual funds
for a variety of investment applications. Specific markets include:
Institutional Clients
Federated Investors, Inc. meets the needs of approximately 900 institutional
clients nationwide by managing and servicing separate accounts and mutual funds
for a variety of applications, including defined benefit and defined
contribution programs, cash management, and asset/liability management.
Institutional clients include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division.
Bank Marketing
Other institutional clients include close relationships with more than 1,600
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios. The
marketing effort to trust clients is headed by Timothy C. Pillion, Senior Vice
President, Bank Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/ dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any other
mutual fund distributor. Federated's service to financial professionals and
institutions has earned it high ranking in several DALBAR Surveys. DALBAR, Inc
is recognized as the industry benchmark for service quality measurement. The
marketing effort to these firms is headed by James F. Getz, President, Federated
Securities Corp.
* Source: Investment Company Institute
<PAGE>
Standard and Poor's ("S&P") Municipal Bond Ratings
AAA--Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
NR--Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
Plus (+) or minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Moody's Investors Service, Inc. ("Moody's") Municipal Bond Ratings
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
NR--Not rated by Moody's.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate or municipal bond rating
system. The modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
Fitch IBCA, Inc. "Fitch" Investment Grade Bond Ratings
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA." Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+."
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered strong, but
may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit quality.
NR--NR indicates that Fitch does not rate the specific issue.
Plus (+) or Minus (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "AAA" category.
Standard and Poor's Municipal Note Ratings
SP-1--Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
sign (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
Moody's Investors Service, Inc. Short-Term Loan Ratings
MIG1/VMIG1--This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad based access to the market for refinancing.
MIG2/VMIG2--This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
Standard and Poor's Commercial Paper Ratings
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high for issues
designated A-1.
Moody's Investors Service, Inc. Commercial Paper Ratings
P-1--Issuers rated P-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. P-1 repayment
capacity will normally be evidenced by the following characteristics:
o leading market positions in well-established industries;
o high rates of return on funds employed;
o conservative capitalization structure with moderate reliance on debt and
ample asset protection;
o broad margins in earning coverage of fixed financial charges and high
internal cash generation; and
o well-established access to a range of financial markets and assured sources
of alternative liquidity.
P-2--Issuers rated P-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.
Federated 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 Statement of Additional Information for
Institutional Shares and Institutional Service Shares dated August 31, 1998,
with the Securities and Exchange Commission ("SEC"). The information contained
in the Statement of Additional Information is incorporated by reference into
this prospectus. You may request a copy of the Statement of Additional
Information or a paper copy of this prospectus, if you have received your
prospectus electronically, free of charge by calling 1-800-341-7400. To obtain
other information, or make inquiries about the Trust, contact the Trust at the
address listed in the back of this prospectus. The Statement of Additional
Information, material incorporated by reference into this document, and other
information regarding the Trust is maintained electronically with the SEC at
Internet Web site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Prospectus dated August 31, 1998
<PAGE>
Summary of Trust Expenses............ 1
Financial Highlights--Institutional Service Shares 2
General Information.................. 3
Year 2000 Statement................................................... 3
Investment Information............... 3
Investment Objective............... 3
Investment Policies................ 3
Municipal Securities............... 4
Investment Risks................... 5
Investment Limitations............. 5
Trust Information.................... 5
Management of the Trust............ 5
Distribution of Institutional
Service Shares................... 6
Administration of the Trust........ 7
Net Asset Value...................... 7
Investing in Institutional Service Shares 7
Share Purchases.................... 7
Minimum Investment Required........ 7
What Shares Cost................... 7
Account Activity................... 8
Dividends.......................... 8
Capital Gains...................... 8
Redeeming Institutional Service Shares 8
Telephone Redemption............... 8
Written Requests................... 8
Accounts with Low Balances......... 9
Shareholder Information.............. 9
Voting Rights...................... 9
Tax Information...................... 9
Federal Income Tax................. 9
State and Local Taxes.............. 10
Performance Information.............. 10
Other Classes of Shares.............. 10
Financial Highlights--Institutional Shares 11
Financial Statements................. 12
Report of Independent Public Accountants 24
<PAGE>
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated May 8, 1981. 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 charge
imposed by the Trust.
Year 2000 Statement.
Like other mutual funds and business organizations worldwide, the Trust's
service providers (among them, the adviser, distributor, administrator and
transfer agent) must ensure that their computer systems are adjusted to properly
process and calculate date-related information from and after January 1, 2000.
Many software programs and, to a lesser extent, the computer hardware in use
today cannot distinguish the year 2000 from the year 1900. Such a design flaw
could have a negative impact in the handling of securities trades, pricing and
accounting services. The Trust and its service providers are actively working on
necessary changes to computer systems to deal with the year 2000 issue and
believe that systems will be year 2000 compliant when required. Analysis
continues regarding the financial impact of instituting a year 2000 compliant
program on the
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:
n 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, including industrial development bonds, 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; and
n participation interests, as described below, in any of the above obligations.
