FEDERATED MASTER TRUST
PROSPECTUS
The shares of Federated Master Trust (the "Trust") offered by this prospectus
represent interests in an open-end, diversified management investment company (a
mutual fund), investing in short-term money market securities 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
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE TRUST
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE TRUST WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Trust. Keep this prospectus for future reference.
The Trust has also filed a Statement of Additional Information dated January 31,
1995, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information
free of charge, obtain other information, or make inquiries about the Trust, by
contacting the Trust at the address listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated January 31, 1995
TABLE OF CONTENTS
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SUMMARY OF TRUST EXPENSES 1
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FINANCIAL HIGHLIGHTS 2
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GENERAL INFORMATION 3
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INVESTMENT INFORMATION 3
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Investment Objective 3
Investment Policies 3
Investment Risks 6
Investment Limitations 6
Regulatory Compliance 7
TRUST INFORMATION 7
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Management of the Trust 7
Distribution of Shares 8
Administration of the Trust 8
NET ASSET VALUE 9
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INVESTING IN THE TRUST 9
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Share Purchases 9
Minimum Investment Required 10
Subaccounting Services 10
Certificates and Confirmations 10
Dividends 10
Capital Gains 11
REDEEMING SHARES 11
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By Mail 11
Telephone Redemption 12
Accounts with Low Balances 12
SHAREHOLDER INFORMATION 12
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Voting Rights 12
Massachusetts Partnership Law 12
TAX INFORMATION 13
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Federal Income Tax 13
PERFORMANCE INFORMATION 14
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FINANCIAL STATEMENTS 15
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INDEPENDENT AUDITORS' REPORT 24
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ADDRESSES 25
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SUMMARY OF TRUST EXPENSES
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<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)........................................ None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)........................................ None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)...................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)........... None
Exchange Fee................................................................. None
ANNUAL TRUST OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1)............................................. 0.28%
12b-1 Fee.................................................................... None
Total Other Expenses......................................................... 0.18%
Shareholder Services Fee (after waiver)(2)................................. 0.04%
Total Trust Operating Expenses(3)....................................... 0.46%
</TABLE>
(1) The management fee has been reduced to reflect the waiver of a portion of
the management fee. The maximum management fee is 0.40%.
(2) The maximum Shareholder Services Fee is 0.25%.
(3) The Total Trust Operating Expenses in the table above are based on expenses
expected during the fiscal year ending November 30, 1995. The Total Trust
Operating Expenses were 0.46% for the fiscal year ended November 30, 1994 and
would have been 0.58% 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
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<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period......... $5 $15 $26 $ 58
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FEDERATED 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 24.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
- ------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET
VALUE,
BEGINNING OF
PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -------------
INCOME FROM
INVESTMENT
OPERATIONS
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Net
investment
income 0.04 0.03 0.04 0.06 0.08 0.09 0.07 0.06 0.07 0.08
LESS
DISTRIBUTIONS
- -------------
Dividends to
shareholders
from net
investment
income (0.04) (0.03) (0.04) (0.06) (0.08) (0.09) (0.07) (0.06) (0.07) (0.08)
- ------------- --- --- --- --- --- --- --- --- --- ---
NET ASSET
VALUE, END
OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------------- --- --- --- --- --- --- --- --- --- ---
TOTAL RETURN* 3.78% 2.91% 3.76% 6.22% 8.16% 9.21% 7.33% 6.39% 6.82% 8.23%
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RATIOS TO
AVERAGE NET
ASSETS
- -------------
Expenses 0.46% 0.46% 0.46% 0.46% 0.45% 0.45% 0.45% 0.45% 0.45% 0.45%
- -------------
Net
investment
income 3.72% 2.88% 3.73% 6.13% 7.87% 8.83% 7.03% 6.22% 6.60% 7.94%
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SUPPLEMENTAL
DATA
- -------------
Net assets,
end of
period (000
omitted) $773,260 $868,828 $1,058,671 $1,302,565 $1,495,299 $2,109,661 $2,391,625 $3,237,809 $3,057,411 $2,864,241
- -------------
</TABLE>
* Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(See Notes which are an integral part of the Financial Statements)
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 investing in short-term money
market securities. A minimum initial investment of $25,000 over a 90-day period
is required.
The Trust attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
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INVESTMENT OBJECTIVE
The investment objective of the Trust is current income consistent with
stability of principal. 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, unless indicated otherwise, cannot be changed
without shareholder approval.
INVESTMENT POLICIES
The Trust pursues its investment objective by investing in a portfolio of money
market securities maturing in one year or less. The average maturity of the
securities in the Trust's portfolio, computed on a dollar-weighted basis, will
be 120 days or less. As a matter of operating policy, which can be changed
without shareholder approval, the Trust will limit the average maturity of its
portfolio to 90 days or less, in order to meet regulatory requirements.
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
are 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;
- 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 debt
instruments that have variable or floating interest rates and provide the
Trust with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at
par. The interest rate may float or be adjusted at regular intervals
(ranging from daily to annually), and is normally based on a published
interest rate or interest rate index. Most variable rate demand notes allow
the Trust to demand the repurchase of the security on not more than seven
days prior notice. Other notes only permit the Trust to tender the security
at the time of each interest rate adjustment or at other fixed intervals.
See "Demand Features." The Trust treats variable rate demand notes as
maturing on the later of the date of the next interest rate adjustment or
the date on which the Trust may next tender the security for repurchase.
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.
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
interests in special purpose trusts, 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 predominantly upon
collections of the loans and receivables held by the issuer.
SHORT-TERM CREDIT FACILITIES. The Trust may enter into, or acquire
participations in, short-term borrowing arrangements with corporations,
consisting of either a short-term revolving credit facility or a master
note agreement payable upon demand. Under these arrangements, the borrower
may reborrow funds during the term of the facility. The Trust treats any
commitments to provide such advances as a standby commitment to purchase
the borrower's notes.
RATINGS. An 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 Ratings Group ("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. Certain securities in which the Trust invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, brokers/dealers, and other recognized financial
institutions sell securities to the Trust and agree at the time of sale to
repurchase them at a mutually agreed upon time and price. To the extent that the
seller does not repurchase the securities from the Trust, the Trust could
receive less than the repurchase price on any sale of such securities.
CREDIT ENHANCEMENT. Certain of the Trust's acceptable investments may be 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.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Trust may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Trust purchases securities with payment and delivery scheduled for
a future time. The seller's failure to complete these transactions may cause the
Trust to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Trust may pay more or less than the market value of the
securities on the settlement date.
The Trust may dispose of a commitment prior to settlement if the adviser deems
it appropriate to do so. In addition, the Trust may enter into transactions to
sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Trust may realize short-term profits or losses upon the sale of such
commitments.
RESTRICTED AND ILLIQUID SECURITIES. The Trust may invest in restricted
securities. Restricted securities are any securities in which the Trust may
otherwise invest pursuant to its investment objective and policies but which are
subject to restrictions on resale under federal securities law. However, the
Trust will limit investments in illiquid securities, including certain
restricted securities not determined by the Trustees to be liquid,
non-negotiable time deposits, and repurchase agreements providing for settlement
in more than seven days after notice, to 10% of its net assets. These policies
may be changed without shareholder approval.
The Trust may invest in commercial paper issued in reliance on the exemption
from registration afforded by Section 4(2) of the Securities Act of 1933.
