FEDERATED MASTER TRUST
PROSPECTUS
Federated Master Trust (the "Trust") is a no-load, open-end, diversified man-
agement investment company (a mutual fund) investing in money market instru-
ments to achieve current income consistent with stability of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR GUAR-
ANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. THE TRUST ATTEMPTS TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE NO ASSURANCE
THAT THE TRUST WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Trust. Keep this prospectus for future reference.
The Trust has also filed a Statement of Additional Information dated January
31, 1994, with the Securities and Exchange Commission. The information con-
tained in the Statement of Additional Information is incorporated by reference
into this prospectus. You may request a copy of the Statement of Additional In-
formation free of charge by calling 1-800-235-4669. To obtain other information
or to make inquiries about the Trust, contact the Fund at the address listed in
the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated January 31, 1994
TABLE OF CONTENTS
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SUMMARY OF TRUST EXPENSES 1
- --------------------------------------------------
FINANCIAL HIGHLIGHTS 2
- --------------------------------------------------
GENERAL INFORMATION 3
- --------------------------------------------------
INVESTMENT INFORMATION 3
- --------------------------------------------------
Investment Objective 3
Investment Policies 3
Acceptable Investments 3
Variable Rate Demand Notes 3
Bank Instruments 4
Short-Term Credit Facilities 4
Asset-Backed Securities 4
Ratings 4
Repurchase Agreements 4
Credit Enhancement 5
Demand Features 5
Concentration of Investments 5
Investment Risks 6
Investment Limitations 6
Regulatory Compliance 6
TRUST INFORMATION 7
- --------------------------------------------------
Management of the Trust 7
Board of Trustees 7
Investment Adviser 7
Advisory Fees 7
Adviser's Background 7
Distribution of Trust Shares 7
Administration of the Trust 8
Administrative Services 8
Custodian 8
Transfer Agent and Dividend
Disbursing Agent 8
Legal Counsel 8
Independent Auditors 8
NET ASSET VALUE 8
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INVESTING IN THE TRUST 8
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Share Purchases 8
By Wire 8
By Mail 9
Minimum Investment Required 9
Cash Sweep Program 9
Participating Depository Institutions 9
What Shares Cost 9
Subaccounting Services 9
Certificates and Confirmations 10
Dividends 10
Capital Gains 10
REDEEMING SHARES 10
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Telephone Redemption 10
Written Requests 11
Signatures 11
Receiving Payment 11
Redemption Before Purchase
Instruments Clear 11
Accounts with Low Balances 11
SHAREHOLDER INFORMATION 12
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Voting Rights 12
Massachusetts Partnership Law 12
TAX INFORMATION 12
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Federal Income Tax 12
Pennsylvania Corporate and Personal
Property Taxes 12
PERFORMANCE INFORMATION 13
- --------------------------------------------------
FINANCIAL STATEMENTS 14
- --------------------------------------------------
INDEPENDENT AUDITORS' REPORT 25
- --------------------------------------------------
ADDRESSES Inside Back Cover
- ----------------------------
SUMMARY OF TRUST EXPENSES
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<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).................................. None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price).................................. None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds as applicable)................. None
Redemption Fees (as a percentage of amount redeemed, if applicable)... None
Exchange Fee.......................................................... None
<CAPTION>
ANNUAL TRUST OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C>
Management Fees (after waiver)(1)..................................... 0.35%
12b-1 Fee............................................................. None
Total Other Expenses.................................................. 0.11%
Total Trust Operating Expenses(2)................................. 0.46%
</TABLE>
(1) The management fee has been reduced to reflect the waiver of a portion of
the management fee. The maximum management fee is 0.40%.
(2) The Total Trust Operating Expenses would have been 0.51% absent the waiver
of a portion of the management fee.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE TRUST WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "TRUST INFORMATION." Wire-transferred redemptions of less than
$5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000
investment assuming (1) 5% annual return and
(2) redemption at the end of each time period.
As noted in
the table above, the Trust charges no
redemption fees................................ $5 $15 $26 $58
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FEDERATED MASTER TRUST
FINANCIAL HIGHLIGHTS
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(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Independent Auditors' Report on page 25.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
--------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987 1986
- ---------------- -------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------
INCOME FROM
INVESTMENT
OPERATIONS
- ----------------
Net investment
income 0.03 0.04 0.06 0.08 0.09 0.07 0.06 0.07
- ---------------- ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBU-
TIONS
- ----------------
Dividends to
shareholders
from net
investment in-
come (0.03) (0.04) (0.06) (0.08) (0.09) (0.07) (0.06) (0.07)
- ---------------- ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------- ------ ------ ------ ------ ------ ------ ------ ------
TOTAL RETURN* 2.91% 3.76% 6.22% 8.16% 9.21% 7.33% 6.39% 6.82%
- ----------------
RATIOS TO
AVERAGE NET
ASSETS
- ----------------
Expenses 0.46% 0.46% 0.46% 0.45% 0.45% 0.45% 0.45% 0.45%
- ----------------
Net investment
income 2.88% 3.73% 6.13% 7.87% 8.83% 7.03% 6.22% 6.60%
- ----------------
SUPPLEMENTAL
DATA
- ----------------
Net assets, end
of
period (000
omitted) $868,828 $1,058,671 $1,302,565 $1,495,299 $2,109,661 $2,391,625 $3,237,809 $3,057,411
- ----------------
</TABLE>
<TABLE>
<CAPTION>
1985 1984
- ---------------- -------- ----------
<S> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD $ 1.00 $ 1.00
- ----------------
INCOME FROM
INVESTMENT
OPERATIONS
- ----------------
Net investment
income 0.08 0.10
- ---------------- ------ ------
LESS DISTRIBU-
TIONS
- ----------------
Dividends to
shareholders
from net
investment in-
come (0.08) (0.10)
- ---------------- ------ ------
NET ASSET VALUE,
END OF PERIOD $ 1.00 $ 1.00
- ---------------- ------ ------
TOTAL RETURN* 8.23% 10.49%
- ----------------
RATIOS TO
AVERAGE NET
ASSETS
- ----------------
Expenses 0.45% 0.45%
- ----------------
Net investment
income 7.94% 9.96%
- ----------------
SUPPLEMENTAL
DATA
- ----------------
Net assets, end
of
period (000
omitted) $2,864,241 $3,531,411
- ----------------
</TABLE>
* Based on net asset value which does not reflect the sales load or redemption
fee, if applicable.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
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The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated October 10, 1977. The Trust is designed for
institutional investors such as banks, fiduciaries, custodians of public
funds, and similar institutional investors as a convenient means of
accumulating an interest in a professionally managed, diversified portfolio
limited to money market instruments maturing in one year or less. A minimum
initial investment of $25,000 over a 90-day period is required.
The Trust attempts to stabilize the value of a share at $1.00. Trust shares
are currently sold and redeemed at that price.
INVESTMENT INFORMATION
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Trust is current income consistent with
stability of principal. The Trust pursues this investment objective by
investing in a portfolio of money market instruments maturing in one year or
less. The average maturity of money market instruments in the Trust's
portfolio, computed on a dollar weighted basis, will be 90 days or less. 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 policies and limitations
described below cannot be changed without approval of shareholders.
INVESTMENT POLICIES
ACCEPTABLE INVESTMENTS. The Trust invests in high quality money market
instruments that are either rated in the highest short-term rating category by
one or more nationally recognized statistical rating organizations ("NRSROs")
or of comparable quality to securities having such ratings. Examples of these
instruments include, but are not limited to:
. domestic issues of corporate debt obligations, including variable rate
demand notes;
. commercial paper (including Canadian Commercial Paper and Europaper);
. certificates of deposit, demand and time deposits, bankers' acceptances
and other instruments of domestic and foreign banks and other deposit
institutions ("Bank Instruments");
. short-term credit facilities, such as demand notes;
. asset-backed securities;
. obligations issued or guaranteed as to payment of principal and interest
by the U.S. government or one of its agencies or instrumentalities
("Government Securities"); and
. other money market instruments.
The Trust invests only in instruments denominated and payable in U.S. dollars.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term
corporate debt instruments that have variable or floating interest rates
and provide the Trust with the right to
tender the security for repurchase at its stated principal amount plus
accrued interest. Such securities typically bear interest at a rate that is
intended to cause the securities to trade at par. The interest rate may
float or be adjusted at regular intervals (ranging from daily to annually),
and is normally based on a published interest rate or interest rate index.
Most variable rate demand notes allow the Trust to demand the repurchase of
the security on not more than seven days prior notice. Other notes only
permit the Trust to tender the security at the time of each interest rate
adjustment or at other fixed intervals. See "Demand Features." The Trust
treats variable rate demand notes as maturing on the later of the date of
the next interest adjustment or the date on which the Trust may next tender
the security for repurchase.
BANK INSTRUMENTS. The Trust only invests in Bank Instruments either issued
by an institution having capital, surplus and undivided profits over $100
million or insured by the Bank Insurance Fund ("BIF") or the Savings
Association Insurance Fund ("SAIF"). Bank Instruments may include
Eurodollar Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit
("Yankee CDs"), and Eurodollar Time Deposits ("ETDs"). The Trust will treat
securities credit enhanced with a bank's letter of credit as Bank
Instruments.