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:
n rated within the four highest ratings for municipal securities by Moody's
Investors Service, Inc. ("Moody's") (Aaa, Aa, A, or Baa) or by
Standard & Poor's ("S&P") and Fitch IBCA, Inc. ("Fitch") (AAA, AA, A, or BBB);
n guaranteed at the time of purchase by the U.S. government as to the payment of
principal and interest;
n rated at the time of purchase within the two highest ratings categories of
Moody's short-term municipal securities ratings, (MIG1/VMIG1, MIG2/VMIG2) or
Moody's municipal commercial paper ratings, (P-1, P-2) or S&P's municipal note
rating, (SP-1, SP-2) or S&P's municipal commercial paper and short-term
ratings, (A-1, A-2); or
n unrated, if at the time of purchase, determined by the Trust's investment
adviser to be of comparable quality to municipal securities as stated above.
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
Statement of Additional Information.
Participation Interests
The Trust may purchase participation interests from financial institutions such
as commercial banks, savings 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.
Inverse Floaters
The Fund may invest in securities known as "inverse floaters" which represent
interests in municipal securities. The Fund intends to purchase inverse floaters
to assist in duration management and to seek current income. These obligations
pay interest rates that vary inversely with changes in the interest rates of
specified short-term municipal securities or an index of short-term municipal
securities. The interest rates on inverse floaters will typically decline as
short-term market interest rates increase and increase as short-term market
rates decline. Inverse floaters will generally respond to changes in market
interest rates more rapidly than fixed-rate long-term securities (typically
twice as fast). As a result, the market values of inverse floaters will
generally be more volatile than the market values of fixed-rate municipal
securities. Typically, the portion of the portfolio invested in inverse floaters
will be subject to additional volatility.
Financial Futures
The Fund may purchase and sell interest rate and index financial futures
contracts. These financial futures contracts may be used to hedge all or a
portion of its portfolio against changes in the market value of portfolio
securities and interest rates, provide additional liquidity, and accomplish its
current strategies in a more expeditious fashion. Financial futures contracts
call for the delivery of particular debt instruments at a certain time in the
future. The seller of the contract agrees to make delivery of the type of
instrument called for in the contract and the buyer agrees to take delivery of
the instrument at the specified future time.
As a matter of investment policy, which may be changed without shareholder
approval, the Fund may not purchase or sell futures contracts if immediately
thereafter the sum of the amount of margin deposits on the Fund's existing
futures positions would exceed 5% of the market value of the Fund's total
assets. When the Fund purchases futures contracts, an amount of municipal
securities, cash or cash equivalents, equal to the underlying commodity value of
the futures contracts (less any related margin deposits), will be deposited in a
segregated account with the Fund's custodian (or the broker, if legally
permitted) to collateralize the position.
Risks
When the Fund uses financial futures, there is a risk that the prices of the
securities subject to the futures contracts may not correlate perfectly with
the prices of the securities in the Fund's portfolio. This may cause the
futures contract to react differently than the portfolio securities to market
changes. In addition, the Fund's investment adviser could be incorrect in its
expectations about the direction or extent of market factors such as interest
rate movements. In these events, the Fund may lose money on the futures
contract. It is not certain that a secondary market for positions in futures
contracts will exist at all times. Although the investment adviser will
consider liquidity before entering into futures transactions, there is no
assurance that a liquid secondary market on an exchange or otherwise will
exist for any particular futures contract at any particular time. The Fund's
ability to establish and close out futures positions depends on this secondary
market.
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. 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:
n Invest more than 5% of its total assets in securities of one issuer (except
cash and cash items and U.S. government obligations); or n 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:
n commit more than 15% of its net assets to illiquid obligations;
n 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.
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 0.40%
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 0.45% 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.
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. It is a subsidiary of Federated Investors, Inc. All of the Class A
(voting) shares of Federated Investors, Inc. are owned by a trust, the
trustees of which are John F. Donahue, Chairman and Director of Federated
Investors, Inc., Mr. Donahue's wife, and Mr. Donahue's son, J. Christopher
Donahue, who is President and Director of Federated Investors, Inc..
Jeff A. Kozemchak has been the Trust's portfolio manager since June 1996. Mr.
Kozemchak joined Federated Investors, Inc. or its predecessor in 1987 and has
been a Vice President of the Trust's investment adviser since 1993. Mr.
Kozemchak served as an Assistant Vice President of the investment adviser from
1990 until 1992. Mr. Kozemchak is a Chartered Financial Analyst and received his
M.S. in Industrial Administration from Carnegie Mellon University in 1987.
Mary Jo Ochson has been the Trust's portfolio manager since January 1997. Ms.
Ochson joined Federated Investors, Inc. or its predecessor in 1982 and has been
a Senior Vice President of the Trust's investment adviser since January 1996.
From 1988 through 1995, Ms. Ochson served as a Vice president of the Trust's
investment adviser. Ms. Ochson is a Chartered Financial Analyst and received her
M.B.A. in Finance from the University of Pittsburgh.
Federated Management and other subsidiaries of Federated Investors, Inc. serve
as investment advisers to a number of investment companies and private accounts.