Section 4(2) commercial paper is restricted as to disposition under federal
securities law, and is generally sold to institutional investors, such as the
Trust, who agree that they are purchasing the paper for investment purposes and
not with a view to public distribution. Any resale by the purchaser must be in
an exempt transaction. Section 4(2) commercial paper is normally resold to other
institutional investors like the Trust through or with the assistance of the
issuer or investment dealers who make a market in Section 4(2) commercial paper,
thus providing liquidity. The Trust believes that Section 4(2) commercial paper
and possibly certain other restricted securities which meet the criteria for
liquidity established by the Trustees of the Trust are quite liquid. The Trust
intends, therefore, to treat the restricted securities which meet the criteria
for liquidity established by the Trustees, including Section 4(2) commercial
paper, as determined by the Trust's investment adviser, as liquid and not
subject to the investment limitation applicable to illiquid securities. In
addition, because Section 4(2) commercial paper is liquid, the Trust intends to
not subject such paper to the limitation applicable to restricted securities.
CONCENTRATION OF INVESTMENTS. The Trust will invest 25% or more of its total
assets in 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 in the industry of their parent's
corporation. Concentrating investments in one industry may subject the Trust to
more risk than if it did not concentrate.
In addition, the Trust may invest 25% or more of the value of its total assets
in 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.
INVESTMENT RISKS
ECDs, ETDs, Yankee CDs, Canadian Commercial Paper and Europaper are subject to
different risks than domestic obligations of domestic banks or corporations.
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
entity, and the possible impact of interruptions in the flow of international
currency transactions. 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, 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 directly or through reverse repurchase
agreements (arrangements in which the Trust sells a money market instrument for
a percentage of its cash value with an agreement to buy it back on a set date)
except, under certain circumstances, the Trust may borrow up to one-third of the
value of its total assets. This investment limitation cannot be changed without
shareholder approval.
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 these operational policies to reflect changes in the laws and
regulations without the approval of its shareholders.
TRUST INFORMATION
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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. An
Executive Committee of the Board of Trustees handles the Board's
responsibilities between meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Trust are made by Federated
Research (the "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 and sale of
portfolio instruments.
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 Research and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide
administrative services to a number of investment companies. 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 SHARES
Federated Securities Corp. is the principal distributor for shares of the Trust.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
SHAREHOLDER SERVICES PLAN. The Trust has adopted a Shareholder Services Plan
(the "Services Plan") under which it will pay Federated Shareholder Services, an
affiliate of Federated Investors, an amount not exceeding .25 of 1% of the
average daily net asset value of the Trust to provide personal services and/or
maintenance of shareholder accounts to the Trust and its shareholders. From time
to time and for such periods as deemed appropriate, the amount stated above may
be reduced voluntarily.
Federated Shareholder Services may elect to pay financial institutions fees
based upon shares owned by their clients or customers for services provided to
those clients or customers. The schedules of such fees and the basis upon which
such fees will be paid will be determined from time to time by Federated
Shareholder Services.
GLASS-STEAGALL ACT. The Glass-Steagall Act prohibits a depository institution
(such as a commercial bank or a savings and loan association) from being an
underwriter or distributor of most securities. In the event the Glass-Steagall
Act is deemed to prohibit depository institutions from acting in the
administrative capacities described above or should Congress relax current
restrictions on depository institutions, the Trustees will consider appropriate
changes in the administrative services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE TRUST
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and accounting services) necessary to operate the Trust. Federated
Administrative Services provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
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<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares. Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may choose
voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, MA is custodian for the
securities and cash of the Trust.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, PA is transfer agent for the shares of, and dividend disbursing
agent for, the Trust.
INDEPENDENT AUDITORS. The independent auditors for the Trust are Deloitte &
Touche LLP, Pittsburgh, PA.
NET ASSET VALUE
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The Trust attempts to stabilize the net asset value of its shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per share is determined by subtracting total liabilities from total assets
and dividing the remainder by the number of shares outstanding. The Trust cannot
guarantee that its net asset value will always remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 3:00 p.m., and 4:00 p.m.
(Eastern 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 during which no shares are
tendered for redemption and no orders to purchase shares are received; or (iii)
the following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
INVESTING IN THE TRUST
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SHARE PURCHASES
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange and the Federal Reserve Wire System are open for business. Shares may
be purchased either by wire or mail. The Trust reserves the right to reject any
purchase request.
To make a purchase, open an account by calling Federated Securities Corp.
Information needed to establish the account will be taken by telephone.
BY WIRE. To purchase by Federal Reserve wire, call the Trust before 3:00 p.m.,
(Eastern time) to place an order. The order is considered received immediately.
Payment by federal funds must be received before 3:00 p.m., (Eastern time) that
day. Federal funds should be wired as follows: Federated Services Company, c/o
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;
and 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 by mail, send a check made payable to Federated Master
Trust to: Federated Services Company, Federated Master Trust, P.O. Box 8602,
Boston, MA 02266-8602. Orders by mail are considered received when payment by
check is converted into federal funds. This is normally the next business day
after the check is received.
AUTOMATIC INVESTMENTS. Investors may establish accounts with their
financial institutions to have cash accumulations automatically invested in
the Trust. The investments may be made on predetermined dates or when the
investor's account reaches a certain level. Participating financial
institutions are responsible for prompt transmission of orders relating to
the program, and they may charge for their services. Investors should read
this prospectus along with the financial institution's agreement or
literature describing these services and fees.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment is $25,000. However, an account may be opened
with a smaller amount as long as the minimum is reached within 90 days. Minimum
investments will be calculated by combining all accounts maintained with the
Trust. Financial institutions may impose different minimum investment
requirements on their customers.
SUBACCOUNTING SERVICES
Financial institutions are encouraged to open single master accounts. However,
certain financial 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. Financial institutions 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 financial 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 or Federated Services Company in writing.
Monthly confirmations are sent to report transactions such as all purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are automatically
reinvested on payment dates in additional shares of the Trust unless cash
payments are requested by writing to the Trust. Shares purchased by wire before
3:00 p.m., (Eastern time) begin earning dividends that day. Shares purchased by
check begin earning dividends the day after the check is converted into federal
funds.
CAPITAL GAINS
The Trust does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Trust will distribute in cash or additional shares any realized
net long-term capital gains at least once every 12 months.
REDEEMING SHARES
- --------------------------------------------------------------------------------
Shares are redeemed at their net asset value next determined after Federated
Services Company receives the redemption request. Redemptions will be made on
days on which the Trust computes its net asset value. Redemption requests must
be received in proper form and can be made as described below.
BY MAIL
Shares may be redeemed by sending a written request to: Federated Master Trust,
P.O. Box 8602, Boston, MA 02266-8602. The written request should state:
Federated Master Trust; shareholder's name; the account number; and the share or
dollar amount requested. Sign the request exactly as the shares are registered.
Shareholders should call the Trust for assistance in redeeming by mail.
If share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request.
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 their
signatures guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund which is administered by the Federal Deposit Insurance
Corporation ("FDIC");
- 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, 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 the 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 the
signature guarantee program. The Trust and its transfer agent reserve the right
to amend these standards at any time without notice.
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. Dividends are paid up to and including the day that a redemption
request is processed.
TELEPHONE REDEMPTION
Shares may be redeemed by telephoning the Trust. Telephone instructions may be
recorded, and if reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions. 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.
