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,
1997. This Statement is not a prospectus. You may request a copy of a
prospectus or a paper copy of this Statement, if you have received it
electronically, free of charge by calling 1-800-341-7400.
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Statement dated January 31, 1997
FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the Funds
and is a subsidiary of Federated Investors.
Cusip 314214107
8010411B (1/97)
INVESTMENT POLICIES 1
Acceptable Investments 1
U.S. Government Securities 1
Bank Instruments 1
Ratings 1
When-Issued and Delayed Delivery Transactions 1
Repurchase Agreements 1
Credit Enhancement 2
INVESTMENT LIMITATIONS 2
FEDERATED MASTER TRUST MANAGEMENT 4
Share Ownership 7
Trustee Compensation 8
Trustee Liability 8
INVESTMENT ADVISORY SERVICES 9
Investment Adviser 9
Advisory Fees 9
BROKERAGE TRANSACTIONS 9
OTHER SERVICES 9
Trust Administration 9
Custodian and Portfolio Accountant 9
Transfer Agent 10
Independent Auditors 10
DETERMINING NET ASSET VALUE 10
SHAREHOLDER SERVICES 10
REDEMPTION IN KIND 10
MASSACHUSETTS PARTNERSHIP LAW 11
THE TRUST'S TAX STATUS 11
PERFORMANCE INFORMATION 11
Yield 11
Effective Yield 11
Total Return 11
Performance Comparisons 12
Economic and Market Information 12
ABOUT FEDERATED INVESTORS 12
INVESTMENT POLICIES
Unless indicated otherwise, the policies described below may not be changed
by the Board of Trustees without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of the
security; the issuer of any demand feature applicable to the security; or
any guarantor of either the security or any demand feature.
U.S. GOVERNMENT SECURITIES
The types of U.S. government securities in which the Trust may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued or guaranteed by
U.S. government agencies or instrumentalities. These securities are backed
by:
othe full faith and credit of the U.S. Treasury;
othe issuer's right to borrow from the U.S. Treasury;
othe discretionary authority of the U.S. government to purchase
certain obligations of agencies or instrumentalities; or
othe credit of the agency or instrumentality issuing the obligations.
BANK INSTRUMENTS
The instruments of banks and savings associations 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.
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.''
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Trust. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of the
Trust 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 believes that under the regular procedures normally in effect for
custody of the Trust's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the
Trust and allow retention or disposition of such securities. The Trust will
only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the
Trust's adviser to be creditworthy pursuant to guidelines established by
the Trustees.
CREDIT ENHANCEMENT
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 being issued by the credit enhancer for diversification
purposes. However, under certain circumstances applicable regulations may
require the Trust to treat securities as having been issued by both the
issuer and the credit enhancer.
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 purchases and sales of securities.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Trust will not issue senior securities except that the Trust may borrow
money in amounts up to one-third of the value of its total assets,
including the amounts borrowed.
The Trust will not borrow money, except as a temporary measure for
extraordinary or emergency purposes, and then (a) only in amounts not in
excess of 5% of the value of its total assets or (b) in an amount up to
one-third of the value of its total assets, including the amount borrowed,
in order to meet redemption requests without immediately selling any
portfolio securities (any such borrowings under this section will not be
collateralized).
PLEDGING ASSETS
The Trust will not pledge securities.
LENDING CASH OR SECURITIES
The Trust will not make loans to other persons; provided, however, that the
purchase or holding of money market instruments, to include repurchase
agreements and variable amount demand master notes, in accordance with the
Trust's investment objective and policies shall not constitute the making
of a loan.
INVESTING IN COMMODITIES
The Trust will not invest in commodities or commodity contracts.
INVESTING IN REAL ESTATE
The Trust will not invest in real estate, except that the Trust may
purchase money market instruments issued by companies, which invest in real
estate or interests therein.
UNDERWRITING
The Trust will not engage in underwriting of securities issued by others.
ACQUIRING SECURITIES
The Trust will not acquire voting securities except as part of a merger,
consolidation, reorganization, or acquisition of assets.