Certain other subsidiaries also provide administrative services to a number of
investment companies. With over $120 billion invested across more than 300 funds
under management and/or administration by its subsidiaries, as of December 31,
1997, Federated Investors Inc. is one of the largest mutual fund investment
managers in the United States. With more than 2,000 employees, Federated
continues to be led by the management who founded the company in 1955. Federated
funds are presently at work in and through approximately 4,000 financial
institutions nationwide.
Both the Trust and the Adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the 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.
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, Inc.
Distribution Plan and Shareholder Services
Under a distribution plan adopted in accordance with Rule 12b-1 under the
Investment Company Act of 1940 (the "Plan"), the distributor may be paid a fee
by the Trust in an amount computed at an annual rate of up to 0.25% of the
average daily net asset value of the Shares. 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 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 Plan.
In addition, the Trust has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, Inc., under
which the Trust may make payments up to 0.25% of the average daily net asset
value of its shares to obtain certain personal services for shareholders and to
maintain shareholder accounts. From time to time and for such periods as deemed
appropriate, the amount stated above may be reduced voluntarily. Under the
Shareholder Services Agreement, Federated Shareholder Services will either
perform shareholder services directly or will select financial institutions to
perform shareholder services. Financial institutions will receive fees based
upon shares owned by their clients or customers. The schedules of such fees and
the basis upon which fees will be paid will be determined from time to time by
the Trust and Federated Shareholder Services.
Supplemental Payments to Financial Institutions
In addition to payments made pursuant to the Distribution Plan and Shareholder
Services Agreement, Federated Securities Corp. and Federated Shareholder
Services, from their own assets, may pay financial institutions supplemental
fees for the performance of substantial sales services, distribution-related
support services, or shareholder services. The support may include sponsoring
sales, educational and training seminars for their employees, providing sales
literature, and engineering computer software programs that emphasize the
attributes of the Trust. Such assistance will be predicated upon the amount of
shares the financial institution sells or may sell, and/or upon the type and
nature of sales or marketing support furnished by the financial institution. Any
payments made by the distributor may be reimbursed by the Trust's investment
adviser or its affiliates.
Administration of the Trust
Administrative Services
Federated Services Company, a subsidiary of Federated Investors, Inc., provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Trust. Federated Services Company
provides these at an annual rate which relates to the average aggregate daily
net assets of all funds advised by subsidiaries of Federated Investors, Inc.
("Federated Funds") as specified below:
Maximum Average Aggregate
Fee Daily Net Assets
0.150% on the first $250 million 0.125% on the next $250 million 0.100% on the
next $250 million 0.075% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Services Company may choose voluntarily to waive a portion of its fee.
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.
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 Shareholder 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. Questions on wire purchases
should be directed to your shareholder services representative at the telephone
number listed on your account statement. By Mail To purchase Shares by mail,
send a check made payable to Federated Short-Term Municipal Trust-Institutional
Service Shares to: Federated Shareholder Services Company, P.O. Box 8600,
Boston, Massachusetts 02266-8600. Orders by mail are considered received when
payment by check is converted 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 financial
intermediary'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
financial intermediary may be subject to a smaller minimum investment. What
Shares Cost Shares are sold at their net asset value next determined after an
order is received. There is no sales charge imposed by the Trust. Investors who
purchase Shares through a financial intermediary may be charged an additional
service fee by that financial intermediary.
The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange Monday through Friday, except
on (i) days on which there are not sufficient changes in the value of the
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, Martin Luther King Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Account Activity
Shareholders will receive periodic statements reporting all account activity,
including dividends paid. The Trust will not issue share certificates.
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.
The Trust redeems Shares at their net asset value next determined after the
Trust receives the redemption request. Investors who redeem Shares through a
financial intermediary may be charged a service fee by that financial
intermediary. 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
Shareholder 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 should be sent unendorsed with the
written request by registered or certified mail to the address noted above.
Signatures
Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Trust, or a redemption payable other than to
the shareholder of record must have their signatures guaranteed by:
n a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund, which is administered by the Federal Deposit Insurance
Corporation ("FDIC");
n a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
n a savings bank or savings association whose deposits are insured by the
Savings Association Insurance Fund, which is administered by the FDIC; or
n 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.
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.
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.
State and Local Taxes
Because interest received by the Trust may not be exempt from all state and
local taxes, shareholders may be required to pay state and local taxes on
dividends received from the Trust. Shareholders are urged to consult their own
tax advisers regarding the status of their accounts under state and local tax
laws.
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 charge 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.
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, Inc.
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 1-800-341-7400.