If the redemption request is received before 3:00 p.m. (Eastern time), the
proceeds will be wired the same day to the shareholder's account at a domestic
commercial bank which is a member of the Federal Reserve System, and those
shares redeemed will not be entitled to that day's dividend. A daily dividend
will be paid on shares redeemed if the redemption request is received after 3:00
p.m. (Eastern time). However, the proceeds are not wired until the following
business day. Under limited circumstances, arrangements may be made with the
distributor for same-day payment of proceeds, without that day's dividend, for
redemption requests received before 3:00 p.m. (Eastern time).
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 "By Mail", should be considered. If at any time
the Trust shall determine it necessary to terminate or modify this method of
redemption, shareholders would be promptly notified.
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 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.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for any act or
obligation of the Trust. Therefore, financial loss resulting from liability as a
shareholder will occur only if the Trust itself cannot meet its obligations to
indemnify shareholders and pay judgments against them.
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.
In the opinion of Houston, Houston, & Donnelly, counsel to the Trust:
- the Trust is not subject to Pennsylvania corporate or personal property
taxes; and
- Trust shares may be subject to personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania to the
extent that the portfolio securities in the Trust would be subject to
such taxes if owned directly by residents of those jurisdictions.
OTHER STATE AND LOCAL TAXES. 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.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment.
Advertisements and 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, advertisements for the Trust may refer to ratings, rankings,
and other information in certain financial publications and/or compare its
performance to certain indices.
FEDERATED MASTER TRUST
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
BANKERS ACCEPTANCE--1.9%
- ----------- ----------------------------------------------------------------------
BANKING--1.9%
-----------------------------------------------------------------
$15,000,000 Republic National Bank of New York, 5.50%, 2/13/95 $ 14,830,418
----------------------------------------------------------------- ------------
CERTIFICATE OF DEPOSIT--0.6%
- ----------------------------------------------------------------------------------
5,000,000 Societe Generale, Paris, 5.22%, 2/13/95 5,000,100
----------------------------------------------------------------- ------------
++COMMERCIAL PAPER--49.2%
- ----------------------------------------------------------------------------------
BANKING--6.8%
-----------------------------------------------------------------
15,000,000 Bank of Nova Scotia, Toronto, 5.07%-5.70%, 1/9/95-4/25/95 14,742,954
-----------------------------------------------------------------
10,000,000 Canadian Imperial Holdings, Inc., (Guaranteed by Canadian
Imperial Bank of Commerce, Toronto), 6.00%, 3/2/95 9,848,333
-----------------------------------------------------------------
15,000,000 Commerzbank U.S. Finance, Inc., (Guaranteed by Commerzbank AG,
Frankfurt), 5.05%, 1/30/95 14,873,750
-----------------------------------------------------------------
5,000,000 Dresdner US Finance, 6.20%, 5/31/95 4,844,139
-----------------------------------------------------------------
8,000,000 Toronto Dominion Holdings (USA), Inc., (Guaranteed by
Toronto-Dominion Bank), 5.07%-5.08%, 3/8/95-3/9/95 7,889,873
----------------------------------------------------------------- ------------
Total 52,199,049
----------------------------------------------------------------- ------------
FINANCE-COMMERCIAL--20.5%
-----------------------------------------------------------------
26,000,000 Asset Securitization Cooperative Corp., 5.00%-5.65%,
1/9/95-2/10/95 25,783,900
-----------------------------------------------------------------
29,100,000 Beta Finance, Inc., 5.05%-6.125%, 1/9/95-6/7/95 28,642,932
-----------------------------------------------------------------
13,000,000 CIESCO, Inc., 4.84%, 12/1/94 13,000,000
-----------------------------------------------------------------
29,000,000 CIT Group Holdings, Inc., 5.10%-5.40%, 1/13/95-1/25/95 28,796,833
-----------------------------------------------------------------
23,000,000 Corporate Asset Funding Co., Inc. (CAFCO), 5.00%-6.05%,
1/5/95-5/25/95 22,627,002
-----------------------------------------------------------------
9,000,000 General Electric Capital Corp., 5.10%-5.70%, 1/12/95-4/27/95 8,837,450
-----------------------------------------------------------------
</TABLE>
FEDERATED MASTER TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
++COMMERCIAL PAPER--CONTINUED
- ----------------------------------------------------------------------------------
FINANCE-COMMERCIAL--CONTINUED
-----------------------------------------------------------------
$21,000,000 PREFCO-Preferred Receivables Funding Co., 4.83%-5.45%,
12/5/94-1/13/95 $ 20,950,186
-----------------------------------------------------------------
10,000,000 Sheffield Receivables Corp., 5.68%, 12/1/94 10,000,000
----------------------------------------------------------------- ------------
Total 158,638,303
----------------------------------------------------------------- ------------
FINANCE-RETAIL--11.3%
-----------------------------------------------------------------
35,000,000 Associates Corp. of North America, 5.50%-5.75%, 12/1/94-1/17/95 34,928,194
-----------------------------------------------------------------
32,200,000 Ford Credit Receivables Funding, Inc. 4.85%-5.81%,
12/1/94-2/28/95 31,845,105
-----------------------------------------------------------------
21,000,000 New Center Asset Trust, A1+/P1 Series, 5.05%-5.08%,
1/23/95-2/17/95 20,786,720
----------------------------------------------------------------- ------------
Total 87,560,019
----------------------------------------------------------------- ------------
INSURANCE--5.7%
-----------------------------------------------------------------
25,573,000 Prospect Street Sr. Loan Port L.P. (Guaranteed by FSA),
5.44%-5.95% 1/17/95-4/25/95 25,285,770
-----------------------------------------------------------------
19,000,000 Prudental Funding Corp., 4.80%-6.05%, 12/5/94-5/30/95 18,850,872
----------------------------------------------------------------- ------------
Total 44,136,642
----------------------------------------------------------------- ------------
OIL & OIL FINANCE--1.7%
-----------------------------------------------------------------
13,000,000 Chevron Transport Corp., (Guaranteed by Chevron Corp.), 5.50%,
1/31/95 12,878,847
----------------------------------------------------------------- ------------
TELECOMMUNICATIONS--3.2%
-----------------------------------------------------------------
20,000,000 Ameritech Capital Funding Corp., (Guaranteed by Ameritech Corp.),
5.10%, 1/13/95 19,878,167
-----------------------------------------------------------------
5,000,000 Ameritech Corp., 4.70%, 12/12/94 4,992,819
----------------------------------------------------------------- ------------
Total 24,870,986
----------------------------------------------------------------- ------------
TOTAL COMMERCIAL PAPER 380,283,846
----------------------------------------------------------------- ------------
*NOTES-VARIABLE--27.4%
- ----------------------------------------------------------------------------------
BANKING--15.9%
-----------------------------------------------------------------
9,930,000 500 South Front Street L.P., Series A, (Huntington National Bank
LOC), 5.97%, 12/1/94 9,930,000
-----------------------------------------------------------------
</TABLE>
FEDERATED MASTER TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
*NOTES VARIABLE--CONTINUED
- ----------------------------------------------------------------------------------
BANKING--CONTINUED
-----------------------------------------------------------------
$ 1,555,000 Continental Commercial Properties (Huntington National Bank,
Columbus, OH LOC), 5.97%, 12/1/94 $ 1,555,000
-----------------------------------------------------------------
2,680,000 Continental Downtown Properties, (Huntington National Bank,
Columbus, OH LOC) 5.97%, 12/1/94 2,680,000
-----------------------------------------------------------------
8,750,000 H & D Inc. (Huntington National Bank, Columbus, OH LOC), 5.968%,
12/1/94 8,750,000
-----------------------------------------------------------------
19,500,000 Jackson County, AL, Industrial Development Board, (National
Westminster Bank, PLC, London LOC), 6.018%, 12/1/94 19,500,000
-----------------------------------------------------------------
20,392,000 Midwest Funding Corp., (Bank One, Columbus N.A. LOC), 5.91%,
12/1/94 20,392,000
-----------------------------------------------------------------