SHORT-TERM CREDIT FACILITIES. Demand notes are short-term borrowing
arrangements between a corporation and an institutional lender (such as the
Trust) payable upon demand by either party. The notice period for demand
typically ranges from one to seven days, and the party may demand full or
partial payment. The Trust may also enter into, or acquire participations
in, short-term revolving credit facilities with corporate borrowers. Demand
notes and other short-term credit arrangements usually provide for floating
or variable rates of interest.
ASSET-BACKED SECURITIES. Asset-backed securities are securities issued by
special purpose entities whose primary assets consist of a pool of loans or
accounts receivable. The securities may take the form of beneficial
interest in a special purpose trust, limited partnership interests or
commercial paper or other debt securities issued by a special purpose
corporation. Although the securities often have some form of credit or
liquidity enhancement, payments on the securities depend predominately upon
collections of the loans and receivables held by the issuer.
RATINGS. A NRSRO's highest rating category is determined without regard for
sub-categories and gradations. For example, securities rated A-1 or A-1+ by
Standard & Poor's Corporation ("S&P"), Prime-1 by Moody's Investors
Service, Inc. ("Moody's"), or F-1 (+ or -) by Fitch Investors Service, Inc.
("Fitch") are all considered rated in the highest short-term rating
category. The Trust will follow applicable regulations in determining
whether a security rated by more than one NRSRO can be treated as being in
the highest short-term rating category; currently, such securities must be
rated by two NRSROs in their highest rating category. See "Regulatory
Compliance."
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which banks,
broker/ dealers, and other recognized financial institutions sell U.S.
government securities or other securities to the Trust and agree at the time
of sale to repurchase them at a mutually agreed upon time and price within one
year from the date of acquisition. The Trust or its custodian will take
possession of the securities subject to repurchase agreements and these
securities will be marked to market daily. To the extent that the original
seller does not repurchase the securities from the Trust, the Trust could
receive less than the repurchase price on any sale of such securities. In the
event that such a defaulting seller filed for
bankruptcy or became insolvent, disposition of such securities by the Trust
might be delayed pending court action. The Trust believes that under the
regular procedures normally in effect for custody of the Trust's portfolio
securities subject to repurchase agreements, a court of competent jurisdiction
would rule in favor of the Trust and allow retention or disposition of such
securities. The Trust will only enter into repurchase agreements with banks
and other recognized financial institutions such as broker/dealers which are
deemed by the Trust's adviser to be creditworthy pursuant to guidelines
established by the Trustees.
CREDIT ENHANCEMENT. Certain of the Trust's acceptable investments may have
been credit enhanced by a guaranty, letter of credit or insurance. The Trust
typically evaluates the credit quality and ratings of credit enhanced
securities based upon the financial condition and ratings of the party
providing the credit enhancement (the "credit enhancer"), rather than the
issuer. Generally, the Trust will not treat credit enhanced securities as
having been issued by the credit enhancer for diversification purposes.
However, under certain circumstances applicable regulations may require the
Trust to treat the securities as having been issued by both the issuer and the
credit enhancer. The bankruptcy, receivership, or default of the credit
enhancer will adversely affect the quality and marketability of the underlying
security.
DEMAND FEATURES. The Trust may acquire securities that are subject to puts and
standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period
(usually seven days) following a demand by the Trust. The demand feature may
be issued by the issuer of the underlying securities, a dealer in the
securities or by another third party, and may not be transferred separately
from the underlying security. The Trust uses these arrangements to provide the
Trust with liquidity and not to protect against changes in the market value of
the underlying securities. The bankruptcy, receivership or default by the
issuer of the demand feature, or a default on the underlying security or other
event that terminates the demand feature before its exercise, will adversely
affect the liquidity of the underlying security. Demand features that are
exercisable even after a payment default on the underlying security may be
treated as a form of credit enhancement.
CONCENTRATION OF INVESTMENTS. Generally, in excess of 50% of the assets of the
Trust will be invested in commercial paper and variable amount demand master
notes. The Trust will invest more than 25% of its total assets in the
commercial paper issued by finance companies. The finance companies in which
the Trust intends to invest can be divided into two categories, commercial
finance companies and consumer finance companies. Commercial finance companies
are principally engaged in lending to corporations or other businesses.
Consumer finance companies are primarily engaged in lending to individuals.
Captive finance companies or finance subsidiaries which exist to facilitate
the marketing and financial activities of their parent will, for purposes of
industry concentration, be classified by the Trust in the industry of its
parent corporation.
In addition, the Trust may invest more than 25% of the value of its total
assets in cash or cash items (including instruments issued by a U.S. branch of
a domestic bank or savings and loan having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment), securities
issued or guaranteed by the U.S. government, its agencies, or
instrumentalities, or instruments secured by these money market instruments,
such as repurchase agreements.
INVESTMENT RISKS
ECDs, ETDs, Yankee CDs, CCPs, and Europaper are subject to somewhat different
risks than domestic obligations of domestic banks. Examples of these risks
include international, economic and political developments, foreign
governmental restrictions that may adversely affect the payment of principal or
interest, foreign withholding or other taxes on interest income, difficulties
in obtaining or enforcing a judgment against the issuing bank, and the possible
impact of interruptions in the flow of international currency transactions.
Different risks may also exist for ECDs, ETDs, and Yankee CDs because the banks
issuing these instruments, or their domestic or foreign branches, are not
necessarily subject to the same regulatory requirements that apply to domestic
banks, such as reserve requirements, loan limitations, examinations,
accounting, auditing, and recordkeeping, and the public availability of
information. These factors will be carefully considered by the Trust's adviser
in selecting investments for the Trust.
INVESTMENT LIMITATIONS
The Trust will not:
. borrow money except, under certain circumstances, the Trust may borrow up
to one-third of the value of its total assets; or
. invest more than 5% of its total assets in securities of one issuer (except
cash and cash items, repurchase agreements, and U.S. government
obligations).
The above investment limitations cannot be changed without shareholder
approval.
As a matter of investment practice, which can be changed without shareholder
approval, the Trust will not:
. invest more than 10% of its net assets in securities which are illiquid,
including repurchase agreements providing for settlement in more than seven
days after notice; or
. invest more than 10% of its total assets in securities subject to
restrictions on resale.
REGULATORY COMPLIANCE
The Trust may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in this
prospectus and its Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940, as amended. In particular, the Trust
will comply with the various requirements of Rule 2a-7, which regulates money
market mutual funds. The Trust will determine the effective maturity of its
investments, as well as its ability to consider a security as having received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The Trust
may change its operational policies to reflect changes in the laws and
regulations without the approval of its shareholders.
TRUST INFORMATION
- -------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees (the
"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
Research (the "Adviser"), the Trust's investment adviser, subject to direction
by the Trustees. The Adviser continually conducts investment research and
supervision for the Trust and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the Trust.
ADVISORY FEES. The Adviser receives an annual investment advisory fee equal
to .40 of 1% of the Trust's average daily net assets. Under the investment
advisory contract, the Adviser will waive 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, expenses of withholding
taxes, and extraordinary expenses, exceed .45 of 1% of its average daily
net assets. This does not include reimbursement to the Trust of any
expenses incurred by shareholders who use the transfer agent's
subaccounting facilities. The Adviser has also undertaken to waive its
operating expenses in excess of limitations established by certain states.
ADVISER'S BACKGROUND. Federated Research, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
DISTRIBUTION OF TRUST SHARES
Federated Securities Corp. is the principal distributor for shares of the
Trust. It is a Pennsylvania corporation organized on November 14, 1969, and is
the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
ADMINISTRATION OF THE TRUST
ADMINISTRATIVE SERVICES. Federated Administrative Services, Inc., which is a
subsidiary of Federated Investors, provides the Trust with the administrative
personnel and services necessary to operate the Trust. Such services include
shareholder servicing and certain legal and accounting services. Federated
Administrative Services, Inc. provides these at approximate cost.
CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Trust.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, is transfer agent for the shares of the Trust, and
dividend disbursing agent for the Trust.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, Washington, D.C.
INDEPENDENT AUDITORS. The independent auditors for the Trust are Deloitte &
Touche, Boston, Massachusetts.
NET ASSET VALUE
- -------------------------------------------------------------------------------
The Trust attempts to stabilize the net asset value of its shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net
asset value per share is determined by subtracting total liabilities from
total assets and dividing the remainder by the number of shares outstanding.
The Trust, of course, cannot guarantee that its net asset value will always
remain at $1.00 per share.
INVESTING IN THE TRUST
- -------------------------------------------------------------------------------
SHARE PURCHASES
Trust shares are sold on days on which the New York Stock Exchange is open.
Shares may be purchased either by wire or mail.