<PAGE>
Federated Short-Term Municipal Trust
Institutional Service Shares
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Management
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Public Accountants
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222
Federated Short-Term Municipal Trust
Institutional Service Shares
Prospectus
August 31, 1998
A No-Load, Open-End, Diversified
Management Investment Company
Federated Securities Corp., Distributor
Cusip 313907206
8072507A-SS (8/98)
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits:
(a) Financial Statements. (Filed in Part A)
(b) Exhibits:
(1) (i) Conformed Copy of Declaration of Trust of the Registrant;(13)
(ii) Conformed Copy of Amendment No. 1 to the Declaration of
Trust; (13)
(ii) Conformed Copy of Amendment No. 2 to the Declaration of
Trust; (13)
(ii) Conformed Copy of Amendment No. 3 to the Declaration of
Trust; (13)
(iii) Conformed Copy of Amendment No. 4 to the Declaration of Trust
of Registrant; (12)
(2) (i) Copy of the By-Laws of the Registrant; (13) (ii)
Copy of Amendment to the By-Laws; (7) (iii) Copy of
Amendment No. 5 to the By-Laws; + (iv) Copy of Amendment
No. 6 to the By-Laws; + (v) Copy of Amendment No. 7 to
the By-Laws; + (vi) Copy of Amendment No. 8 to the
By-Laws; +
(3) Not applicable;
(4) Copy of Specimen Certificate of Shares; (13)
(5) Conformed Copy of the Investment Advisory Contract; (9)
(6) (i) Conformed Copy of the Distributor's Contract of the
Registrant; (11)
(ii) The Registrant hereby incorporates the conformed
copy of the specimen Mutual Funds Sales and Service
Agreement; Mutual Funds Service Agreement; and Plan Item
24 (b) (6) of the Cash Trust Series II Registration
Statement on Form N-1A, filed with the Commission on
July 24, 1995. (File Numbers 33-38550 and 811-6269).
(7) Not applicable;
(8) Conformed Copy of the Custodian Agreement of the Registrant; (11)
(i) Conformed Copy of Domestic Custody Fee Schedule; +
(9) (i) Conformed Copy of Agreement for Fund Accounting Services,
Administrative Services, Transfer Agency
Services, and ....Custody Services Procurement; (14)
- ---------------
+ All exhibits have been filed electronically.
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed August 24, 1987. (File Nos. 2-72277 and
811-3181)
9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 15 on Form N-1A filed August 24, 1989. (File Nos. 2-72277 and
811-3181)
11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 26 on Form N-1A filed August 26, 1994. (File Nos. 2-72277 and
811-3181)
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 28 on Form N-1A filed August 25, 1995. (File Nos. 2-72277 and
811-3181)
13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 29 on Form N-1A filed April 25, 1996. (File Nos. 2-72277 and
811-3181)
14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 31 on Form N-1A filed August 26, 1996. (File Nos. 2-72277 and
811-3181)
(ii) The responses described in Item 24 (b)(6)(ii) are
hereby incorporated by reference.
(iii) The registrant hereby incorporates the conformed
copy of the Shareholder Services Sub- Contract between
Fidelity and Federated Shareholder Services from Item
24(b)(9)(iii) of the Federated GNMA Trust Registration
Statement on Form N-1A, filed with the Commission on
March 25, 1996. (File Nos. 2-75670 and 811- 3375) (iv)
Conformed Copy of Amended and Restated Shareholder
Services Agreement; +
(10) Copy of Opinion and Consent of Counsel as to the
legality of shares being registered; (2)
(11) Conformed Copy of the Consent of Independent Public
Accountants; (15)
(12) Not applicable;
(13) Copy of Initial Capital Understanding; (13)
(14) Not applicable;
(15) Conformed Copy of Rule 12b-1 Plan; (11)
(16) Schedule for Computation of Fund Performance Data; (8)
(17) Copy of Financial Data Schedules; (15)
(18) The Registrant hereby incorporates the Conformed Copy
of the specimen Multiple Class Plan from Item 24(b)(18)
of the World Investment Series, Inc. Registration
Statement on Form N-1A, filed with the Commission on
January 26, 1996. (File Nos. 33-52149 and 811-07141)
(19) Power of Attorney; (15)
Item 25. Persons Controlled by or Under Common Control with
Registrant:
None
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of June 27, 1998
Shares of Beneficial Interest
(no par value)
Institutional Shares 1,277
Institutional Service Shares 183
Item 27. Indemnification: (10)
- ---------------------------
+ All exhibits have been filed electronically.
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed August 4, 1981. (File Nos. 2-72277 and
811-3181)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 on Form N-1A filed August 22, 1988. (File Nos. 2-72277 and
811-3181)
11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 26 on Form N-1A filed August 26, 1994. (File Nos. 2-72277 and
811-3181)
13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 29 on Form N-1A filed April 25, 1996. (File Nos. 2-72277 and
811-3181)
15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 33 on Form N-1A filed August 25, 1997. (File Nos. 2-72277 and
811-3181)
Item 28. Business and Other Connections of Investment Adviser:
(a) For a description of the other business of the investment adviser, see the
section entitled "Trust Information - Management of the Trust" in Part A. The
affiliations with the Registrant of four of the Trustees and one of the Officers
of the investment adviser are included in Part B of this Registration Statement
under "Federated Short-Term Municipal Trust Management." The remaining Trustee
of the investment adviser, his position with the investment adviser, and, in
parentheses, his principal occupation is: Mark D. Olson (Partner, Wilson,
Halbrook & Bayard), 107 W. Market Street, Georgetown, Delaware 19947.