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 agreements
collateralized by such U.S. government securities.
DIVERSIFICATION OF INVESTMENTS
The Trust will not invest more than 5% of its assets in the securities of
any one issuer (except cash or cash items, repurchase agreements and
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities).
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Trust will not invest in securities issued by any other investment
company.
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 ILLIQUID SECURITIES
The Trust will not invest more than 10% of the value of its net assets in
illiquid securities including certain restricted securities not determined
to be liquid under criteria established by the Trustees, non-negotiable
time deposits and repurchase agreements providing for settlement in more
than seven days after notice.
INVESTING IN OPTIONS
The Trust will not invest in puts, calls, straddles, spreads, or any
combination of them.
For purposes of the above limitations, the Trust considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic
bank or savings association having capital, surplus, and undivided profits
in excess of $100,000,000 at the time of investment to be `cash items.''
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not result
in a violation of such limitation.
The Trust did not borrow money or pledge securities in excess of 5% of the
value of its net assets during the last fiscal year and has no present
intent to do so during the coming fiscal year.
REGULATORY COMPLIANCE
The Trust may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in
the prospectus and this Statement of Additional Information, in order to
comply with applicable laws and regulations, including the provisions of
and regulations under the Investment Company Act of 1940. In particular,
the Trust will comply with the various requirements of Rule 2a-7, which
regulates money market mutual funds. The Trust will also determine the
effective maturity of its investments , as well as its ability to consider
a security as having received the requisite short-term ratings by NRSROs,
according to Rule 2a-7. The Trust may change these operational policies to
reflect changes in the laws and regulations without the approval of its
shareholders.
FEDERATED MASTER TRUST MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Master Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee of the
Funds.
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Trustee,
University of Pittsburgh; Director or Trustee of the Funds.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John
R. Wood and Associates, Inc., Realtors; Partner or Trustee in private real
estate ventures in Southwest Florida; formerly, President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
formerly, Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.;
Director, Ryan Homes, Inc.; Director or Trustee of the Funds.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine, University of Pittsburgh; Medical Director,
University of Pittsburgh Medical Center - Downtown; Member, Board of
Directors, University of Pittsburgh Medical Center; formerly, Hematologist,
Oncologist, and Internist, Presbyterian and Montefiore Hospitals; Director
or Trustee of the Funds.
Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.
Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Trustee
Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street
Boston Corporation; Director or Trustee of the Funds.
Gregor F. Meyer
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney, Member of Miller, Ament, Henny & Kochuba; Chairman, Meritcare,
Inc.; Director, Eat'N Park Restaurants, Inc.; Director or Trustee of the
Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director or Trustee of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., National Defense University, U.S. Space Foundation
and Czech Management Center; President Emeritus, University of Pittsburgh;
Founding Chairman, National Advisory Council for Environmental Policy and
Technology, Federal Emergency Management Advisory Board and Czech
Management Center; Director or Trustee of the Funds.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/Marketing/Conference Planning, Manchester Craftsmen's
Guild; Restaurant Consultant, Frick Art & History Center; Conference
Coordinator, University of Pittsburgh Art History Department; Director or
Trustee of the Funds.
Glen R. Johnson
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President
Trustee, Federated Investors; President and/or Trustee of some of the
Funds; staff member, Federated Securities Corp.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company, and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee of the Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company; Trustee or Director of
some of the Funds; President, Executive Vice President and Treasurer of
some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President , Secretary and Treasurer
Executive Vice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.;
Trustee, Federated Shareholder Services Company; Director, Federated
Services Company; President and Trustee, Federated Shareholder Services;
Director, Federated Securities Corp.; Executive Vice President and
Secretary of the Funds; Treasurer of some of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some
of the Funds; Director or Trustee of some of the Funds.
*This Trustee is deemed to be an ``interested person'' as defined in
the Investment Company Act of 1940.
@Member of the Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board between
meetings of the Board.