29,000,000 PHH/CFC Leasing, Inc. (Guaranteed by Sara Lee Corp.), 6.00%,
12/7/94 29,000,000
-----------------------------------------------------------------
3,000,000 PHH/CFC Leasing, Inc. (Guaranteed by Sara Lee Corp.), 6.00%,
12/7/94 3,000,000
-----------------------------------------------------------------
20,000,000 SMM Trust 1994-B (Guaranteed by Morgan Guaranty Trust Co. NY),
5.892%, 2/13/95 19,992,066
-----------------------------------------------------------------
8,325,000 Wendy's of Las Vegas, Inc. and Wendy's of San Antonio, Inc.,
(Huntington National Bank, Columbus, OH LOC), 5.97%, 12/1/94 8,325,000
----------------------------------------------------------------- ------------
Total 123,124,066
----------------------------------------------------------------- ------------
ELECTRICAL EQUIPMENT--4.9%
-----------------------------------------------------------------
3,244,300 GS Funding Corp. (Guaranteed by General Electric Co.), 5.954%,
12/5/94 3,244,300
-----------------------------------------------------------------
34,352,147 Northwest Airlines, Inc. (Guaranteed by General Electric Co.),
5.983%, 12/5/94 34,352,147
----------------------------------------------------------------- ------------
Total 37,596,447
----------------------------------------------------------------- ------------
FINANCE-AUTOMOTIVE--3.5%
-----------------------------------------------------------------
27,000,000 Carco Auto Loan Mater Trust, Series 1993-2, 5.368%, 12/15/94 27,000,000
-----------------------------------------------------------------
INSURANCE--3.1%
-----------------------------------------------------------------
24,000,000 Peoples Security Life Insurance Co., 5.81%, 12/1/94 24,000,000
----------------------------------------------------------------- ------------
TOTAL NOTES-VARIABLE 211,720,513
----------------------------------------------------------------- ------------
</TABLE>
FEDERATED MASTER TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ----------------------------------------------------------------- ------------
<C> <C> <S> <C>
**REPURCHASE AGREEMENTS--21.0%
- ----------------------------------------------------------------------------------
$24,400,000 Fuji Government Securities, Inc., 5.72%, 12/1/94 $ 24,400,000
-----------------------------------------------------------------
9,500,000 J.P. Morgan and Co., Inc., 5.72%, 12/1/94 9,500,000
-----------------------------------------------------------------
13,000,000 PaineWebber, Inc., 5.75%, 12/1/94 13,000,000
-----------------------------------------------------------------
37,600,000 Salomon Brothers, Inc., 5.75%, 12/1/94 37,600,000
-----------------------------------------------------------------
7,700,000 Smith Barney, Inc., 5.55%, 12/1/94 7,700,000
-----------------------------------------------------------------
70,000,000 Warburg Securities, 5.72%, 12/1/94 70,000,000
----------------------------------------------------------------- ------------
TOTAL REPURCHASE AGREEMENTS 162,200,000
----------------------------------------------------------------- ------------
TOTAL INVESTMENTS, AT AMORTIZED COST 774,034,877+
----------------------------------------------------------------- ------------
</TABLE>
* Current rate and next reset date 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.
+ Also represents cost for federal tax purposes.
++ Each issue shows the rate of discount at the time of purchase for discount
issues, or the coupon for interest bearing issues.
Note: The categories of investments are shown as a percentage of net assets
($773,260,074) at November 30, 1994.
The following abbreviations are used in this portfolio:
<TABLE>
<S> <C> <C>
FSA -- Financial Security Assurance
LOC -- Letter of Credit
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED MASTER TRUST
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments in repurchase agreements $162,200,000
- -----------------------------------------------------------------
Investments in other securities 611,834,877
- ----------------------------------------------------------------- ------------
Total investments, at amortized cost and value $774,034,877
- --------------------------------------------------------------------------------
Cash 547,649
- --------------------------------------------------------------------------------
Interest receivable 1,080,262
- --------------------------------------------------------------------------------
Receivable for Trust shares sold 18,706
- -------------------------------------------------------------------------------- ------------
Total assets 775,681,494
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Dividends payable 2,306,001
- -----------------------------------------------------------------
Payable for Trust shares redeemed 9,894
- -----------------------------------------------------------------
Accrued expenses 105,525
- ----------------------------------------------------------------- ------------
Total liabilities 2,421,420
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 773,260,074 shares of beneficial interest outstanding $773,260,074
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
($773,260,074 / 773,260,074 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, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------
Interest income $34,015,088
- ---------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------
Investment advisory fee $3,257,773
- --------------------------------------------------------------------
Trustees' fees 11,676
- --------------------------------------------------------------------
Administrative personnel and services 601,523
- --------------------------------------------------------------------
Custodian and portfolio accounting fees 314,782
- --------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 38,559
- --------------------------------------------------------------------
Trust share registration costs 53,564
- --------------------------------------------------------------------
Auditing fees 19,260
- --------------------------------------------------------------------
Legal fees 15,669
- --------------------------------------------------------------------
Printing and postage 12,440
- --------------------------------------------------------------------
Taxes 14,591
- --------------------------------------------------------------------
Shareholder services fees 305,027
- --------------------------------------------------------------------
Insurance premiums 16,429
- --------------------------------------------------------------------
Miscellaneous 8,000
- -------------------------------------------------------------------- ----------
Total expenses 4,669,293
- --------------------------------------------------------------------
Deduct--Waiver of investment advisory fee 936,782
- -------------------------------------------------------------------- ----------
Net expenses 3,732,511
- --------------------------------------------------------------------------------- -----------
Net investment income $30,282,577
- --------------------------------------------------------------------------------- -----------
</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,
----------------------------------
1994 1993
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------
Net investment income $ 30,282,577 $ 30,332,900
- ------------------------------------------------------------ --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------------------
Dividends to shareholders from net investment income (30,282,577) (30,332,900)
- ------------------------------------------------------------ --------------- ---------------
TRUST SHARE (PRINCIPAL) TRANSACTIONS--
- ------------------------------------------------------------
Proceeds from sale of shares 5,769,238,863 7,012,193,252
- ------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of dividends declared 5,990,213 5,866,430
- ------------------------------------------------------------
Cost of shares redeemed (5,870,797,250) (7,207,902,151)
- ------------------------------------------------------------ --------------- ---------------
Change in net assets from Trust share transactions (95,568,174) (189,842,469)
- ------------------------------------------------------------ --------------- ---------------
Change in net assets (95,568,174) (189,842,469)
- ------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------
Beginning of period 868,828,248 1,058,670,717
- ------------------------------------------------------------ --------------- ---------------
End of period $ 773,260,074 $ 868,828,248
- ------------------------------------------------------------ --------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED MASTER TRUST
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Master Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as a diversified, open-end, no load,
management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--The Trust's use of the amortized cost method to value its
portfolio securities is in accordance with Rule 2a-7 under the Act.