The remaining Officers of the investment adviser are:
Executive Vice Presidents: William D. Dawson, III
...... Henry A. Frantzen
...... J. Thomas Madden
Senior Vice Presidents: Joseph M. Balestrino
...... Drew J. Collins
...... Jonathan C. Conley
...... Deborah A. Cunningham
...... Mark E. Durbiano
...... Sandra L. McInerney
...... J. Alan Minteer
...... Susan M. Nason
...... Mary Jo Ochson
...... Robert J. Ostrowski
Vice Presidents: Todd A. Abraham
...... J. Scott Albrecht
...... Randall S. Bauer
...... David A. Briggs
...... Micheal W. Casey
...... Kenneth J. Cody
...... Alexandre de Bethmann
...... Michael P. Donnelly
...... Linda A. Duessel
...... Donald T. Ellenberger
...... Kathleen M. Foody-Malus
...... Thomas M. Franks
...... Edward C. Gonzales
...... James E. Grefenstette
...... Susan R. Hill
...... Stephen A. Keen
...... Robert K. Kinsey
...... Robert M. Kowit
...... Jeff A. Kozemchak
...... Steven Lehman
...... Marian R. Marinack
...... Charles A. Ritter
...... Scott B. Schermerhorn
...... Frank Semack
...... Aash M. Shah
...... Christopher Smith
...... William F. Stotz
...... Tracy P. Stouffer
...... Edward J. Tiedge
...... Paige M. Wilhelm
...... Jolanta M. Wysocka
Assistant Vice Presidents:
...... Stefanie L. Bachhuber
...... Arthur J. Barry
...... Robert E. Cauley
...... Lee R. Cunningham, II
...... Paul S. Drotch
...... Salvatore A. Esposito
...... Donna M. Fabiano
...... John T. Gentry
...... William R. Jamison
...... Constantine Kartsonsas
...... Natalie F. Metz
...... Joseph M. Natoli
...... Keith J. Sabol
...... John Sheehy
...... Michael W. Sirianni
...... Gregg S. Tenser
...... Leonardo A. Vila
...... Lori A. Wolff
Secretary:.. Stephen A. Keen
Treasurer:.. Thomas R. Donahue
Assistant Secretaries: Thomas R. Donahue
...... Richard B. Fisher
...... Christine I. McGonigle
Assistant Treasurer: Richard B. Fisher
The business address of each of the Officers of the investment adviser is
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779. These
individuals are also officers of a majority of the investment advisers to the
Funds listed in Part B of this Registration Statement.
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the Distributor for shares of the
Registrant, also acts as principal underwriter for the following
open-end investment companies:
111 Corcoran Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
Adjustable Rate U.S. Government Fund, Inc.; Federated American Leaders Fund,
Inc.; Federated ARMs Fund; Federated Core Trust; Federated Equity Funds;
Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Investment Portfolios; Federated Investment Trust; Federated
Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated Stock and Bond
Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; Fixed Income Securities, Inc.; High Yield Cash
Trust; Independence One Mutual Funds; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.; Investment Series
Trust; Liberty U.S. Government Money Market Trust; Liquid Cash Trust; Managed
Series Trust; Marshall Funds, Inc.; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; Peachtree Funds; Regions
Funds; RIMCO Monument Funds; SouthTrust Vulcan Funds; Star Funds; Targeted
Duration Trust; Tax-Free Instruments Trust; The Planters Funds; The Virtus
Funds; The Wachovia Funds; The Wachovia Municipal Funds; Tower Mutual Funds;
Trust for Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations;
Vision Group of Funds, Inc.; and World Investment Series, Inc.
Federated Securities Corp. also acts as principal underwriter for the following
closed-end investment company: Liberty Term Trust, Inc.- 1999.
<PAGE>
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Richard B. Fisher Director, Chairman, Chief
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary and Asst.
Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice
Federated Investors Tower President, Federated,
Pittsburgh, PA 15222-3779 Securities Corp.
Thomas R. Donahue Director, Assistant Secretary
Federated Investors Tower and Assistant Treasurer
Pittsburgh, PA 15222-3779 Federated Securities Corp
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Byron F. Bowman Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Raymond Hanley Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Brian G. Kelly Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
David L. Immonen Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert M. Rossi Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Leslie K. Platt Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Item 30. Location of Accounts and Records:
Registrant 5800 Corporate Drive
Pittsburgh, PA 15237-7000
Federated Shareholder
Services Company Federated Investors Tower
("Transfer Agent, Dividend 1001 Liberty Avenue
----------------
Disbursing Agent and Pittsburgh, PA 15222-3779
Portfolio Recordkeeper")
Federated Administrative Services Federated Investors Tower
("Administrator") 1001 Liberty Avenue
---------------------------------
Pittsburgh, PA 15222-3779
Federated Management Federated Investors Tower
("Adviser") 1001 Liberty Avenue
Pittsburgh, PA 15222-3779
State Street Bank and Trust Company P.O. Box 8600
("Custodian") Boston, MA 02266-8600
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED SHORT-TERM MUNICIPAL
TRUST has duly caused this Amendment to its Registration Statement to be signed
on its behalf by the undersigned, thereto duly authorized, in the City of
Pittsburgh and Commonwealth of Pennsylvania, on the 30th day of June, 1998.