As referred to in the list of Trustees and Officers, `Funds'' includes the
following investment companies:
111 Corcoran Funds; Arrow Funds; Automated Government Money Trust;
Blanchard Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust Series
II; Cash Trust Series, Inc. ; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund,
Inc.; Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated
Equity Funds; Federated Equity Income Fund, Inc.; Federated Fund for U.S.
Government Securities, Inc.; Federated GNMA Trust; Federated Government
Income Securities, Inc.; Federated Government Trust; Federated High Income
Bond Fund, Inc.; Federated High Yield Trust; Federated Income Securities
Trust; Federated Income Trust; Federated Index Trust; Federated
Institutional Trust; Federated Insurance Series; Federated Investment
Portfolios; Federated Investment Trust; Federated Master Trust; Federated
Municipal Opportunities Fund, Inc.; Federated Municipal Securities Fund,
Inc.; Federated Municipal Trust; Federated Short-Term Municipal Trust;
Federated Short-Term U.S. Government Trust; Federated Stock and Bond Fund,
Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income
Securities, Inc.; High Yield Cash Trust; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Term Trust, Inc. - 1999; Liberty U.S. Government
Money Market Trust; Liquid Cash Trust; Managed Series Trust; Money Market
Management, Inc.; Money Market Obligations Trust; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; Peachtree Funds; RIMCO
Monument Funds; Targeted Duration Trust; Tax-Free Instruments Trust; The
Planters Funds; The Starburst Funds; The Starburst Funds II; The Virtus
Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; and World Investment Series, Inc.
SHARE OWNERSHIP
Officers and Trustees as a group own less than 1% of the Trust`s
outstanding shares.
As of January 2, 1997, the following shareholder of record owned 5% or more
of the outstanding shares of the Trust: Saxon & Co., PNC Bank,
Philadelphia, Pennsylvania, owned approximately 116,946,856 shares
(19.81%).
TRUSTEE COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST* FROM FUND COMPLEX +
John F. Donahue, $ 0 $ 0 for the Trust and
Chairman and Trustee 56 other investment companies in
the Fund Complex
Thomas G. Bigley++, $1,699.31 $108,725 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
John T. Conroy, Jr., $1,869.54 $119,615 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
William J. Copeland, $1,869.54 $119,615 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
James E. Dowd, $1,869.54 $119,615 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
Lawrence D. Ellis, M.D., $1,699.31
$108,725 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
Edward L. Flaherty, Jr., $1,869.54
$119,615 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
Peter E. Madden, $1,699.31 $108,725 for Trust and
Trustee 56 other investment companies in
the Fund Complex
Gregor F. Meyer, $1,699.31 $108,725 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
John E. Murray, Jr., $1,699.31 $108,725 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
Wesley W. Posvar, $1,699.31 $108,725 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
Marjorie P. Smuts, $1,699.31 $108,725 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
*Information is furnished for the fiscal year ended November 30, 1996.
+The information is provided for the last calendar year.
TRUSTEE LIABILITY
The Declaration of Trust provides that the Trustees will not be liable for
errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
INVESTMENT ADVISER
The Trust's investment adviser is Federated Research. It is a subsidiary of
Federated Investors. All the voting securities of Federated Investors are
owned by a trust, the trustees of which are John F. Donahue, his wife and
his son, J. Christopher Donahue.
The adviser shall not be liable to the Trust or any shareholder for any
losses that may be sustained in the purchase, holding, or sale of any
security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, Federated Research receives an annual investment
advisory fee as described in the prospectus. For the fiscal years ended
November 30, 1996, 1995, and 1994, the adviser earned $2,804,812,
$3,287,528, and $3,257,773, respectively, of which $876,351, $1,005,315,
and $936,782, respectively, were waived.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the order
at a favorable price. In working with dealers, the adviser will generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the
Trustees. The adviser may select brokers and dealers who offer brokerage
and research services. These services may be furnished directly to the
Trust or to the adviser and may include: advice as to the advisability of
investing in securities; security analysis and reports; economic studies;
industry studies; receipt of quotations for portfolio evaluations; and
similar services. Research services provided by brokers and dealers may be
used by the adviser or its affiliates in advising the Trust and other
accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have paid,
it would tend to reduce their expenses. The adviser and its affiliates
exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research
services provided. During the last fiscal year ended November 1996, the
Trust paid no brokerage commissions.