To purchase shares of the Trust, 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 of the Trust by Federal Reserve wire, call the
Trust before 3:00 p.m. (Boston time) to place an order. The order is
considered received immediately. Payment by federal funds must be received
before 3:00 p.m. (Boston time) that same day. Federal funds should be wired as
follows: State Street Bank and Trust Company, Boston, Massachusetts;
Attention: EDGEWIRE; For Credit to: Federated Master Trust; Fund Number (this
number can be found on the account statement or by contacting the Trust);
Group Number or Order Number; Nominee or Institution Name; ABA Number
011000028. Shares cannot be purchased by Federal Reserve wire on Columbus Day,
Veterans' Day, or Martin Luther King Day.
BY MAIL. To purchase shares of the Trust by mail, send a check made payable to
Federated Master Trust to State Street Bank and Trust Company, P.O. Box 8602,
Boston, Massachusetts 02266-8602. Orders by mail are considered received after
payment by check is converted by State Street Bank into federal funds. This is
normally the next business day after State Street Bank receives the check.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Trust is $25,000. However, an account
may be opened with a smaller amount as long as the $25,000 minimum is reached
within 90 days. An institutional investor's minimum investment will be
calculated by combining all accounts it maintains with the Trust. Accounts
established through a non-affiliated bank or broker may be subject to a
smaller minimum investment.
CASH SWEEP PROGRAM
Cash accumulations in demand deposit accounts with depository institutions,
such as banks and savings and loan associations, may be automatically invested
in shares of the Trust on a day selected by the depository institution and its
customer, or when the demand deposit account reaches a predetermined dollar
amount (e.g., $5,000).
PARTICIPATING DEPOSITORY INSTITUTIONS. Participating depository institutions
are responsible for prompt transmission of orders relating to the program.
These depository institutions are the record owners of the shares of the
Trust. Depository institutions participating in this program may charge their
customers for services relating to the program. This prospectus should,
therefore, be read together with any agreement between the customer and the
depository institution with regard to the services provided, the fees charged
for those services, and any restrictions and limitations imposed.
WHAT SHARES COST
Trust shares are sold at their net asset value next determined after an order
is received. There is no sales charge imposed by the Trust.
The net asset value is determined at 12:00 noon (Boston time), 3:00 p.m.
(Boston time), and 4:00 p.m. (Boston time), 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 on which no shares are tendered for redemption and no orders to
purchase shares are received; and (iii) the following holidays: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
SUBACCOUNTING SERVICES
Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. The transfer agent charges
a fee based on the level of subaccounting services rendered. Institutions
holding Trust shares in a fiduciary, agency, custodial, or similar capacity
may charge or pass through subaccounting fees as part of or in addition to
normal trust or agency account fees. They may also charge fees for other
services provided which may be related to the ownership of Trust shares. This
prospectus should, therefore, be read together with any agreement between the
customer and the institution with regard to the services provided, the fees
charged for those services, and any restrictions and limitations imposed.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Trust, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless
requested by contacting the Trust.
Monthly confirmations are sent to report transactions such as purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Shares purchased by wire before
3:00 p.m. (Boston time) begin earning dividends that day. Shares purchased by
check begin earning dividends on the day after the check is converted, upon
instruction of the transfer agent, into federal funds. Dividends are
automatically reinvested on payment dates in additional shares of the Trust
unless cash payments are requested by contacting the Trust.
CAPITAL GAINS
Capital gains, if any, could result in an increase in dividends. Capital losses
could result in a decrease in dividends. If, for some extraordinary reason, the
Trust realizes net long-term capital gains, it will distribute them at least
once every 12 months.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Trust redeems shares at their net asset value next determined after the
Trust receives the redemption request. Redemptions will be made on days on
which the Trust computes its net asset value. Redemption requests must be
received in proper form and can be made by telephone request or by written
request.
TELEPHONE REDEMPTION
Shareholders may redeem their shares by telephoning the Trust before 12:00 noon
(Boston time). The proceeds will be wired the same day 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.
A daily dividend will be paid on shares redeemed if the redemption request is
received after 12:00 noon (Boston time). However, the proceeds are not wired
until the following business day. Redemption requests received before 12:00
noon (Boston time) will be paid the same day but will not be entitled to that
day's dividend.
An authorization form permitting the Trust to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp.
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.
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.
WRITTEN REQUESTS
Trust shares may also be redeemed by sending a written request to the Trust.
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,
his account number, and the share or dollar amount requested. If share
certificates have been issued, they must be properly endorsed and should be
sent by registered or certified mail with the written request.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record
with the Trust, or a redemption payable other than to the shareholder of
record must have signatures on written redemption requests guaranteed by:
. a trust company or commercial bank whose deposits are insured by the
Bank Insurance Fund ("BIF"), which is administered by the Federal
Deposit Insurance Corporation ("FDIC");
. a member of the New York, American, Boston, Midwest, or Pacific
Stock Exchanges;
. a savings bank or savings and loan association whose deposits are
insured by the Savings Association Insurance Fund ("SAIF"), which is
administered by the FDIC; or
. any other "eligible guarantor institution," as defined in the
Securities Exchange Act of 1934.
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.
REDEMPTION BEFORE PURCHASE INSTRUMENTS CLEAR
When shares are purchased by check, the proceeds from the redemption of those
shares are not available, and the shares may not be exchanged, until the Trust
or its agents are reasonably certain that the purchase check has cleared,
which could take up to ten calendar days.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Trust may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $25,000 due to
shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Trust gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. 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 the Trust shall be called by the Trustees upon
the written request of shareholders owning at least 10% of the Trust's
outstanding shares.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust. These documents require notice of this disclaimer to be given in
each agreement, obligation, or instrument the Trust or its Trustees enter into
or sign 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.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Trust will pay no federal income tax because it expects to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional shares.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Trust:
. the Trust is not subject to Pennsylvania corporate or personal property
taxes; and
. Trust shares may be subject to personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania to the
extent that the portfolio securities in the Trust would be subject to
such taxes if owned directly by residents of those jurisdictions.
Shareholders are urged to consult their own tax advisers regarding the status
of their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Trust advertises its yield and effective yield.
The yield of the Trust represents the annualized rate of income earned on an
investment in the Trust over a seven-day period. It is the annualized dividends
earned during the period on the investment, shown as a percentage of the
investment. The effective yield is calculated similarly to the yield, but when
annualized, the income earned by an investment in the Trust is assumed to be
reinvested daily. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.
Advertisements and other sales literature may also refer to total return. Total
return represents the change, over a specified period of time, in the value of
an investment in the Trust after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed
as a percentage.
From time to time, the Trust may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
FEDERATED MASTER TRUST PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- -------------------------------------------------- -----------
<S> <C> <C>
BANK NOTE--2.3%
--------------------------------------------------------------
$20,000,000 NBD Bank N.A. Detroit
--------------------------------------------------
3.18%, 1/18/94 $19,998,921
-------------------------------------------------- -----------
CERTIFICATES OF DEPOSIT--3.2%
--------------------------------------------------------------
BANKING--3.2%
--------------------------------------------------
10,000,000 Bank of Nova Scotia, 3.50%, 3/14/94 10,000,000
--------------------------------------------------
10,000,000 Canadian Imperial Bank of Commerce
--------------------------------------------------
3.52%, 8/5/94 10,000,000
--------------------------------------------------
3,000,000 Credit Suisse, 3.56%, 3/11/94 3,000,482
--------------------------------------------------
5,000,000 Rabobank Nederland, 3.53%, 8/16/94 4,999,313
-------------------------------------------------- -----------
TOTAL CERTIFICATES OF DEPOSIT 27,999,795
-------------------------------------------------- -----------
MEDIUM TERM NOTE--0.6%
--------------------------------------------------------------
5,000,000 Beta Finance, Inc., 3.44%, 4/28/94 5,000,000
-------------------------------------------------- -----------
++COMMERCIAL PAPER--51.8%
--------------------------------------------------------------
BANKING--17.5%
--------------------------------------------------
Abbey National N.A. Corp. (Guaranteed by Abbey
33,000,000 National
--------------------------------------------------
Bank PLC), 3.22%-3.39%, 3/22/94-4/26/94 32,621,811
--------------------------------------------------
31,000,000 Bank of Nova Scotia, 3.23%-3.30%, 1/5/94-6/27/94 30,711,951
--------------------------------------------------
10,000,000 Canadian Imperial Holdings, Inc., 3.19%, 3/14/94 9,908,731
--------------------------------------------------
38,000,000 Commerzbank U.S. Finance, Inc., 3.45%-3.48%,
--------------------------------------------------
8/12/94-8/19/94 37,061,005
--------------------------------------------------
PEMEX Capital, Inc. (Swiss Bank Corp. LOC), 3.33%-
18,000,000 3.37%,
--------------------------------------------------
1/6/94-1/20/94 17,933,307
--------------------------------------------------
23,898,000 Queensland Alumina, Ltd. (Credit Suisse LOC)
--------------------------------------------------
3.25%-3.30%, 1/25/94-1/28/94 23,773,809
-------------------------------------------------- -----------
Total 152,010,614
-------------------------------------------------- -----------
</TABLE>
FEDERATED MASTER TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- -------------------------------------------------- ------------
<S> <C> <C>
COMMERCIAL PAPER--CONTINUED
--------------------------------------------------------------
FINANCE--COMMERCIAL--8.3%
--------------------------------------------------
$31,000,000 CIT Group Holdings, Inc.