FEDERATED SHORT-TERM MUNICIPAL TRUST
BY: /s/ Matthew S. Hardin
Matthew S. Hardin, Assistant Secretary
Attorney in Fact for John F. Donahue
June 30, 1998
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:
NAME TITLE DATE
By: /s/ Matthew S. Hardin
Matthew S. Hardin Attorney In Fact June 30, 1998
---------
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
Glen R. Johnson* President and Trustee
Edward C. Gonzales* Executive Vice President
John W. McGonigle* Secretary, Treasurer and Executive
Vice President
(Principal Financial and
Accounting Officer)
Thomas G. Bigley* Trustee
John T. Conroy, Jr.* Trustee
William J. Copeland* Trustee
James E. Dowd* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr.* Trustee
Glen R. Johnson* Trustee
Peter E. Madden* Trustee
John E. Murray, Jr.* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
* By Power of Attorney
Exhibit 9(iv) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
Amended and Restated
SHAREHOLDER SERVICES AGREEMENT
THIS AGREEMENT, amended and restated as of the first day of September,
1995, (originally made and entered into as of the first day of March, 1994), by
and between those investment companies listed on Exhibit 1, as may be amended
from time to time, having their principal office and place of business at
Federated Investors Tower, Pittsburgh, PA 15222-3779 and who have approved this
form of Agreement (individually referred to herein as a "Fund" and collectively
as "Funds") and Federated Shareholder Services, a Delaware business trust,
having its principal office and place of business at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779 ("FSS").
1. The Funds hereby appoint FSS to render or cause to be rendered personal
services to shareholders of the Funds and/or the maintenance of accounts
of shareholders of the Funds ("Services"). In addition to providing
Services directly to shareholders of the Funds, FSS is hereby appointed
the Funds' agent to select, negotiate and subcontract for the performance
of Services. FSS hereby accepts such appointments. FSS agrees to provide
or cause to be provided Services which, in its best judgment (subject to
supervision and control of the Funds' Boards of Trustees or Directors, as
applicable), are necessary or desirable for shareholders of the Funds. FSS
further agrees to provide the Funds, upon request, a written description
of the Services which FSS is providing hereunder.
2. During the term of this Agreement, each Fund will pay FSS and FSS agrees
to accept as full compensation for its services rendered hereunder a fee
at an annual rate, calculated daily and payable monthly, up to 0.25% of 1%
of average net assets of each Fund.
For the payment period in which this Agreement becomes effective or
terminates with respect to any Fund, there shall be an appropriate
proration of the monthly fee on the basis of the number of days that this
Agreement is in effect with respect to such Fund during the month.
3. This Agreement shall continue in effect for one year from the date of its
execution, and thereafter for successive periods of one year only if the
form of this Agreement is approved at least annually by the Board of each
Fund, including a majority of the members of the Board of the Fund who are
not interested persons of the Fund ("Independent Board Members") cast in
person at a meeting called for that purpose.
4. Notwithstanding paragraph 3, this Agreement may be terminated as follows:
(a) at any time, without the payment of any penalty, by the vote of a
majority of the Independent Board Members of any Fund or by a vote of
a majority of the outstanding voting securities of any Fund as
defined in the Investment Company Act of 1940 on sixty (60) days'
written notice to the parties to this Agreement;
(b) automatically in the event of the Agreement's assignment as defined in
the Investment Company Act of 1940; and
(c) by any party to the Agreement without cause by giving the other party
at least sixty (60) days' written notice of its intention to
terminate.
5. FSS agrees to obtain any taxpayer identification number certification from
each shareholder of the Funds to which it provides Services that is
required under Section 3406 of the Internal Revenue Code, and any
applicable Treasury regulations, and to provide each Fund or its designee
with timely written notice of any failure to obtain such taxpayer
identification number certification in order to enable the implementation
of any required backup withholding.
6. FSS shall not be liable for any error of judgment or mistake of law or for
any loss suffered by any Fund in connection with the matters to which this
Agreement relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or
from reckless disregard by it of its obligations and duties under this
Agreement. FSS shall be entitled to rely on and may act upon advice of
counsel (who may be counsel for such Fund) on all matters, and shall be
without liability for any action reasonably taken or omitted pursuant to
such advice. Any person, even though also an officer, trustee, partner,
employee or agent of FSS, who may be or become a member of such Fund's
Board, officer, employee or agent of any Fund, shall be deemed, when
rendering services to such Fund or acting on any business of such Fund
(other than services or business in connection with the duties of FSS
hereunder) to be rendering such services to or acting solely for such Fund
and not as an officer, trustee, partner, employee or agent or one under the
control or direction of FSS even though paid by FSS.
This Section 6 shall survive termination of this Agreement.
7. No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the
party against which an enforcement of the change, waiver, discharge or
termination is sought.