Although investment decisions for the Trust are made independently from
those of the other accounts managed by the adviser, investments of the type
the Trust may make may also be made by those other accounts. When the Trust
and one or more other accounts managed by the adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Trust or
the size of the position obtained or disposed of by the Trust. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Trust.
OTHER SERVICES
TRUST ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Trust for a fee as described
in the prospectus. From March 1, 1994 to March 1, 1996, Federated
Administrative Services served as the Trust's Administrator. Prior to March
1, 1994, Federated Administrative Services, Inc. served as the Trust's
Administrator. Both former Administrators are subsidiaries of Federated
Investors. For purposes of this Statement of Additional Information,
Federated Services Company, Federated Administrative Services and Federated
Administrative Services, Inc. may hereinafter collectively be referred to
as the `Administrators.'' For the fiscal years ended November 30, 1996,
1995, and 1994, the Administrators earned $530,087, $622,165, and $601,523,
respectively.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Trust. Federated Services Company, Pittsburgh,
PA, provides certain accounting and recordkeeping services with respect to
the Trust's portfolio investments. The fee paid for this service is based
upon the level of the Trust's average net assets for the period plus out-
of-pocket expenses.
TRANSFER AGENT
Federated Services Company, through its registered transfer agent,
Federated Shareholder Services Company, maintains all necessary shareholder
records. For its services, the transfer agent receives a fee based on the
number of shareholder accounts.
INDEPENDENT AUDITORS
The independent auditors for the Trust are Deloitte &Touche LLP,
Pittsburgh, PA.
DETERMINING NET ASSET VALUE
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization
of premium or accumulation of discount rather than at current market value.
Accordingly, neither the amount of daily income nor the net asset value is
affected by any unrealized appreciation or depreciation of the portfolio.
In periods of declining interest rates, the indicated daily yield on shares
of the Trust computed by dividing the annualized daily income on the
Trust's portfolio by the net asset value computed as above may tend to be
higher than a similar computation made by using a method of valuation based
upon market prices and estimates. In periods of rising interest rates, the
opposite may be true.
The Trust's use of the amortized cost method of valuing portfolio
instruments depends on its compliance with certain conditions in Rule 2a-7
(the `Rule'') promulgated by the Securities and Exchange Commission under
the Investment Company Act of 1940. Under the Rule, the Trustees must
establish procedures reasonably designed to stabilize the net asset value
per share, as computed for purposes of distribution and redemption, at
$1.00 per share, taking into account current market conditions and the
Trust's investment objective. The procedures include monitoring the
relationship between the amortized cost value per share and the net asset
value per share based upon available indications of market value. The
Trustees will decide what, if any, steps should be taken if there is a
difference of more than 0.5 % between the two values. The Trustees will
take any steps they consider appropriate (such as redemption in kind or
shortening the average portfolio maturity) to minimize any material
dilution or other unfair results arising from differences between the two
methods of determining net asset value.
SHAREHOLDER SERVICES
This arrangement permits the payment of fees to Federated Shareholder
Services to cause services to be provided which are necessary for the
maintenance of shareholder accounts and to encourage personal services to
shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. These activities and services may
include but are not limited to providing office space, equipment, telephone
facilities, and various clerical, supervisory, computer, and other
personnel as necessary or beneficial to establish and maintain shareholder
accounts and records; processing purchase and redemption transactions and
automatic investments of client account cash balances; answering routine
client inquiries; and assisting clients in changing dividend options,
account designations, and addresses.
By adopting the Shareholder Services Agreement, the Trustees expect that
the Trust will benefit by: (1) providing personal services to
shareholders; (2) investing shareholder assets with a minimum of delay and
administrative detail; (3) enhancing shareholder recordkeeping systems; and
(4) responding promptly to shareholders' requests and inquiries concerning
their accounts.
For the fiscal year ended November 30, 1996, the Trust paid shareholder
service fees in the amount of $1,753,008 of which $1,643,764 was waived.