--------------------------------------------------
3.20%-3.32%, 1/6/94-4/29/94 $ 30,805,496
--------------------------------------------------
42,000,000 General Electric Capital Corp.
--------------------------------------------------
3.30-3.43%, 1/26/94-8/9/94 41,603,334
-------------------------------------------------- ------------
Total 72,408,830
-------------------------------------------------- ------------
FUNDING CORPORATION--20.3%
--------------------------------------------------
30,000,000 Asset Securitization Cooperative Corp.
--------------------------------------------------
3.35%, 12/21/93-5/18/94 29,668,721
--------------------------------------------------
34,000,000 Beta Finance, Inc.
--------------------------------------------------
3.23%-3.36%, 12/29/93-4/28/94 33,762,500
--------------------------------------------------
25,300,000 CIESCO
--------------------------------------------------
3.12%-3.30%, 12/1/93-3/7/94 25,218,886
--------------------------------------------------
26,100,000 Corporate Asset Funding Co., Inc.
--------------------------------------------------
3.16%-3.32%, 1/12/94-2/9/94 25,963,231
--------------------------------------------------
6,000,000 Falcon Asset Securitization Corp.
--------------------------------------------------
3.27%, 1/18/94 5,973,840
--------------------------------------------------
36,000,000 New Center Asset Trust (Series A1+/P1)
--------------------------------------------------
3.12%-3.39%, 12/20/93-2/4/94 35,885,925
--------------------------------------------------
10,000,000 PREFCO
--------------------------------------------------
3.35%, 2/1/94 9,942,306
--------------------------------------------------
10,000,000 Sheffield Receivables Corp.
--------------------------------------------------
3.27%, 1/11/94 9,962,758
-------------------------------------------------- ------------
Total 176,378,167
-------------------------------------------------- ------------
INSURANCE--2.9%
--------------------------------------------------
Prospect Street Sr. Loan Port. L.P. (Guaranteed by
6,999,000 FSA)
--------------------------------------------------
3.12%-3.13%, 12/3/93 6,997,785
--------------------------------------------------
</TABLE>
FEDERATED MASTER TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ----------------------------------------------- ------------
<S> <C> <C>
COMMERCIAL PAPER--CONTINUED
-----------------------------------------------------------
INSURANCE--CONTINUED
-----------------------------------------------
$18,000,000 Prudential Funding Corp.
-----------------------------------------------
3.22%-3.30%, 1/13/94-2/2/94 $ 17,915,040
----------------------------------------------- ------------
Total 24,912,825
----------------------------------------------- ------------
TELECOMMUNICATIONS--2.8%
-----------------------------------------------
25,000,000 AT&T Corp.
-----------------------------------------------
3.21%-3.30%, 1/5/94-2/24/94 24,854,230
----------------------------------------------- ------------
TOTAL COMMERCIAL PAPER 450,564,666
----------------------------------------------- ------------
SHORT-TERM NOTES--2.9%
-----------------------------------------------------------
FINANCE--AUTOMOTIVE--2.9%
-----------------------------------------------
5,116,421 Capital Auto Receivables Asset Trust
-----------------------------------------------
1993-2 Class A-1, 3.35%, 6/15/94 5,114,519
-----------------------------------------------
4,094,449 Premier Auto Trust
-----------------------------------------------
1993-2 Class A-1, 3.23%, 4/15/94 4,094,449
-----------------------------------------------
3,855,183 Premier Auto Trust
-----------------------------------------------
1993-3 Class A-1, 3.38%, 6/15/94 3,853,860
-----------------------------------------------
12,240,542 Premier Auto Trust
-----------------------------------------------
1993-4 Class A-1, 3.43%, 8/2/94 12,243,726
----------------------------------------------- ------------
TOTAL SHORT-TERM NOTES 25,306,554
----------------------------------------------- ------------
*VARIABLE RATE INSTRUMENTS--31.8%
-----------------------------------------------------------
BANKING--16.7%
-----------------------------------------------
10,000,000 500 South Front St. LP. Series A
-----------------------------------------------
(Huntington National Bank LOC), 3.45%, 12/2/93 10,000,000
-----------------------------------------------
Continental Commercial Properties (Huntington
1,655,000 National Bank
-----------------------------------------------
LOC), 3.45%, 12/2/93 1,655,000
-----------------------------------------------
Continental Downtown Properties (Huntington
2,680,000 National Bank
-----------------------------------------------
LOC), 3.45%, 12/2/93 2,680,000
-----------------------------------------------
</TABLE>
FEDERATED MASTER TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------------------------------------------- ------------
<S> <C> <C>
VARIABLE RATE INSTRUMENTS--CONTINUED
-------------------------------------------------------------
BANKING--CONTINUED
-------------------------------------------------
$ 8,880,000 H & D, Inc., (Huntington National Bank LOC),
-------------------------------------------------
3.45%, 12/2/93 $ 8,880,000
-------------------------------------------------
Industrial Development Board of Jackson, AL
22,800,000 (National
-------------------------------------------------
Westminister Bank LOC), 3.50%, 12/2/93 22,800,000
-------------------------------------------------
22,231,000 Midwest Funding Corp., (Bank One, Columbus LOC)
-------------------------------------------------
3.30%, 12/2/93 22,231,000
-------------------------------------------------
30,600,000 S. Grumbacher & Son (PNC Bank N.A. LOC)
-------------------------------------------------
3.44%, 12/6/93 30,600,000
-------------------------------------------------
SMM Trust 1993-A (Guaranteed by Morgan Guaranty
5,000,000 Trust Co.)
-------------------------------------------------
3.24%, 12/20/93 5,000,000
-------------------------------------------------
SMM Trust 1993-B (Guaranteed by Morgan Guaranty
32,000,000 Trust Co.)
-------------------------------------------------
3.55%, 2/14/94 32,000,000
-------------------------------------------------
Wendy's of Las Vegas, Inc. and Wendy's of San
9,200,000 Antonio, Inc.
-------------------------------------------------
(Huntington National Bank LOC), 3.45%, 12/2/93 9,200,000
------------------------------------------------- ------------
Total 145,046,000
------------------------------------------------- ------------
ELECTRIC EQUIPMENT--5.5%
-------------------------------------------------
GS Funding Corp. (Guaranteed by General Electric
10,706,300 Co.)
-------------------------------------------------
3.44%, 12/6/93 10,706,300
-------------------------------------------------
Northwest Airlines, Inc. (Guaranteed by General
37,245,378 Electric Co.)
-------------------------------------------------
3.45%, 12/6/93 37,245,378
------------------------------------------------- ------------
Total 47,951,678
------------------------------------------------- ------------
FINANCE--AUTOMOTIVE--3.1%
-------------------------------------------------
Carco Auto Loan Master Trust Certificates, Series
27,000,000 1993-2
-------------------------------------------------
Class A-1, 3.23%, 12/15/93 27,000,000
------------------------------------------------- ------------
INSURANCE--2.8%
-------------------------------------------------
24,000,000 Peoples Security Life Insurance Co.
-------------------------------------------------
3.35%, 12/1/93 24,000,000
------------------------------------------------- ------------
</TABLE>
FEDERATED MASTER TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ----------------------------------------------- -------------
<S> <C> <C>
VARIABLE RATE INSTRUMENTS--CONTINUED
-----------------------------------------------------------
LEASING--3.7%
-----------------------------------------------
$29,000,000 PHH/CFC Leasing (Banque Nationale de Paris LOC)
-----------------------------------------------
3.43%, 12/1/93 $ 29,000,000
-----------------------------------------------
3,000,000 PHH/CFC Leasing (Societe Generale LOC)
-----------------------------------------------
3.43%, 12/1/93 3,000,000
----------------------------------------------- -------------
Total 32,000,000
----------------------------------------------- -------------
TOTAL VARIABLE RATE INSTRUMENTS 275,997,678
----------------------------------------------- -------------
**REPURCHASE AGREEMENTS--7.4%
-----------------------------------------------------------
10,000,000 Eastbridge Capital, Inc.
-----------------------------------------------
3.20%, dated 11/30/93, due 12/1/93 10,000,000
-----------------------------------------------
4,200,000 Goldman, Sachs & Co.
-----------------------------------------------
3.05%, dated 11/30/93, due 12/1/93 4,200,000
-----------------------------------------------
10,050,000 Kidder, Peabody & Co., Inc.
-----------------------------------------------
3.20%, dated 11/30/93, due 12/1/93 10,050,000
-----------------------------------------------
8,000,000 PaineWebber, Inc.,
-----------------------------------------------
3.25%, dated 11/30/93, due 12/1/93 8,000,000
-----------------------------------------------
25,000,000 S.G. Warburg & Co., Inc.