8. FSS is expressly put on notice of the limitation of liability as set forth
in the Declaration of Trust of each Fund that is a Massachusetts business
trust and agrees that the obligations assumed by each such Fund pursuant
to this Agreement shall be limited in any case to such Fund and its assets
and that FSS shall not seek satisfaction of any such obligations from the
shareholders of such Fund, the Trustees, Officers, Employees or Agents of
such Fund, or any of them.
9. The execution and delivery of this Agreement have been authorized by the
Trustees of FSS and signed by an authorized officer of FSS, acting as
such, and neither such authorization by such Trustees nor such execution
and delivery by such officer shall be deemed to have been made by any of
them individually or to impose any liability on any of them personally,
and the obligations of this Agreement are not binding upon any of the
Trustees or shareholders of FSS, but bind only the trust property of FSS
as provided in the Declaration of Trust of FSS.
10. Notices of any kind to be given hereunder shall be in writing (including
facsimile communication) and shall be duly given if delivered to any Fund
and to such Fund at the following address: Federated Investors Tower,
Pittsburgh, PA 15222-3779, Attention: President and if delivered to FSS at
Federated Investors Tower, Pittsburgh, PA 15222-3779, Attention:
President.
11. This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof
whether oral or written. If any provision of this Agreement shall be held
or made invalid by a court or regulatory agency decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
Subject to the provisions of Sections 3 and 4, hereof, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and shall be governed by Pennsylvania law;
provided, however, that nothing herein shall be construed in a manner
inconsistent with the Investment Company Act of 1940 or any rule or
regulation promulgated by the Securities and Exchange Commission
thereunder.
12. This Agreement may be executed by different parties on separate
counterparts, each of which, when so executed and delivered, shall be an
original, and all such counterparts shall together constitute one and the
same instrument.
13. This Agreement shall not be assigned by any party without the prior
written consent of FSS in the case of assignment by any Fund, or of the
Funds in the case of assignment by FSS, except that any party may assign
to a successor all of or a substantial portion of its business to a party
controlling, controlled by, or under common control with such party.
Nothing in this Section 14 shall prevent FSS from delegating its
responsibilities to another entity to the extent provided herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
Investment Companies (listed on Exhibit
1)
Attest: /s/ John W. McGonigle By: /s/ John F. Donahue
John W. McGonigle John F. Donahue
Secretary Chairman
Federated Shareholder Services
Attest: /s/ John W. McGonigle By: /s/ Glen R. Johnson
Secretary President
<PAGE>
Exhibit 1
Federated Short-Term Municipal Trust
Institutional Shares
Institutional Service Shares
Exhibit 8(i) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
STATE STREET
DOMESTIC CUSTODY
FEE SCHEDULE
Federated Funds
I. Custody Services
Maintain custody of fund assets. Settle portfolio purchases and sales.
Report buy and sell fails. Determine and collect portfolio income. Make
cash disbursements and report cash transactions. Monitor corporate
actions.
ANNUAL FEES
ASSET
Per Fund .25 Basis Points
Wire Fees $3.00 per wire
Settlements:
o Each DTC Transaction $5.00
o Each Federal Reserve Book Entry Transaction $3.75
o Each Repo Transaction (All Repo) $3.75
o Each Physical Transaction (NY/Boston, Private Placement) $15.00
o Each Option Written/Exercised/Expired $18.75
Each Book Entry Muni (Sub-custody) Transaction $15.00
o Government Paydowns $5.00
o Maturity Collections $8.00
o PTC Transactions $6.00
II. Special Services
Fees for activities of a non-recurring nature such as fund consolidation
or reorganization, extraordinary security shipments and the preparation of
special reports will be subject to negotiation.
III. Balance Credit
Municipal Funds
A balance credit equal to 75% of the average demand deposit account
balance in the custodian account for the month billed times the 30 day
T-Bill Rate on the last Monday of the month billed, will be applied
against the month's custodian bill.
Transfer Agent
A balance credit equal to 100% of the average balance in the transfer
agent demand deposit accounts, less the reserve requirement and applicable
related expenses, times 75% of the 30 average Fed Funds Rate.
IV. Payment
The above fees will be charged against the funds' custodian checking
account thirty (30) days after the invoice is mailed to the funds' offices.
V. Term of Contract
The parties agree that this fee schedule shall become effective January 1,
1997.
FEDERATED SERVICES COMPANY STATE STREET
BY: /s/ Douglas L. Hein BY: /s/ Michael E. Hagerty
TITLE: Senior Vice President TITLE: Vice President
DATE: April 15, 1997 DATE: April 8, 1997
----------------------------------- -------------
Exhibit 2(iii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
Federated Short-Term Municipal Trust
Amendment No. 5
to the By-Laws
Effective November 18, 1997
Delete Article III, Section 7 and replace with the following:
Action by Consent of the Board of Trustees, Executive Committee or Other
Committee. Subject to Article V, Section 2 of these By-Laws, any action required
or permitted to be taken at any meeting of the Trustees, Executive Committee or
any other duly appointed Committee may be taken without a meeting if consents in
writing setting forth such action are signed by all members of the Board or such
committee and such consents are filed with the records of the Trust. In the
event of the death, removal, resignation or incapacity of any Board or committee
member prior to that Trustee signing such consent, the remaining Board or
committee members may re-constitute themselves as the entire Board or committee
until such time as the vacancy is filled in order to fulfill the requirement
that such consents be signed by all members of the Board of committee.