B. REPURCHASE AGREEMENTS--It is 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 collateral to ensure that the value of collateral at
least equals the principal amount of the repurchase agreement, including accrued
interest.
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 Board of Trustees
("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. INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS--Interest income and expenses are accrued
daily. Bond premium and discount, if applicable, are amortized as required by the
Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are
recorded on the ex-dividend date.
D. FEDERAL TAXES--It is the Trust's policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to shareholders each year
substantially all of its taxable income. Accordingly, no provisions for federal tax are
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 on the trade
date and maintains security positions such that sufficient liquid assets will be
available to make payment for the securities purchased. Securities purchased on a
when-issued or delayed delivery basis are marked to market daily and begin earning
interest on the settlement date.
</TABLE>
FEDERATED MASTER TRUST
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
F. OTHER--Investment transactions are accounted for on the trade date.
</TABLE>
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At
November 30, 1994, capital paid-in aggregated $773,260,074. Transactions in
Trust shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
--------------------------------
1994 1993
- -------------------------------------------------------------- -------------- --------------
<S> <C> <C>
Shares sold 5,769,238,863 7,012,193,252
- --------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 5,990,213 5,866,430
- --------------------------------------------------------------
Shares redeemed (5,870,797,250) (7,207,902,151)
- -------------------------------------------------------------- -------------- --------------
Net change resulting from Trust share transactions (95,568,174) (189,842,469)
- -------------------------------------------------------------- -------------- --------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Research, the Trust's investment adviser
("Adviser"), receives for its services an annual investment advisory fee equal
to .40 of 1% of the Trust's average daily net assets. Adviser will waive, to the
extent of its advisory fee, the amount, if any, by which the Trust's aggregate
annual operating expenses (excluding interest, taxes, brokerage commission,
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 average daily net assets of the Trust.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Trust
administrative personnel and services. Prior to March 1, 1994, these services
were provided at approximate cost. Effective March 1, 1994, the fee is based on
the level of average aggregate daily net assets of all funds advised by
subsidiaries of Federated Investors for the period. The administrative fee
received during any fiscal year shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Service Agreement
with Federated Shareholder Services ("FSS"), the Trust will pay FSS up to 0.25
of 1% of average net assets to the Trust for the period. This fee is to obtain
certain personal services for shareholders and to maintain the shareholder
accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ") serves as transfer and dividend disbursing agent for the
Trust. The FServ fee is based on the size, type and number of accounts and
transactions made by shareholders.
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of
FEDERATED 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, 1994,
the related statement of operations for the year then ended, the statement of
changes in net assets for the years ended November 30, 1994 and 1993, and the
financial highlights (see page 2 of the prospectus) for each of the years in the
ten-year period ended November 30, 1994. 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, 1994 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, 1994, the results of its operations, the changes in its
net assets, and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
January 6, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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
- ----------------------------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company P.O. Box 8602
Boston, Massachusetts 02266-8602
- ----------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8602
Boston, Massachusetts 02266-8602
- ----------------------------------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania 15222
- ----------------------------------------------------------------------------------------------------
</TABLE>
FEDERATED MASTER TRUST
PROSPECTUS
An Open-End, Diversified, Management
Investment Company
Prospectus dated January 31, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
314214107
8010411A (1/95)
Federated Master Trust
Statement of Additional Information
This Statement of Additional Information should
be read with the prospectus of Federated Master
Trust (the "Trust") dated January 31, 1995. This
Statement is not a prospectus. To receive a
copy of a prospectus, write or call the Trust.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated January 31, 1995
Federated
Securitie
s Corp.
Distr
ibuto
r
A
subsi
diary
of
Feder
ated
Inves
tors
Investment Policies 1
Bank Instruments 1
When-Issued And
Delayed Delivery
Transactions 1
Repurchase Agreements 1
Reverse Repurchase
Agreements 1
Investment Limitations 1
Brokerage Transactions 3
Federated Master Trust
Management 4
The Funds 7
Share Ownership 7
Officers and Trustees
Compensation 8
Trustee Liability 8
Investment Advisory
Services 9
Investment Adviser 9
Advisory Fees 9
Other Related Services 9
Trust Administration 9
Shareholder Services
Plan 10
Determining Net Asset
Value 10
Redemption in Kind 10
The Trust's Tax Status 10
Performance Information 11
Yield 11
Effective Yield 11
Total Return 11
Performance
Comparisons 11
Investment Policies
Unless indicated otherwise, the policies described
below may not be changed by the Trustees without
shareholder approval.
Bank Instruments
The instruments of banks and savings and loans whose
deposits are insured by the Bank Insurance Fund
("BIF") or the Savings Association Insurance Fund
("SAIF"), such as certificates of deposit, demand and
time deposits, savings shares, and bankers'
acceptances, are not necessarily guaranteed by those
organizations. In addition to domestic bank
instruments, the Trust may invest in: Eurodollar
Certificates of Deposit issued by foreign branches of
U.S. or foreign banks; Eurodollar Time Deposits,
which are U.S. dollar-denominated deposits in foreign
branches of U.S. or foreign banks; Canadian Time
Deposits, which are U.S. dollar-denominated deposits
issued by branches of major Canadian banks located in
the United States; and Yankee Certificates of Deposit,
which are U.S. dollar-denominated certificates of
deposit issued by U.S. branches of foreign banks and
held in the United States.
When-Issued And Delayed Delivery Transactions
These transactions are made to secure what is
considered to be an advantageous price or yield for
the Trust. Settlement dates may be a month or more
after entering into these transactions, and the market
values of the securities purchased may vary from the
purchase prices. No fees or other expenses, other than
normal transaction costs, are incurred. However,
liquid assets of the Trust sufficient to make payment
for the securities to be purchased are segregated on
the Trust's records at the trade date. These assets
are marked to market daily and are maintained until
the transaction has been settled. As a matter of
operating policy, the Trust does not intend to engage
in when-issued and delayed delivery transactions to an
extent that would cause the segregation of more than
20% of the total value of its assets.
Repurchase Agreements
The Trust or its custodian will take possession of the
securities subject to repurchase agreements, and these
securities will be marked to market daily. In the
event that a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by
the Trust might be delayed pending court action. The
Trust believes that under the regular procedures
normally in effect for custody of the Trust's
portfolio securities subject to repurchase agreements,
a court of competent jurisdiction would rule in favor
of the Trust and allow retention or disposition of
such securities. The Trust will only enter into
repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which
are deemed by the Trust's adviser to be creditworthy
pursuant to guidelines established by the Trustees.
Reverse Repurchase Agreements
The Trust may also enter into reverse repurchase
agreements. These transactions are similar to
borrowing cash. In a reverse repurchase agreement,
the Trust transfers possession of a portfolio
instrument in return for a percentage of the
instrument's market value in cash and agrees that on a
stipulated date in the future the Trust will
repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon
rate. The use of reverse repurchase agreements may
enable the Trust to avoid selling portfolio
instruments at a time when a sale may be deemed to be
disadvantageous, but does not ensure this result. When
effecting reverse repurchase agreements, liquid assets
of the Trust, in a dollar amount sufficient to make
payment for the obligations to be purchased, are:
segregated on the Trust's records at the trade date;
marked to market daily; and maintained until the
transaction is settled.