-----------------------------------------------
3.20%, dated 11/30/93, due 12/1/93 25,000,000
-----------------------------------------------
7,000,000 UBS Securities, Inc.
-----------------------------------------------
3.15%, dated 11/30/93, due 12/1/93 7,000,000
----------------------------------------------- -------------
TOTAL REPURCHASE AGREEMENTS (NOTE 1B) 64,250,000
----------------------------------------------- -------------
TOTAL INVESTMENTS, AT AMORTIZED COST $869,117,614+
----------------------------------------------- -------------
</TABLE>
The following abbreviations are used in this portfolio:
FSA--Financial Security Assurance
LOC--Letter(s) of Credit
+ Also represents cost for federal tax purposes.
++ Each issue shows the rate of discount at time of purchase for discount
issues, or the coupon for interest bearing issues.
* Current rate and next rate reset shown.
** Repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investments in repurchase agreements are through participation in joint
accounts with other Federated Funds.
FEDERATED MASTER TRUST
- --------------------------------------------------------------------------------
Note: The categories of investments are shown as a percentage of net assets
($868,828,248) at November 30, 1993.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MASTER TRUST
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -----------------------------------------------------
Investments, at amortized cost and value (Note 1A and
1B) $869,117,614
- -----------------------------------------------------
Cash 246,597
- -----------------------------------------------------
Interest receivable 1,384,422
- -----------------------------------------------------
Receivable for Trust shares sold 28,130
- -----------------------------------------------------
Prepaid expenses 2,030
- ----------------------------------------------------- ------------
Total assets 870,778,793
- -----------------------------------------------------
LIABILITIES:
- -----------------------------------------------------
Dividends payable $1,766,675
- ----------------------------------------
Payable for Trust shares redeemed 51,173
- ----------------------------------------
Accrued expenses and other liabilities 132,697
- ---------------------------------------- ------------
Total liabilities 1,950,545
- ----------------------------------------------------- ------------
NET ASSETS for 868,828,248 shares of beneficial in-
terest outstanding $868,828,248
- ----------------------------------------------------- ------------
NET ASSET VALUE, Offering Price and Redemption Price
Per Share
($868,828,248 / 868,828,248 shares of beneficial
interest outstanding) $1.00
- ----------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED MASTER TRUST
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------
Interest income (Note 1C) $35,141,040
- ------------------------------------------------------------------
EXPENSES:
- ------------------------------------------------------------------
Investment advisory fee (Note 4) $4,206,902
- ------------------------------------------------------
Trustees' fees 21,904
- ------------------------------------------------------
Administrative personnel and services (Note 4) 592,362
- ------------------------------------------------------
Custodian, transfer and dividend disbursing agent fees
and expenses (Note 4) 311,624
- ------------------------------------------------------
Trust share registration costs 62,440
- ------------------------------------------------------
Auditing fees 21,276
- ------------------------------------------------------
Legal fees 21,048
- ------------------------------------------------------
Printing and postage 9,330
- ------------------------------------------------------
Taxes 14,033
- ------------------------------------------------------
Insurance premiums 22,229
- ------------------------------------------------------
Miscellaneous 7,992
- ------------------------------------------------------ ----------
Total expenses 5,291,140
- ------------------------------------------------------
Deduct--Waiver of investment advisory fee (Note 4) 483,000
- ------------------------------------------------------ ----------
Net expenses 4,808,140
- ------------------------------------------------------------------ -----------
Net investment income $30,332,900
- ------------------------------------------------------------------ -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED MASTER TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
--------------------------------
1993 1992
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------
OPERATIONS--
- ------------------------------------------
Net investment income $ 30,332,900 $ 43,908,300
- ------------------------------------------ --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2)--
- ------------------------------------------
Dividends to shareholders from net invest-
ment income (30,332,900) (43,908,300)
- ------------------------------------------ --------------- ---------------
TRUST SHARE (PRINCIPAL) TRANSACTIONS (NOTE
3)--
- ------------------------------------------
Proceeds from sale of shares 7,012,193,252 7,023,092,497
- ------------------------------------------
Net asset value of shares issued to
shareholders in payment of dividends
declared 5,866,430 6,173,716
- ------------------------------------------
Cost of shares redeemed (7,207,902,151) (7,273,160,885)
- ------------------------------------------ --------------- ---------------
Change in net assets from Trust share
transactions (189,842,469) (243,894,672)
- ------------------------------------------ --------------- ---------------
Change in net assets (189,842,469) (243,894,672)
- ------------------------------------------
NET ASSETS:
- ------------------------------------------
Beginning of period 1,058,670,717 1,302,565,389
- ------------------------------------------ --------------- ---------------
End of period $ 868,828,248 $ 1,058,670,717
- ------------------------------------------ --------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED MASTER TRUST
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1993
- -------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
The Trust is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end, management investment company. The following is a
summary of significant accounting policies consistently followed by the Trust
in the preparation of its financial statements. The policies are in conformity
with generally accepted accounting principles.
A. VALUATION OF INVESTMENTS--The Board of Trustees ("Trustees") has determined
that the best method currently available for valuing portfolio securities
is amortized cost. The Trust's use of the amortized cost method to value
its portfolio securities is conditioned on its compliance with Rule 2a-7
under the Investment Company Act of 1940.
B. REPURCHASE AGREEMENTS--It is the policy of the Trust to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Trust to monitor, on a daily basis, the market value of
each repurchase agreement's underlying securities to ensure the existence
of a proper level of collateral.
The Trust will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers which are deemed
by the Trust's adviser to be creditworthy pursuant to guidelines
established by the Trustees. Risks may arise from the potential inability
of counterparties to honor the terms of the repurchase agreement.
Accordingly, the Trust could receive less than the repurchase price on the
sale of collateral securities.
C. INCOME--Interest income is recorded on the accrual basis. Interest income
includes interest and discount earned (net of premium), including original
issue discount as required by the Internal Revenue Code, plus or minus
realized gains or losses, if any, on portfolio securities.
D. FEDERAL TAXES--It is the Trust's policy to comply with the provisions of
the Internal Revenue Code applicable to investment companies and to
distribute to shareholders each year all of its taxable income.
Accordingly, no provision for federal tax is necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Trust may engage in
when-issued or delayed delivery transactions. The Trust records when-issued
securities and maintains security positions such that sufficient liquid
assets will be available to make payment for the securities purchased.
Securities purchased on a when-issued or delayed delivery basis are marked
to market daily and begin earning interest on the settlement date.
Federated Master Trust
F. OTHER--Investment transactions are accounted for on the date of the
transaction.
(2) DIVIDENDS
The Trust computes its net income daily and, immediately prior to the
calculation of its net asset value at the close of business, declares and
records dividends to shareholders of record at the time of the previous
computation of the Trust's net asset value. Payment of dividends is made
monthly in cash, or in additional shares at the net asset value on the payable
date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). For the
year ended November 30, 1993, paid-in capital aggregated $868,828,248.
Transactions in Trust shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
------------------------------
1993 1992
-------------- --------------
- ----------------------------------------------------------------------------
<S> <C> <C>
Shares outstanding, beginning of period 1,058,670,717 1,302,565,389
- -------------------------------------------
Shares sold 7,012,193,252 7,023,092,497
- -------------------------------------------
Shares issued to shareholders in payment of
dividends declared 5,866,430 6,173,716
- -------------------------------------------
Shares redeemed (7,207,902,151) (7,273,160,885)
- ------------------------------------------- -------------- --------------
Shares outstanding, end of period 868,828,248 1,058,670,717
- ------------------------------------------- -------------- --------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Federated Research ("Adviser") receives for its services an annual investment
advisory fee equal to .40 of 1% of average daily net assets subject to an
undertaking to waive, to the extent of its advisory fee, the amount, if any, by
which the Trust's aggregate annual operating expenses (including the investment
advisory fee, but excluding interest, taxes, brokerage commissions, expenses of
registering and qualifying the Trust and its shares under federal and state
laws, expenses of withholding taxes, and extraordinary expenses) exceeded .45
of 1% of average daily net assets of the Trust. For the year ended November 30,
1993, Adviser earned advisory fees of $4,206,902, of which $483,000 was waived
in accordance with the above agreement. Administrative personnel and services
were provided at approximate cost by Federated Administrative Services, Inc.
Certain Officers and Trustees of the Trust are Officers and Directors of the
above Corporations.
During the year ended November 30, 1993, the Trust engaged in purchase and sale
transactions with other Funds advised by the Adviser, pursuant to Rule 17a-7 of
the Investment Company Act of 1940, amounting to $95,000,000 and $62,000,000,
respectively. These purchases and sales were conducted on an arms-length basis
insofar as they were transacted for cash considerations only, at independent
current market prices, and without brokerage commissions, fees, or other
remuneration.