Exhibit 2(iv) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
Federated Short-Term Municipal Trust
Amendment #6
to the By-Laws
(effective February 23, 1998)
Delete Sections 1, 2 and 3 of Article I, OFFICERS AND THEIR ELECTION, and
replace with:
Section 1. Officers. The Officers of the Trust shall be a President, one
or more Vice Presidents, a Treasurer, and a Secretary. The Board of
Trustees, in its discretion, may also elect or appoint a Chairman of the
Board of Trustees (who must be a Trustee) and other Officers or agents,
including one or more Assistant Vice Presidents, one or more Assistant
Secretaries, and one or more Assistant Treasurers. A Vice President, the
Secretary or the Treasurer may appoint an Assistant Vice President, an
Assistant Secretary or an Assistant Treasurer, respectively, to serve
until the next election of Officers. Two or more offices may be held by a
single person except the offices of President and Vice President may not
be held by the same person concurrently. It shall not be necessary for any
Trustee or any Officer to be a holder of shares in any Series or Class of
the Trust.
Section 2. Election of Officers. The Officers shall be elected annually by
the Trustees. Each Officer shall hold office for one year and until the
election and qualification of his successor, or until earlier resignation
or removal. The Chairman of the Board of Trustees, if there is one, shall
be elected annually by and from the Trustees, and serve until a successor
is so elected and qualified, or until earlier resignation or removal.
Section 3. Resignations and Removals and Vacancies. Any Officer of the
Trust may resign at any time by filing a written resignation with the
Board of Trustees (or Chairman of the Trustees, if there is one), with the
President, or with the Secretary. Any such resignation shall take effect
at the time specified therein or, if no time is specified, at the time of
receipt. Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective. Any Officer
elected by the Board of Trustees or whose appointment has been ratified by
the Board of Trustees may be removed with or without cause at any time by
a majority vote of all of the Trustees. Any other employee of the Trust
may be removed or dismissed at any time by the President. Any vacancy in
any of the offices, whether by resignation, removal or otherwise, may be
filled for the unexpired portion of the term by the President. A vacancy
in the office of Assistant Vice President may be filled by a Vice
President; in the office of Assistant Secretary by the Secretary; or in
the office of Assistant Treasurer by the Treasurer. Any appointment to
fill any vacancy shall serve subject to ratification by the Board of
Trustees at its next regular meeting.
Exhibit 2(v) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
Federated Short-Term Municipal Trust
Amendment #7
to the By-Laws
(effective February 27, 1998)
Delete Section 5 Proxies of Article IV Shareholders' Meetings, and replace with
the following:
Section 5. Proxies. Any shareholder entitled to vote at any meeting of
shareholders may vote either in person, by telephone, by electronic means
including facsimile, or by proxy, but no proxy which is dated more than
six months before the meeting named therein shall be accepted unless
otherwise provided in the proxy. Every proxy shall be in writing,
subscribed by the shareholder or his duly authorized agent or be in such
other form as may be permitted by law, including documents conveyed by
electronic transmission. Every proxy shall be dated, but need not be
sealed, witnessed or acknowledged. The placing of a shareholder's name on
a proxy or authorizing another to act as the shareholder's agent, pursuant
to telephone or electronically transmitted instructions obtained in
accordance with procedures reasonably designed to verify that such
instructions have been authorized by such shareholder, shall constitute
execution of a proxy by or on behalf of such shareholder. Where Shares are
held of record by more than one person, any co-owner or co-fiduciary may
execute the proxy or give authority to an agent, unless the Secretary of
the Trust is notified in writing by any co-owner or co-fiduciary that the
joinder of more than one is to be required. All proxies shall be filed
with and verified by the Secretary or an Assistant Secretary of the Trust,
or the person acting as Secretary of the Meeting. Unless otherwise
specifically limited by their term, all proxies shall entitle the holders
thereof to vote at any adjournment of such meeting but shall not be valid
after the final adjournment of such meeting.
Exhibit 2(vi) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
Federated Short-Term Municipal Trust
Amendment #8
to the By-Laws
(effective May 12, 1998)
Strike Section 3 - Place of Meeting of Article IV - Shareholders' Meetings and
replace it with the following:
Section 3. Place of Meeting. Meetings of the shareholders of the Trust or
a particular Series or Class shall be held at such place within or without
The Commonwealth of Massachusetts as may be fixed from time to time by
resolution of the Trustees.
Strike Section 6 - Place of Meeting of Article V - Trustees' Meetings and
replace it with the following:
Section 6. Place of Meeting. Meetings of the Trustees shall be held at
such place within or without The Commonwealth of Massachusetts as fixed
from time to time by resolution of the Trustees, or as the person or
persons requesting said meeting to be called may designate, but any
meeting may adjourn to any other place.