REDEMPTION IN KIND
The Trust is obligated to redeem shares solely in cash up to $250,000 or 1%
of the Trust's net asset value, whichever is less, for any one shareholder
within a 90-day period. Any redemption beyond this amount will also be in
cash unless the Trustees determine that further payments should be in kind.
In such cases, the Trust will pay all or a portion of the remainder of the
redemption in portfolio instruments valued in the same way as the Trust
determines net asset value. The portfolio instruments will be selected in a
manner that the Trustees deem fair and equitable. Redemption in kind is
not as liquid as a cash redemption. If redemption is made in kind,
shareholders who sell these securities could receive less than the
redemption value and could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect
its shareholders, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of its shareholders for acts or
obligations of the Trust. These documents require notice of this disclaimer
to be given in each agreement, obligation, or instrument the Trust or its
Trustees enter into or sign.
In the unlikely event a shareholder is held personally liable for the
Trust's obligations, the Trust is required by the Declaration of Trust to
use its property to protect or compensate the shareholder. On request, the
Trust will defend any claim made and pay any judgment against a shareholder
for any act or obligation of the Trust. Therefore, financial loss resulting
from liability as a shareholder will occur only if the Trust itself cannot
meet its obligations to indemnify shareholders and pay judgments against
them.
THE TRUST'S TAX STATUS
To qualify for the special tax treatment afforded to regulated investment
companies, the Trust must, among other requirements: derive at least 90%
of its gross income from dividends, interest, and gains from the sale of
securities; 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 yield is calculated based upon the seven days ending on the day of the
calculation, called the `base period.'' This yield is computed by:
determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net
change excluding capital changes but including the value of any additional
shares purchased with dividends earned from the original one share and all
dividends declared on the original and any purchased shares; dividing the
net change in the account's value by the value of the account at the
beginning of the base period to determine the base period return; and
multiplying the base period return by 365/7.
The Trust's yield for the seven-day period ended November 30, 1996, was
5.07%.
EFFECTIVE YIELD
The effective yield is calculated by compounding the unannualized base
period return by: adding 1 to the base period return; raising the sum to
the 365/7th power; and subtracting 1 from the result. The Trust's effective
yield for the seven-day period ended November 30, 1996, was 5.16%.
TOTAL RETURN
Average annual total return is the average compounded rate of return for a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period
by the net asset value per share at the end of the period. The number of
shares owned at the end of the period is based on the number of shares
purchased at the beginning of the period with $1,000, adjusted over the
period by any additional shares, assuming the monthly reinvestment of all
dividends and distributions.
The Trust's average annual total returns for the one-year, five-year and
ten-year periods ended November 30, 1996 were 5.18%, 4.27% and 5.85%,
respectively.
PERFORMANCE COMPARISONS
Investors may use financial publications and/or indices to obtain a more
complete view of the Trust's performance. When comparing performance,
investors should consider all relevant factors such as the composition of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Trust
uses in advertising may include:
OLIPPER 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.
oIBC/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.
oMONEY, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day effective
yield.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Trust`s returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Trust can
compare its performance, or performance for the types of securities in
which it invests, to a variety of other investments, such as bank savings
accounts, certificates of deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Trust may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on
these developments by the Trust portfolio managers and their views and
analysis on how such developments could affect the Funds. In addition,
advertising and sales literature may quote statistics and give general
information about the mutual fund industry, including growth of the
industry, from sources such as the Investment Company Institute.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is
reflected in its investment decision making-structured, straightforward,
and consistent. This has resulted in a history of competitive performance
with a range of competitive investment products that have gained the
confidence of thousands of clients and their customers.
The company's disciplined security selection process is firmly rooted in
sound methodologies backed by fundamental and technical research.
Investment decisions are made and executed by teams of portfolio managers,
analysts, and traders dedicated to specific market sectors. These traders
handle trillions of dollars in annual trading volume.