Investment Limitations
Selling Short and Buying on Margin
The Trust will not sell any securities short or
purchase any securities on margin but may obtain
such short-term credits as are necessary for
clearance of transactions.
Issuing Senior Securities and Borrowing Money
The Trust will not issue senior securities.
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.
Lending Cash or Securities
The Trust will not lend any of its assets,
except that it may purchase or hold portfolio
securities permitted by its investment
objective, policies, and limitations, or
Declaration of Trust.
Investing in Commodities
The Trust will not purchase or sell commodities
or commodity contracts.
Investing in Real Estate
The Trust will not purchase or sell real estate,
including limited partnership interests,
although it may invest in securities of issuers
whose business involves the purchase or sale of
real estate or in securities which are secured
by real estate or interests in real estate.
Underwriting
The Trust will not engage in underwriting of
securities issued by others.
Acquiring Securities
The Trust will not acquire the voting securities
of any issuer.
Concentration of Investments
The Trust will not invest 25% or more of the
value of its total assets in any one industry
except that the Trust will invest 25% or more of
the value of its total assets in commercial
paper issued by finance companies. The Trust
may invest 25% or more of the value of its total
assets in cash, cash items, or securities issued
or guaranteed by the government of the United
States or its agencies, or instrumentalities and
repurchase agreement collateralized by such U.S.
government securities.
Diversification of Investments
The Trust will not purchase securities of any
one issuer (other than cash, cash items, or
securities issued or guaranteed by the
government of the United States or its agencies
or instrumentalities and repurchase agreements
collateralized by such U.S. government
securities) if as a result more than 5% of the
value of its total assets would be invested in
the securities of that issuer.
Investing in Securities of Other Investment
Companies
The Trust will not purchase securities of other
investment companies.
Investing for Control
The Trust will not invest in securities of a
company for the purpose of exercising control or
management.
The above limitations cannot be changed without
shareholder approval. The following investment
limitations, however, may be changed by the
Trustees without shareholder approval.
Shareholders will be notified before any
material change in these limitations becomes
effective.
Investing in Restricted Securities
The Trust will not invest more than 10% of its
total assets in securities subject to
restrictions on resale under federal securities
law, except for restricted securities determined
to be liquid under criteria established by the
Trustees.
Investing in Illiquid Securities
The Trust will not invest more than 10% of the
value of its net assets in illiquid securities.
Investing in New Issuers
The Trust will not invest more than 5% of the
value of its total assets in securities of
issuers which have records of less than three
years of continuous operations, including the
operation of any predecessor.
Investing in Issuers Whose Securities Are Owned by
Officers of the Trust
The Trust will not purchase or retain the
securities of any issuer if the officers and
Trustees of the Trust or its investment adviser
owning individually more than .50 of 1% of the
issuer's securities together own more than 5% of
the issuer's securities.
Investing in Options
The Trust will not invest in puts, calls,
straddles, spreads, or any combination of them.
Investing in Minerals
The Trust will not purchase or sell interests in
oil, gas, or other mineral exploration or
development programs or leases, although it may
purchase the securities of issuers which invest
in or sponsor such programs.
For purposes of the above limitations, the Trust
considers 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 to be "cash
items". Except with respect to borrowing money, if a
percentage limitation is adhered to at the time of
investment, a later increase or decrease in percentage
resulting from any change in value or net assets will
not result in a violation of such limitation.
The Trust did not borrow money or pledge securities in
excess of 5% of the value of its net assets during the
last fiscal year and has no present intent to do so
during the coming fiscal year.
Brokerage Transactions
When selecting brokers and dealers to handle the
purchase and sale of portfolio instruments, the
adviser looks for prompt execution of the order at a
favorable price. In working with dealers, the adviser
will generally use those who are recognized dealers in
specific portfolio instruments, except when a better
price and execution of the order can be obtained
elsewhere. The adviser makes decisions on portfolio
transactions and selects brokers and dealers subject
to guidelines established by the Board of Trustees.
The adviser may select brokers and dealers who offer
brokerage and research services. These services may
be furnished directly to the Trust or to the adviser
and may include: advice as to the advisability of
investing in securities; security analysis and
reports; economic studies; industry studies; receipt
of quotations for portfolio evaluations; and similar
services. Research services provided by brokers and
dealers may be used by the adviser or its affiliates
in advising the Trust and other accounts. To the
extent that receipt of these services may supplant
services for which the adviser or its affiliates might
otherwise have paid, it would tend to reduce their
expenses. The adviser and its affiliates exercise
reasonable business judgment in selecting brokers who
offer brokerage and research services to execute
securities transactions. They determine in good faith
that commissions charged by such persons are
reasonable in relationship to the value of the
brokerage and research services provided. During the
fiscal years ended 1994, 1993, and 1992, the Trust
paid no brokerage commissions.
Although investment decisions for the Trust are made
independently from those of the other accounts managed
by the adviser, investments of the type the Trust may
make may also be made by those other accounts. When
the Trust and one or more other accounts managed by
the adviser are prepared to invest in, or desire to
dispose of, the same security, available investments
or opportunities for sales will be allocated in a
manner believed by the adviser to be equitable to
each. In some cases, this procedure may adversely
affect the price paid or received by the Trust or the
size of the position obtained or disposed of by the
Trust. In other cases, however, it is believed that
coordination and the ability to participate in volume
transactions will be to the benefit of the Trust.
Federated Master Trust Management
Officers and Trustees are listed with their
addresses, present positions with Federated Master
Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated
Advisers, Federated Management, and Federated
Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director,
AEtna Life and Casualty Company; Chief Executive
Officer and Director, Trustee, or Managing General
Partner of the Funds. Mr. Donahue is the father of J.
Christopher Donahue, Vice President of the Trust.
Thomas G. Bigley
28th Floor, One Oxford Center
Pittsburgh, PA
Trustee
Director, Oberg Manufacturing Co.; Chairman of the
Board, Children's Hospital of Pittsburgh; Director,
Trustee, or Managing General Partner of the Funds;
formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Trustee
President, Investment Properties Corporation; Senior
Vice-President, John R. Wood and Associates, Inc.,
Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate
ventures in Southwest Florida; Director, Trustee, or
Managing General Partner of the Funds; formerly,
President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Trustee
Director and Member of the Executive Committee,
Michael Baker, Inc.; Director, Trustee, or Managing
General Partner of the Funds; formerly, Vice Chairman
and Director, PNC Bank, N.A., and PNC Bank Corp. and
Director, Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Trustee
Attorney-at-law; Director, The Emerging Germany Fund,
Inc.; Director, Trustee, or Managing General Partner
of the Funds; formerly, Director, Blue Cross of
Massachusetts, Inc.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Trustee
Hematologist, Oncologist, and Internist, Presbyterian
and Montefiore Hospitals; Professor of Medicine and
Trustee, University of Pittsburgh; Director of
Corporate Health, University of Pittsburgh Medical
Center; Director, Trustee, or Managing General Partner
of the Funds.