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of FEDERATED MASTER TRUST:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated Master Trust as of November 30,
1993, the related statement of operations for the year then ended, the
statement of changes in net assets for the years ended November 30, 1993 and
1992, and the financial highlights (see page 2 of the prospectus) for each of
the years in the ten-year period ended November 30, 1993. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
November 30, 1993 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated Master
Trust as of November 30, 1993, the results of its operations, the changes in
its net assets, and its financial highlights for the respective stated periods
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE
Boston, Massachusetts
January 14, 1994
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ADDRESSES
- --------------------------------------------------------------------------------
Federated Master Trust Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- --------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- --------------------------------------------------------------------------------
Investment Adviser
Federated Research Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
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Custodian
State Street Bank and Trust Company P.O. Box 8602
Boston, Massachusetts 02266-
8602
- --------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
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Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
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Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- --------------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche 125 Summer Street
Boston, Massachusetts 02110-
1617
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FEDERATED MASTER TRUST
PROSPECTUS
A No-Load, Open-End, Diversified
Management Investment Company
Prospectus dated January 31, 1994
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
DISTRIBUTOR
A SUBSIDIARY OF FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
8010411A (1/94)
FEDERATED MASTER TRUST
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of the Trust dated January 31, 1994. This Statement is
not a prospectus itself. To receive a copy of the prospectus, write
or call Federated Master Trust.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated January 31, 1994
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
DISTRIBUTOR
A SUBSIDIARY OF FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------
GENERAL INFORMATION ABOUT THE TRUST 1
- -------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- -------------------------------------
Types of Investments 1
U.S. Government Obligations 1
When-Issued and Delayed Delivery
Transactions 1
Investment Limitations 1
TRUST MANAGEMENT 3
- --------------------------------------
Officers and Trustees 3
The Funds 5
Trust Ownership 5
Trustee Liability 5
INVESTMENT ADVISORY SERVICES 5
- --------------------------------------
Adviser to the Trust 5
Advisory Fees 6
Other Related Services 6
ADMINISTRATIVE SERVICES 6
- -------------------------------------
BROKERAGE TRANSACTIONS 6
- -------------------------------------
PURCHASING SHARES 7
- -------------------------------------
Conversion to Federal Funds 7
DETERMINING NET ASSET VALUE 7
- -------------------------------------
Use of the Amortized Cost Method 7
REDEEMING SHARES 8
- -------------------------------------
Redemption in Kind 8
TAX STATUS 8
- -------------------------------------
The Trust's Tax Status 8
Shareholders' Tax Status 8
YIELD 8
- -------------------------------------
EFFECTIVE YIELD 9
- -------------------------------------
PERFORMANCE COMPARISONS 9
- -------------------------------------
GENERAL INFORMATION ABOUT THE TRUST
- --------------------------------------------------------------------------------
Federated Master Trust (the "Trust") was established as a Massachusetts
business trust under a Declaration of Trust dated October 10, 1977.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Trust's investment objective is current income consistent with stability of
principal.
TYPES OF INVESTMENTS
The Trust invests in money market instruments which mature in one year or less
and which include, but are not limited to, commercial paper and demand master
notes, bank instruments and U.S. government obligations.
The above investment objective and policies cannot be changed without approval
of shareholders.
The instruments of banks and savings and loans in which the Trust may invest,
such as certificates of deposit, demand and time deposits, savings shares, and
bankers' acceptances, are not necessarily guaranteed by the Bank Insurance Fund
("BIF") or the Savings Association Insurance Fund ("SAIF").
U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Trust may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued or guaranteed by U.S.
government agencies or instrumentalities. These securities are backed by:
. the full faith and credit of the U.S. Treasury;
. the issuer's right to borrow from the U.S. Treasury;
. the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
. the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
. Federal Farm Credit Banks;
. Federal Home Loan Banks;
. Federal National Mortgage Association;
. Student Loan Marketing Association; and
. Federal Home Loan Mortgage Corporation.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Trust may purchase short-term U.S. government obligations 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. 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.
These transactions are made to secure what is considered to be an advantageous
price and yield for the Trust. The Trust engages in when-issued and delayed
delivery transactions only for the purpose of acquiring portfolio securities
consistent with the Trust's investment objective and policies, not for
investment leverage.
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 assets are marked to market daily and maintained until the
transaction is settled.
In when-issued and delayed delivery transactions, the Trust relies on the
seller to complete the transaction. The seller's failure to complete the
transaction may cause the Trust to miss a price or yield considered to be
advantageous. The Trust may engage in these transactions to an extent that
would cause the segregation of an amount up to 20% of the total value of its
assets.
INVESTMENT LIMITATIONS
The Trust will not change any of the investment limitations described below
without approval of shareholders.
SELLING SHORT AND BUYING ON MARGIN
The Trust will not sell any money market instruments short or purchase
any money market instruments on margin but may obtain such short-term
credits as may be necessary for clearance of purchases and sales of money
market instruments.
BORROWING MONEY
The Trust will not borrow money except as a temporary measure for
extraordinary or emergency purposes and then only in amounts not in
excess of 5% of the value of its total assets. In addition, the Trust may
enter into reverse repurchase agreements and otherwise borrow up to one-
third of the value of its total assets, including the amount borrowed, in
order to meet redemption requests without immediately selling portfolio
instruments. Any such borrowings would not be collateralized. The Trust
will not purchase portfolio instruments while any such borrowings are
outstanding.
PLEDGING SECURITIES
The Trust will not pledge securities.
INVESTING IN COMMODITIES, COMMODITY CONTRACTS, OR REAL ESTATE
The Trust will not invest in commodities, commodity contracts, or real
estate, except that it may purchase money market instruments issued by
companies that invest in real estate or sponsor such interests.
UNDERWRITING
The Trust will not engage in underwriting of securities issued by others.
LENDING CASH OR SECURITIES
The Trust will not lend any of its assets, except that it may purchase or
hold money market instruments, including repurchase agreements and
variable amount demand master notes, permitted by its investment
objective and policies.
ACQUIRING SECURITIES
The Trust will not acquire the voting securities of any issuer. It will
not invest in securities issued by any other investment company. It will
not invest in securities of a company for the purpose of exercising
control or management.
DIVERSIFICATION OF INVESTMENTS
The Trust will not purchase securities issued by any one issuer (other
than cash, cash items, or securities issued or guaranteed by the
government of the United States or its agencies or instrumentalities and
repurchase agreements collateralized by such securities) if as a result
more than 5% of the value of its total assets would be invested in the
securities of that issuer.
CONCENTRATION OF INVESTMENTS
The Trust will not invest more than 25% of the value of its total assets
in any one industry except commercial paper of finance companies.
In addition, the Trust may invest more than 25% in cash or cash items
(including instruments issued by a U.S. branch of a domestic bank or
savings and loan having capital, surplus, and undivided profits in excess
of $100,000,000 at the time of investment), securities issued or
guaranteed by the U.S. government, its agencies, or instrumentalities, or
instruments secured by these money market instruments, such as repurchase
agreements.
ISSUING SENIOR SECURITIES
The Trust will not issue senior securities.
The above investment limitations cannot be changed without shareholder
approval. The following investment limitation, however, may be changed by the
Board of Trustees (the "Trustees") without shareholder approval. Shareholders
will be notified before any material change in this policy becomes effective.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of the value of its total assets
in securities which are subject to restrictions on resale under federal
security laws.
Except with respect to borrowing money, if a percentage limitation is adhered
to at the time of investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a violation
of such restriction.
The Trust did not borrow money or engage in when-issued and delayed delivery
transactions in excess of 5% of the value of its net assets during the last
fiscal year and has no present intent to do so in the coming fiscal year.
TRUST MANAGEMENT
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OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with Federated Research,
Federated Investors, Federated Securities Corp., Federated Administrative
Services, Inc., and the Funds (as defined below).
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C>
- -------------------------------------------------------------------------------
John F. Donahue*+ Chairman and Chairman and Trustee, Federated
Federated Investors Tower Trustee Investors; Chairman and
Pittsburgh, PA Trustee, Federated Advisers,
Federated Management, and
Federated Research; Director,
^tna Life and Casualty Company;
Chief Executive Officer and
Director, Trustee, or Managing
General Partner of the Funds;
formerly, Director, The
Standard Fire Insurance
Company. Mr. Donahue is the
father of J. Christopher
Donahue, Vice President of the
Trust.
- -------------------------------------------------------------------------------
John T. Conroy, Jr. Trustee President, Investment
Wood/IPC Commercial Properties Corporation; Senior
Department Vice President, John R. Wood
John R. Wood and and Associates, Inc., Realtors;
Associates, Inc., Realtors President, Northgate Village
3255 Tamiami Trail North Development Corporation;
Naples, FL General Partner or Trustee in
private real estate ventures in
Southwest Florida; Director,
Trustee, or Managing General
Partner of the Funds; formerly,
President, Naples Property
Management, Inc.
- -------------------------------------------------------------------------------
William J. Copeland Trustee Director and Member of the
One PNC Plaza-- Executive Committee, Michael
23rd Floor Baker, Inc.; Director, Trustee,
Pittsburgh, PA or Managing General Partner of
the Funds; formerly, Vice
Chairman and Director, PNC
Bank, N.A. and PNC Bank Corp.
and Director, Ryan Homes, Inc.