In the money market sector, Federated Investors gained prominence in the
mutual fund industry in 1974 with the creation of the first institutional
money market fund. Simultaneously, the company pioneered the use of the
amortized cost method of accounting for valuing shares of money market
funds, a principal means used by money managers today to value money market
fund shares. Other innovations include the first institutional tax-free
money market fund. As of December 31, 1996, Federated Investors managed
more than $50.3 billion in assets across 50 money market funds, including
18 government, 11 prime and 21 municipal with assets approximating $28.0
billion, $12.8 billion and $9.5 billion, respectively.
J. Thomas Madden, Executive Vice President, oversees Federated Investors'
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors' domestic fixed
income management. Henry A. Frantzen, Executive Vice President, oversees
the management of Federated Investors' international portfolios.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $3.5 trillion to the more than 6,000
funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for
a variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional
clients nationwide by managing and servicing separate accounts and mutual
funds for a variety of applications, including defined benefit and defined
contribution programs, cash management, and asset/liability management.
Institutional clients include corporations, pension funds, tax-exempt
entities, foundations/endowments, insurance companies, and investment and
financial advisors. The marketing effort to these institutional clients is
headed by John B. Fisher, President, Institutional Sales Division.
BANK MARKETING
Other institutional clients include close relationships with more than
1,600 banks and trust organizations. Virtually all of the trust divisions
of the top 100 bank holding companies use Federated funds in their clients'
portfolios. The marketing effort to trust clients is headed by Mark R.
Gensheimer, Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide -- we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country -- supported by more wholesalers than any
other mutual fund distributor. Federated's service to financial
professionals and institutions has earned it high ratings in several
surveys performed by DALBAR, Inc. DALBAR is recognized as the industry
benchmark for service quality measurement. The marketing effort to these
firms is headed by James F. Getz, President, Federated Securities Corp.
*Source: Investment Company Institute
FEDERATED MASTER TRUST
PROSPECTUS
The shares of Federated Master Trust (the "Trust") offered by this prospectus
represent interests in an open-end, management investment company (a mutual
fund). The Trust invests in short-term 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,
1997, with the Securities and Exchange Commission ("SEC"). The information
contained in the Statement of Additional Information is incorporated by
reference into this prospectus. You may request a copy of the Statement of
Additional Information or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-341-7400. To
obtain other information, or make inquiries about the Trust, contact the Trust
at the address listed in the back of this prospectus. The Statement of
Additional Information, material incorporated by reference into this document,
and other information regarding the Trust is maintained electronically with the
SEC at Internet Web site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Prospectus dated January 31, 1997
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF TRUST EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Investment Risks 6
Investment Limitations 6
TRUST INFORMATION 6
- ------------------------------------------------------
Management of the Trust 6
Distribution of Shares 7
Administration of the Trust 8
NET ASSET VALUE 8
- ------------------------------------------------------
HOW TO PURCHASE SHARES 8
- ------------------------------------------------------
HOW TO REDEEM SHARES 9
- ------------------------------------------------------
ACCOUNT AND SHARE INFORMATION 10
- ------------------------------------------------------
TAX INFORMATION 11
- ------------------------------------------------------
Federal Income Tax 11
State and Local Taxes 11
PERFORMANCE INFORMATION 12
- ------------------------------------------------------
FINANCIAL STATEMENTS 13
- ------------------------------------------------------
INDEPENDENT AUDITORS' REPORT 24
- ------------------------------------------------------
ADDRESSES 25
- ------------------------------------------------------
SUMMARY OF TRUST EXPENSES
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)........ None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)................................................ None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable).............................. None
Redemption Fee (as a percentage of amount redeemed, if applicable)................... None
Exchange Fee......................................................................... None
</TABLE>
ANNUAL TRUST OPERATING EXPENSES
(As a percentage of average net assets)
<TABLE>
<S> <C> <C>
Management Fee (after waiver)(1)..................................................... 0.27%
12b-1 Fee............................................................................ None
Total Other Expenses................................................................. 0.18%
Shareholder Services Fee (after waiver)(2).............................. 0.05%
Total Operating Expenses(3)................................................ 0.45%
</TABLE>
(1) The management fee has been reduced to reflect the waiver of a portion of
the management fee. The maximum management fee is 0.40%.