Edward L. Flaherty, Jr.@
Two Gateway Center, Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer &
Flaherty; Director, Eat'N Park Restaurants, Inc., and
Statewide Settlement Agency, Inc.; Director, Trustee,
or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
Peter E. Madden
225 Franklin Street
Boston, MA
Trustee
Consultant; State Representative, Commonwealth of
Massachusetts; Director, Trustee, or Managing General
Partner of the Funds; formerly, President, State
Street Bank and Trust Company and State Street Boston
Corporation and Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Two Gateway Center, Suite 674
Pittsburgh, PA
Trustee
G
General Partner of the Funds; formerly, Vice Chairman,
Horizon Financial, F.A.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Trustee
Professor, Foreign Policy and Management Consultant;
Trustee, Carnegie Endowment for International Peace,
RAND 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; President
Emeritus, University of Pittsburgh; formerly,
Chairman, National Advisory Council for Environmental
Policy and Technology.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Trustee
Public relations/marketing consultant; Director,
Trustee, or Managing General Partner of the Funds.
Glen R. Johnson
Federated Investors Tower
Pittsburgh, PA
President
Trustee, Federated Investors; President and/or Trustee
of some of the Funds; staff member, Federated
Securities Corp. and Federated Administrative
Services.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Vice President
President and Trustee, Federated Investors, Federated
Advisers, Federated Management, and Federated
Research; President and Director, Federated Research
Corp.; President, Passport Research, Ltd.; Trustee,
Federated Administrative Services, Federated Services
Company, and Federated Shareholder Services; President
or Vice President of the Funds; Director, Trustee, or
Managing General Partner of some of the Funds. Mr.
Donahue is the son of John F. Donahue, Chairman and
Trustee of the Trust.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Vice President
Executive Vice President and Trustee, Federated
Investors; Director, Federated Research Corp.;
Chairman and Director, Federated Securities Corp.;
President or Vice President of some of the Funds;
Director or Trustee of some of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated
Investors; Vice President and Treasurer, Federated
Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.;
Executive Vice President, Treasurer, and Director,
Federated Securities Corp.; Trustee, Federated
Services Company and Federated Shareholder Services;
Chairman, Treasurer, and Trustee, Federated
Administrative Services; Trustee or Director of some
of the Funds; Vice President and Treasurer of the
Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and
Trustee, Federated Investors; Vice President,
Secretary, and Trustee, Federated Advisers, Federated
Management, and Federated Research; Vice President and
Secretary, Federated Research Corp. and Passport
Research, Ltd.; Trustee, Federated Services Company;
Executive Vice President, Secretary, and Trustee,
Federated Administrative Services; Secretary and
Trustee, Federated Shareholder Services; Executive
Vice President and Director, Federated Securities
Corp.; Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested
person" as defined in the Investment Company
Act of 1940, as amended.
@ Member of the Executive Committee. The
Executive Committee of the Board of Trustees
handles the responsibilities of the Board of
Trustees between meetings of the Board.
The Funds
As referred to in the list of Trustees and Officers,
"Funds" includes the following investment companies:
American Leaders Fund, Inc.; Annuity Management
Series; Arrow Funds; Automated Cash Management Trust;
Automated Government Money Trust; California
Municipal Cash Trust; Cash Trust Series II; Cash Trust
Series, Inc.; DG Investor Series; Edward D. Jones &
Co. Daily Passport Cash Trust; Federated ARMs Fund;
Federated Exchange Fund, Ltd.; Federated GNMA Trust;
Federated Government Trust; Federated Growth Trust;
Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated
Index Trust; Federated Institutional Trust; Federated
Intermediate Government 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; Insight
Institutional Series, Inc.; Insurance Management
Series; Intermediate Municipal Trust; International
Series, Inc.; Investment Series Funds, Inc.;
Investment Series Trust; Liberty Equity Income Fund,
Inc.; Liberty High Income Bond Fund, Inc.; Liberty
Municipal Securities Fund, Inc.; Liberty U.S.
Government Money Market Trust; Liberty Term Trust,
Inc. - 1999; Liberty Utility Fund, Inc.; Liquid Cash
Trust; Managed Series Trust; The Medalist Funds: Money
Market Management, Inc.; Money Market Obligations
Trust; Money Market Trust; Municipal Securities Income
Trust; New York Municipal Cash Trust; 111 Corcoran
Funds; Peachtree Funds; The Planters Funds; Portage
Funds; RIMCO Monument Funds; The Shawmut Funds; Short-
Term Municipal Trust; Star Funds; The Starburst Funds;
The Starburst Funds II; Stock and Bond Fund, Inc.;
Sunburst Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; Trademark Funds; Trust for
Financial Institutions; Trust For Government Cash
Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations; World
Investment Series, Inc.
Share Ownership
Officers and Trustees own less than 1% of the Trust's
outstanding shares.
As of January 11, 1995, the following shareholders of
record owned 5% or more of the outstanding shares of
the Trust: The Bank of the West, San Jose, California,
owned approximately 41,337,778 shares (5.36%),
Federated Bank and Trust, Gibbsboro, New Jersey, owned
approximately 43,975,114 shares (5.70%), and Saxon &
Co., Philadelphia, Pennsylvania, owned approximately
65,575,601 shares (8.50%).
Officers and Trustees Compensation
NAME , AGGREGATE
TOTAL COMPENSATION PAID
POSITION WITH COMPENSATION FROM TO
TRUSTEES FROM
TRUST TRUST
TRUST AND FUND COMPLEX
John F. Donahue,
Chairman and Trustee $ -0- $ -
0- for the Trust and
69
investment companies
Thomas G. Bigley,
Trustee $ 455.50 $
24,991 for the Trust and
50
investment companies
John T. Conroy, Jr.,
Trustee $ 1,964.75 $
136,100 for the Trust and
65
investment companies
William J. Copeland,
Trustee $ 1,964.75 $
136,100 for the Trust and
65
investment companies
James E. Dowd,
Trustee $ 1,964.75 $
136,100 for the Trust and
65
investment companies
Lawrence D. Ellis, M.D.,
Trustee $ 1780.50 $
123,600 for the Trust and
65
investment companies
Edward L. Flaherty, Jr.,
Trustee $ 1,964.75 $
136,100 for the Trust and
65
investment companies
Peter E. Madden,
Trustee $ 1,507.50 $
104,880 for the Trust and
65
investment companies
Gregor F. Meyer,
Trustee $ 1780.50 $
123,600 for the Trust and
65
investment companies
Wesley W. Posvar,
Trustee $ 1780.50 $
123,600 for the Trust and
65
investment companies
Marjorie P. Smuts,
Trustee $ 1780.50 $
123,600 for the Trust and
65
investment companies
Trustee Liability
The Declaration of Trust provides that the Trustees
will not be liable for errors of judgment or mistakes
of fact or law. However, they are not protected
against any liability to which they would otherwise be
subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties
involved in the conduct of their office.
Investment Advisory Services
Investment Adviser
The Trust's investment adviser is Federated Research.
It is a subsidiary of Federated Investors. All the
voting securities of Federated Investors are owned by
a trust, the trustees of which are John F. Donahue,
his wife and his son, J. Christopher Donahue.
The adviser shall not be liable to the Trust or any
shareholder for any losses that may be sustained in
the purchase, holding, or sale of any security or for
anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties
imposed upon it by its contract with the Trust.
Advisory Fees
For its advisory services, Federated Research receives
an annual investment advisory fee as described in the
prospectus.
For the fiscal years ended November 30, 1994, 1993,
and 1992, the adviser earned $3,257,773, $4,206,902,
and $4,707,327, respectively, of which $936,782,
$483,000, and $414,285, respectively, was voluntarily
waived.