- ------------------------------------------------------------------------------
James E. Dowd Trustee Attorney-at-law; Director, The
571 Hayward Mill Road Emerging Germany Fund, Inc.;
Concord, MA Director, Trustee, or Managing
General Partner of the Funds;
formerly, Director, Blue Cross
of Massachusetts, Inc.
- -------------------------------------------------------------------------------
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and
3471 Fifth Avenue Internist, Presbyterian and
Suite 1111 Montefiore Hospitals; Clinical
Pittsburgh, PA Professor of Medicine and
Trustee, University of
Pittsburgh; Director, Trustee,
or Managing General Partner of
the Funds.
- -------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+ Trustee Attorney-at-law; Partner, Meyer
5916 Penn Mall and Flaherty; Director, Eat'N
Pittsburgh, PA Park Restaurants, Inc., and
Statewide Settlement Agency,
Inc.; Director, Trustee, or
Managing General Partner of the
Funds; formerly, Counsel,
Horizon Financial, F.A.,
Western Region.
- -------------------------------------------------------------------------------
Peter E. Madden Trustee Consultant; State
225 Franklin Street Representative, Commonwealth of
Boston, MA Massachusetts; Director,
Trustee, or Managing General
Partner of the Funds; formerly,
President, State Street Bank &
Trust Company and State Street
Boston Corporation and Trustee,
Lahey Clinic Foundation, Inc.
- -------------------------------------------------------------------------------
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer
5916 Penn Mall and Flaherty; Chairman,
Pittsburgh, PA Meritcare, Inc.; Director,
Eat'N Park Restaurants, Inc.;
Director, Trustee, or Managing
General Partner of the Funds;
formerly, Vice Chairman,
Horizon Financial, F.A.
- -------------------------------------------------------------------------------
Wesley W. Posvar Trustee Professor, Foreign Policy and
1202 Cathedral of Management Consultant; Trustee,
Learning Carnegie Endowment for
University of Pittsburgh International Peace, RAND
Pittsburgh, PA Corporation, Online Computer
Library Center, Inc., and U.S.
Space Foundation; Chairman,
Czecho Slovak Management Center;
Director, Trustee, or Managing
General Partner of the Funds;
formerly, President Emeritus,
University of Pittsburgh;
formerly, Chairman, National
Advisory Council for
Environmental Policy and
Technology.
- -------------------------------------------------------------------------------
Marjorie P. Smuts Trustee Public relations/marketing
4905 Bayard Street consultant; Director, Trustee, or
Pittsburgh, PA Managing General Partner of the
Funds.
- -------------------------------------------------------------------------------
Glen R. Johnson President Trustee, Federated Investors;
Federated Investors Tower President and/or Trustee of some
Pittsburgh, PA of the Funds; staff member,
Federated Securities Corp. and
Federated Administrative
Services, Inc.
- -------------------------------------------------------------------------------
J. Christopher Donahue Vice President President and Trustee, Federated
Federated Investors Tower Investors; Trustee, Federated
Pittsburgh, PA Advisers, Federated Management,
and Federated Research; President
and Director, Federated
Administrative Services, Inc.;
President or Vice President of
the Funds; Director, Trustee, or
Managing General Partner of some
of the Funds. Mr. Donahue is the
son of John F. Donahue, Chairman
and Trustee of the Trust.
- -------------------------------------------------------------------------------
Richard B. Fisher Vice President Executive Vice President and
Federated Investors Tower Trustee, Federated Investors;
Pittsburgh, PA Chairman and Director, Federated
Securities Corp.; President or
Vice President of the Funds;
Director or Trustee of some of
the Funds.
- -------------------------------------------------------------------------------
Edward C. Gonzales Vice President Vice President, Treasurer, and
Federated Investors Tower and Treasurer Trustee, Federated Investors;
Pittsburgh, PA Vice President and Treasurer,
Federated Advisers, Federated
Management, and Federated
Research; Executive Vice
President, Treasurer, and
Director, Federated Securities
Corp.; Chairman, Treasurer, and
Director, Federated
Administrative Services, Inc.;
Trustee or Director of some of
the Funds; Vice President and
Treasurer of the Funds.
- -------------------------------------------------------------------------------
John W. McGonigle Vice President Vice President, Secretary,
Federated Investors Tower and Secretary General Counsel, and Trustee,
Pittsburgh, PA Federated Investors; Vice
President, Secretary, and
Trustee, Federated Advisers,
Federated Management, and
Federated Research; Executive
Vice President, Secretary, and
Director, Federated
Administrative Services, Inc.;
Director and Executive Vice
President, Federated Securities
Corp.; Vice President and
Secretary of the Funds.
- -------------------------------------------------------------------------------
John A. Staley, IV Vice President Vice President and Trustee,
Federated Investors Tower Federated Investors; Executive
Pittsburgh, PA Vice President, Federated
Securities Corp.; President and
Trustee, Federated Advisers,
Federated Management, and
Federated Research; Vice
President of the Funds; Director,
Trustee, or Managing General
Partner of some of the Funds;
formerly, Vice President, The
Standard Fire Insurance Company
and President of its Federated
Research Division.
- -------------------------------------------------------------------------------
</TABLE>
* This Trustee is deemed to be an "interested person" of the Trust as defined
in the Investment Company Act of 1940.
+ Members of the Trust's Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of Trustees
between meetings of the Board.
THE FUNDS
"The Funds" and "Funds" mean the following investment companies: A.T. Ohio Tax-
Free Money Fund; American Leaders Fund, Inc.; Annuity Management Series;
Automated Cash Management Trust; Automated Government Money Trust; BankSouth
Select Funds; The Boulevard Funds; California Municipal Cash Trust; Cash Trust
Series, Inc.; Cash Trust Series II; 111 Corcoran Funds; DG Investors Series;
Edward D. Jones & Co. Daily Passport Cash Trust; FT Series, Inc.; Federated
ARMs Fund; Federated Exchange Fund, Ltd.; Federated GNMA Trust; Federated
Government Trust; Federated Growth Trust; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Intermediate Government Trust; Federated Master Trust; Federated
Municipal Trust; Federated Short-Intermediate Government Trust; Federated
Short-Term U.S. Government Trust; Federated Stock Trust; Federated Tax-Free
Trust; Federated U.S. Government Bond Fund; First Priority Funds; Fixed Income
Securities, Inc.; Fortress Adjustable Rate U.S. Government Fund, Inc.; Fortress
Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.; Fund for U.S.
Government Securities, Inc.; Government Income Securities, Inc.; High Yield
Cash Trust; Insurance Management Series; Intermediate Municipal Trust;
Investment Series Funds, Inc.; Investment Series Trust; Liberty Equity Income
Fund, Inc.; Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities
Fund, Inc; Liberty Term Trust, Inc.-1999; Liberty U.S. Government Money Market
Trust; Liberty Utility Fund, Inc.; Liquid Cash Trust; Mark Twain Funds; Money
Market Management, Inc.; Money Market Obligations Trust; Money Market Trust;
Municipal Securities Income Trust; New York Municipal Cash Trust; The Planters
Funds; Portage Funds; RIMCO Monument Funds; The Shawmut Funds; Short-Term
Municipal Trust; The Signet Select Funds; Star Funds; The Starburst Funds; The
Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted
Duration Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for
Financial Institutions; Trust for Government Cash Reserves; Trust for Short-
Term U.S. Government Securities; and Trust for U.S. Treasury Obligations.
TRUST OWNERSHIP
Officers and Trustees own less than 1% of the Trust's outstanding shares.
As of January 6, 1994, the following shareholders of record owned 5% or more of
the outstanding shares of the Trust: PNC Bank Pittsburgh, Pittsburgh, PA owned
approximately 101,380,460 shares (12.65%); Peoples Bank, Bridgeport, CT owned
approximately 69,602,040 shares (8.68%); Viro & Co., Citizens Community Trust &
Savings Bank, Pasadena, CA owned approximately 45,785,980 shares (5.71%).
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 pro-
tected against any liability to which they would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE TRUST
The Trust's investment adviser is Federated Research (the "Adviser"). It is a
subsidiary of Federated Investors. All of the voting shares of Federated
Investors are owned by a trust, the trustees of which are John F. Donahue, his
wife, and his son, J. Christopher Donahue. John F. Donahue, Chairman and
Trustee of Federated Research, is Chairman and Trustee of Federated Investors,
and Chairman and Trustee of the Trust. John A. Staley, IV, President and
Trustee of Federated Research, is Vice President and Trustee of Federated
Investors, Executive Vice President of Federated Securities Corp., and Vice
President of the Trust. J. Christopher Donahue, Trustee of Federated Research,
is President and Trustee of Federated Investors, President and Director of
Federated Administrative Services, Inc., and Vice President of the Trust. John
W. McGonigle, Vice President, Secretary and Trustee of Federated Research, is
Vice President, Secretary, General Counsel, and Trustee of Federated Investors,
Executive Vice President, Secretary, and Director of Federated Administrative
Services, Inc., Director and Executive Vice President of Federated Securities
Corp., and Vice President and Secretary of the Trust.