(2) The shareholder services fee has been reduced to reflect the voluntary
waiver of a portion of the shareholder services fee. The shareholder service
provider can terminate this voluntary waiver at any time at its sole discretion.
The maximum shareholder services fee is 0.25%.
(3) The total operating expenses would have been 0.78% absent the waivers of
portions of the management fee and the shareholder services fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Trust will bear, either
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "Trust Information." Wire-transferred redemptions of less than
$5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- ---------------------------------------------- ------- -------- -------- ---------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming (1) 5% annual
return and (2) redemption at the end of each
time period................................... $5 $14 $25 $57
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FEDERATED MASTER TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Independent Auditors' Report on page 24.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-----------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------
INCOME FROM INVESTMENT
OPERATIONS
- ------------------------------
Net investment income 0.05 0.06 0.04 0.03 0.04 0.06 0.08 0.09 0.07 0.06
- ------------------------------
LESS DISTRIBUTIONS
- ------------------------------
Distributions from net
investment income (0.05) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08) (0.09) (0.07) (0.06)
- ------------------------------ ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
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(A) 5.18% 5.73% 3.78% 2.91% 3.76% 6.22% 8.16% 9.21% 7.33% 6.39%
- ------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------
Expenses 0.45% 0.46% 0.46% 0.46% 0.46% 0.46% 0.45% 0.45% 0.45% 0.45%
- ------------------------------
Net investment income 5.04% 5.59% 3.72% 2.88% 3.73% 6.13% 7.87% 8.83% 7.03% 6.22%
- ------------------------------
SUPPLEMENTAL DATA
- ------------------------------
Net assets, end of period
(000 omitted) $626,764 $729,144 $773,260 $868,828 $1,058,671 $1,302,565 $1,495,299 $2,109,661 $2,391,625 $3,237,809
- ------------------------------
</TABLE>
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated 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 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
- --------------------------------------------------------------------------------
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 complying with the
diversification and other requirements of Rule 2a-7 under the Investment Company
Act of 1940 which regulates money market mutual funds and by following the
investment policies described in this prospectus. 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. As a matter of operating policy,
which may be changed without shareholder approval, the Trust will limit the
average maturity of its portfolio to 90 days or less, in order to meet
regulatory requirements.
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; 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.
REPURCHASE AGREEMENTS. Certain securities in which the Trust invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell securities to the Trust and agree at the time of sale to
repurchase them at a mutually agreed upon time and price. To the extent that the
seller does not repurchase the securities from the Trust, the Trust could
receive less than the repurchase price on any sale of such securities.
CREDIT ENHANCEMENT. Certain of the Trust's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, default, or change in the credit quality of the party providing
the credit enhancement will adversely affect the quality and marketability of
the underlying security and could cause losses to the Trust and affect its share
price.
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
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. Under criteria established by the Trustees, certain
restricted securities are determined to be liquid. To the extent that restricted
securities are not determined to be liquid, the Trust will limit their purchase,
together with other illiquid securities, 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. As a matter of operating policy, which can be
changed without shareholder approval, generally, in excess of 50% of the assets
of the Trust will be invested in commercial paper and variable amount demand
master notes. Further, as a matter of fundamental policy, which cannot be
changed without shareholder approval, 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. 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 association having capital, surplus, and undivided profits in excess of
$100,000,000 at the time of investment. Concentrating investments in one
industry may subject the Trust to more risk than if it did not concentrate.
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 pledge securities except, under
certain circumstances, the Trust may borrow up to one-third of the value of its
total assets and pledge assets to secure such borrowings. These investment
limitations cannot be changed without shareholder approval.