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 2-1/2% per year
of the first $30 million of average net assets,
2% per year of the next $70 million of average
net assets, and 1-1/2% 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 fees.
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.
Trust Administration
Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel
and services to the Trust for a fee as described in
the prospectus. Prior to March 1, 1994, Federated
Administrative Services, Inc., also a subsidiary of
Federated Investors, served as the Trust's
Administrator. (For purposes of this Statement of
Additional Information, Federated Administrative
Services and Federated Administrative Services, Inc.
may hereinafter collectively be referred to as the
"Administrators".) For the fiscal years ended
November 30, 1994, 1993, and 1992, the Administrators
earned $601,523, $592,362, and $531,208, respectively.
Dr. Henry J. Gailliot, an officer of Federated
Research, the adviser to the Trust, holds
approximately 20% of the outstanding common stock and
serves as a director of Commercial Data Services,
Inc., a company which provides computer processing
services to Federated Administrative Services.
Custodian and Portfolio Recordkeeper. State Street
Bank and Trust Company, Boston, MA is custodian for
the securities and cash of the Trust. It also
provides certain accounting and recordkeeping services
with respect to the Trust's portfolio investments.
Transfer Agent. As transfer agent, Federated Services
Company maintains all necessary shareholder records.
For its services, the transfer agent receives a fee
based on number of shareholder accounts.
Shareholder Services Plan
This arrangement permits the payment of fees to
Federated Shareholder Services and financial
institutions to cause services to be provided which
are necessary for the maintenance of shareholder
accounts and to encourage personal services to
shareholders by a representative who has knowledge of
the shareholder's particular circumstances and goals.
These activities and services may include, but are not
limited to: providing office space, equipment,
telephone facilities, and various clerical,
supervisory, computer, and other personnel as
necessary or beneficial to establish and maintain
shareholder accounts and records; processing purchase
and redemption transactions and automatic investments
of client account cash balance; answering routine
client inquiries; and assisting clients in changing
dividend options, account designations, and addresses.
By adopting the Shareholder Services Plan, the Board
of Trustees expects that the Trust will benefit by:
(1) providing personal services to shareholders;
(2) investing shareholder assets with a minimum of
delay and administrative detail; (3) enhancing
shareholder recordkeeping systems; and (4) responding
promptly to shareholders' requests and inquiries
concerning their accounts. For the fiscal period
ending November 30, 1994, payments in the amount of
$305,027 were made pursuant to the Shareholder
Services Plan.
Determining Net Asset Value
The Trustees have decided that the best method for
determining the value of portfolio instruments is
amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as
adjusted for amortization of premium or accumulation
of discount rather than at current market value.
Accordingly, neither the amount of daily income nor
the net asset value is affected by any unrealized
appreciation or depreciation of the portfolio. In
periods of declining interest rates, the indicated
daily yield on shares of the Trust computed by
dividing the annualized daily income on the Trust's
portfolio by the net asset value computed as above may
tend to be higher than a similar computation made by
using a method of valuation based upon market prices
and estimates. In periods of rising interest rates,
the opposite may be true.
The Trust's use of the amortized cost method of
valuing portfolio instruments depends on its
compliance with certain conditions in Rule 2a-7 (the
"Rule") promulgated by the Securities and Exchange
Commission under the Investment Company Act of 1940.
Under the Rule, the Trustees must establish procedures
reasonably designed to stabilize the net asset value
per share, as computed for purposes of distribution
and redemption, at $1.00 per share, taking into
account current market conditions and the Trust's
investment objective. The procedures include
monitoring the relationship between the amortized cost
value per share and the net asset value per share
based upon available indications of market value. The
Trustees will decide what, if any, steps should be
taken if there is a difference of more than 0.5 of 1%
between the two values. The Trustees will take any
steps they consider appropriate (such as redemption in
kind or shortening the average portfolio maturity) to
minimize any material dilution or other unfair results
arising from differences between the two methods of
determining net asset value.
Redemption in Kind
The Trust is obligated to redeem shares solely in cash
up to $250,000 or 1% of the Trust's net asset value,
whichever is less, for any one shareholder within a 90-
day period. Any redemption beyond this amount will
also be in cash unless the Trustees determine that
further payments should be in kind. In such cases,
the Trust will pay all or a portion of the remainder
of the redemption in portfolio instruments valued in
the same way as the Trust determines net asset value.
The portfolio instruments will be selected in a manner
that the Trustees deem fair and equitable. Redemption
in kind is not as liquid as a cash redemption. If
redemption is made in kind, shareholders who sell
these securities could receive less than the
redemption value and could incur certain transaction
costs.
The Trust's Tax Status
To qualify for the special tax treatment afforded to
regulated investment companies, the Trust must, among
other requirements: derive at least 90% of its gross
income from dividends, interest, and gains from the
sale of securities; derive less than 30% of its gross
income from the sale of securities held less than
three months; invest in securities within certain
statutory limits; and distribute to its shareholders
at least 90% of its net income earned during the year.
Performance Information
Performance depends upon such variables as: portfolio
quality; average portfolio maturity; type of
instruments in which the portfolio is invested;
changes in interest rates; changes in expenses; and
the relative amount of cash flow. To the extent that
financial institutions and broker/dealers charge fees
in connection with services provided in conjunction
with an investment in shares of the Trust, the
performance will be reduced for those shareholders
paying those fees.
Yield
The Trust calculates its yield based upon the seven
days ending on the day of the calculation, called the
"base period." This yield is computed by: determining
the net change in the value of a hypothetical account
with a balance of one share at the beginning of the
base period, with the net change excluding capital
changes but including the value of any additional
shares purchased with dividends earned from the
original one share and all dividends declared on the
original and any purchased shares; dividing the net
change in the account's value by the value of the
account at the beginning of the base period to
determine the base period return; and multiplying the
base period return by 365/7.
The Trust's yield for the seven-day period ended
November 30, 1994, was 5.17%.
Effective Yield
The Trust calculates its effective yield by
compounding the unannualized base period return by:
adding 1 to the base period return; raising the sum to
the 365/7th power; and subtracting 1 from the result.
The Trust's effective yield for the seven-day period
ended November 30, 1994, was 5.30%.
Total Return
Average annual total return is the average compounded
rate of return for a given period that would equate a
$1,000 initial investment to the ending redeemable
value of that investment. The ending redeemable value
is computed by multiplying the number of shares owned
at the end of the period by the net asset value per
share at the end of the period. The number of shares
owned at the end of the period is based on the number
of shares purchased at the beginning of the period
with $1,000, adjusted over the period by any
additional shares, assuming the monthly reinvestment
of all dividends and distributions.
Performance Comparisons
Investors may use financial publications and/or
indices to obtain a more complete view of the Trust's
performance. When comparing performance, investors
should consider all relevant factors such as the
composition of any index used, prevailing market
conditions, portfolio compositions of other funds, and
methods used to value portfolio securities and compute
offering price. The financial publications and/or
indices which the Trust uses in advertising may
include:
o Lipper Analytical Services, Inc. ranks funds in
various fund categories based on total return,
which assumes the reinvestment of all income
dividends and capital gains distributions, if
any.
o Donoghue's Money Fund Report publishes
annualized yields of money market funds weekly.
Donoghue's Money Market Insight publication
reports monthly and 12-month-to-date investment
results for the same money funds.
o Money, a monthly magazine, regularly ranks money
market funds in various categories based on the
latest available seven-day effective yield.
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