The Adviser shall not be liable to the Trust or any shareholder for any losses
that may be sustained in the purchase, holding, or sale of any security, or for
anything done or omitted by it, except acts or omissions involving willful mis-
feasance, bad faith, gross negligence, or reckless disregard of the duties im-
posed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, Federated Research receives an annual investment
advisory fee as described in the prospectus.
During the fiscal years ended November 30, 1993, 1992, and 1991, the Adviser
earned $4,206,902, $4,707,327, and $5,610,671, respectively, $483,000,
$414,285, and $492,675 of which was waived because of undertakings to limit the
Trust's expenses.
STATE EXPENSE LIMITATIONS
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Trust's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2.5% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1.5% per year
of the remaining average net assets, the Adviser will reimburse the Trust
for its expenses over the limitation.
If the Trust's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
OTHER RELATED SERVICES
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of shares of funds offered by Federated Securities Corp.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services, Inc., a subsidiary of Federated Investors,
provides administrative personnel and services to the Trust at approximate
cost. For the fiscal years ended November 30, 1993, 1992, and 1991, the Trust
incurred administrative service fees of $592,362, $531,208, and $629,219,
respectively. John A. Staley, IV, an officer of the Trust, and Dr. Henry J.
Gailliot, an officer of Federated Research, the adviser to the Trust, each hold
approximately 15% and 20%, respectively, of the outstanding common stock and
serve as directors of Commercial Data Services, Inc., a company which provides
computer processing services to Federated Administrative Services, Inc. For the
fiscal years ended November 30, 1993, 1992, and 1991, Federated Administrative
Services, Inc. paid approximately $164,324, $170,183, and $193,178,
respectively, for services provided by Commercial Data Services, Inc.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better
price and execution of the order can be obtained elsewhere. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees.
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Trust or to the
Adviser and may include:
.advice as to the advisability of investing in securities;
.security analysis and reports;
.economic studies;
.industry studies;
.receipt of quotations for portfolio evaluations; and
.similar services.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers and dealers who offer brokerage and research services to
execute securities transactions. They determine in good faith that commissions
charged by such persons are reasonable in relationship to the value of the
brokerage and research services provided.
Research services provided by brokers and dealers may be used by the Adviser or
by affiliates of Federated Investors in advising Federated Funds and other
accounts. To the extent that receipt of these services may supplant services
for which the Adviser or its affiliates might otherwise have paid, it would
tend to reduce their expenses.
PURCHASING SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value without a sales charge on days the New
York Stock Exchange is open for business. The procedure for purchasing shares
of the Trust is explained in the prospectus under "Investing in the Trust."
CONVERSION TO FEDERAL FUNDS
It is the Trust's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds. State Street Bank acts as the
shareholder's agent in depositing checks and converting them to federal funds.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
The Trust attempts to stabilize the value of a share at $1.00. The days on
which net asset value is calculated by the Trust are described in the
prospectus.
USE OF THE AMORTIZED COST METHOD
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
The Trust's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with Rule 2a-7 (the "Rule") under the Investment
Company Act of 1940. Under that Rule, the Trustees must establish procedures
reasonably designed to stabilize the net asset value per share, as computed for
purposes of distribution and redemption, at $1.00 per share, taking into
account current market conditions and the Trust's investment objective.
Under the Rule, the Trust is permitted to purchase instruments which are
subject to demand features or standby commitments. As defined by the Rule as
amended, a demand feature entitles the Trust to receive the principal amount of
the instrument from the issuer or a third party on (1) no more than 30 days'
notice or (2) at specified intervals not exceeding one year on no more than 30
days' notice. A standby commitment entitles the Trust to achieve same day
settlement and to receive an exercise price equal to the amortized cost of the
underlying instrument plus accrued interest at the time of exercise.
Although demand features and standby commitments are defined as "puts" under
the Rule, the Trust does not consider them to be "puts" as that term is used in
the Trust's investment limitations. Demand features and standby commitments are
features which enhance an instrument's liquidity, and the investment limitation
which proscribes puts is designed to prohibit the purchase and sale of put and
call options and is not designed to prohibit the Trust from using techniques
which enhance the liquidity of portfolio instruments.
MONITORING PROCEDURES
The Trustees' procedures include monitoring the relationship between the
amortized cost value per share and the net asset value per share based
upon available indications of market value. The Trustees will decide
what, if any, steps should be taken if there is a difference of more than
.5 of 1% between the two values. The Trustees will take any steps they
consider appropriate (such as redemption in kind or shortening the
average portfolio maturity) to minimize any material dilution or other
unfair results arising from differences between the two methods of
determining net asset value.
INVESTMENT RESTRICTIONS
The Rule requires that the Trust limit its investments to instruments
that, in the opinion of the Trustees, present minimal credit risks and
have received the requisite rating from one or more nationally recognized
statistical rating organizations. If the instruments are not rated, the
Trustees must determine that they are of comparable quality. The order
also requires the Trust to maintain a dollar weighted average portfolio
maturity (not more than 90 days) appropriate to the objective of
maintaining a stable net asset value of $1.00 per share. In addition, no
instrument with a remaining maturity of more than one year can be
purchased by the Trust.
Should the disposition of a portfolio security result in a dollar
weighted average portfolio maturity of more than 90 days, the Trust will
invest its available cash to reduce the average maturity to 90 days or
less as soon as possible.
The Trust may attempt to increase yield by trading portfolio securities to take
advantage of short-term market variations. This policy may, from time to time,
result in high portfolio turnover. Under the amortized cost method of
valuation, neither the amount of daily income nor the net asset value is
affected by any unrealized appreciation or depreciation of the portfolio.
In periods of declining interest rates, the indicated daily yield on shares of
the Trust computed by dividing the annualized daily income on the Trust's
portfolio by the net asset value computed as above may tend to be higher than a
similar computation made by using a method of valuation based upon market
prices and estimates.
In periods of rising interest rates, the indicated daily yield on shares of the
Trust computed the same way may tend to be lower than a similar computation
made by using a method of calculation based upon market prices and estimates.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Trust redeems shares at the next computed net asset value after the Trust
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Shares." Although the transfer agent does not
charge for expedited 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
The Trust is obligated to redeem shares solely in cash up to $250,000 or 1% of
the Trust's net asset value, whichever is less, for any one shareholder within
a 90-day period.
Any redemption beyond this amount will also be in cash unless the Trustees
determine that further cash payments will have a material adverse effect on
remaining shareholders. In such a case, the Trust will pay all or a portion of
the remainder of the redemption in portfolio instruments, valued in the same
way as the Trust determines net asset value. The portfolio instruments will be
selected in a manner that the Trustees deem fair and equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.
TAX STATUS
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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 applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Trust must,
among other requirements:
.derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
.derive less than 30% of its gross income from the sale of securities held less
than three months;
.invest in securities within certain statutory limits; and
.distribute to its shareholders at least 90% of its net income earned during
the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends received as cash or
additional shares. No portion of any income dividend paid by the Trust is
eligible for the dividends received deduction available to corporations. These
dividends, and any short-term capital gains, are taxable as ordinary income.
CAPITAL GAINS
Capital gains experienced by the Trust could result in an increase in
dividends. Capital losses could result in a decrease in dividends. If,
for some extraordinary reason, the Trust realizes net long-term capital
gains, it will distribute them at least once every 12 months.
YIELD
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The Trust's yield for the seven-day period ended November 30, 1993 was 2.94%.
The Trust calculates its yield daily, based upon the seven days ending on the
day of the calculation, called the "base period." This yield is computed by:
. determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net change
excluding capital changes but including the value of any additional shares
purchased with dividends earned from the original one share and all dividends
declared on the original and any purchased shares;
. dividing the net change in the account's value by the value of the account at
the beginning of the base period to determine the base period return; and
. multiplying the base period return by (365/7).
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the
Trust, the performance will be reduced for those shareholders paying those
fees.
EFFECTIVE YIELD
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The Trust's effective yield for the seven-day period ended November 30, 1993
was 2.98%.
The Trust's effective yield is computed by compounding the unannualized base
period return by:
.adding 1 to the base period return;
.raising the sum to the 365/7th power; and
.subtracting 1 from the result.
PERFORMANCE COMPARISONS
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The Trust's performance depends upon such variables as:
.portfolio quality;
.average portfolio maturity;
.type of instruments in which the portfolio is invested;
.changes in interest rates on money market instruments;
.changes in Trust expenses; and
.the relative amount of Trust cash flow.
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 net asset value. The
financial publications and/or indices which the Trust uses in advertising may
include:
. LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all income dividends and capital gains distributions, if any.
From time to time, the Trust will quote its Lipper ranking in the "money
market instrument funds" category in advertising and sales literature.
Advertisements and other sales literature for the Trust may refer to total
return. Total return is the historic change in the value of an investment in
the Trust based on the monthly reinvestment of dividends over a specified
period of time.
8010411B (1/94)