TRUST INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Trust are made by Federated
Research, the Trust's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment
research and supervision for the Trust and is responsible for the purchase and
sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee
equal to .40% of the Trust's average daily net assets. Under the investment
advisory contract, the adviser will waive the amount, limited to the amount
of the advisory fee, by which the Trust's aggregate annual operating
expenses, including the investment advisory fee but excluding interest,
taxes, brokerage commissions, expenses of registering and qualifying the
Trust and its shares under federal and state laws and regulations, expenses
of withholding taxes, and extraordinary expenses exceed .45% of its average
daily net assets. This does not include reimbursement to the Trust of any
expenses incurred by shareholders who use the transfer agent's
subaccounting facilities.
ADVISER'S BACKGROUND. Federated Research, a Delaware business trust,
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Research and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. With over $76 billion invested across
more than 338 funds under management and/or administration by its
subsidiaries, as of December 31, 1996, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 2,000 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,500 financial institutions nationwide.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Trust and its portfolio securities.
These codes recognize that such persons owe a fiduciary duty to the Trust's
shareholders and must place the interests of shareholders ahead of the
employees' own interests. Among other things, the codes: require preclearance
and periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Trust; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for shares of the Trust.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
SHAREHOLDER SERVICES. The Trust has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which the Trust may make payments up to .25% of the average
daily net asset value of its shares, computed at an annual rate, to obtain
certain personal services for shareholders and to maintain shareholder accounts.
From time to time and for such periods as deemed appropriate, the amount stated
above may be reduced voluntarily. Under the Shareholder Services Agreement,
Federated Shareholder Services will either perform shareholder services directly
or will select financial institutions to perform shareholder services. Financial
institutions will receive fees based upon shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by the Trust and Federated Shareholder
Services.
ADMINISTRATION OF THE TRUST
ADMINISTRATIVE SERVICES. Federated Services Company, a subsidiary of Federated
Investors, provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Trust at an
annual rate which relates to the average aggregate daily net assets of all funds
advised by affiliates of Federated Investors specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE
FEE DAILY NET ASSETS
- -------- ------------------------------------
<S> <C>
.15% on the first $250 million
.125% on the next $250 million
.10% on the next $250 million
.075% 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.
Federated Services Company may choose voluntarily to waive a portion of its fee.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Trust attempts to stabilize the net asset value of its shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per share is determined by subtracting total liabilities from total assets
and dividing the remainder by the number of shares outstanding. The Trust cannot
guarantee that its net asset value will always remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 3:00 p.m. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange is open for business. Shares may be purchased either by wire or by
check. The Trust reserves the right to reject any purchase request.
To make a purchase, open an account by calling Federated Securities Corp.
Information needed to establish the account will be taken by telephone. The
minimum initial investment is $25,000. However, an account may be opened with a
smaller amount as long as the minimum is reached within 90 days. Minimum
investments will be calculated by combining all accounts maintained with the
Trust. Financial institutions may impose different minimum investment
requirements on their customers.
PURCHASING SHARES BY WIRE. Shares may be purchased by Federal Reserve wire by
calling the Trust before 3:00 p.m. (Eastern time) to place an order. The order
is considered received immediately. Payment by federal funds must be received
before 3:00 p.m. (Eastern time) that day. Federal funds should be wired as
follows: Federated Shareholder Services Company, c/o State Street Bank and Trust
Company, Boston, MA; Attention: EDGEWIRE; For Credit to: Federated 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 wire on holidays when wire
transfers are restricted. Questions on wire purchases should be directed to your
shareholder services representative at the telephone number listed on your
account statement.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to
Federated Shareholder Services Company, P.O. Box 8600, Boston, MA 02266-8600.
The check should be made payable to: Federated Master Trust. Orders by mail are
considered received when payment by check is converted into federal funds
(normally the business day after the check is received), and shares begin
earning dividends the next day.
AUTOMATIC INVESTMENTS. Investors may establish accounts with their financial
institutions to have cash accumulations automatically invested in the Trust. The
investments may be made on predetermined dates or when the investor's account
reaches a certain level. Participating financial institutions are responsible
for prompt transmission of orders relating to the program, and they may charge
for their services. Investors should read this prospectus along with the
financial institution's agreement or literature describing these services and
fees.
SUBACCOUNTING SERVICES. Financial institutions are encouraged to open single
master accounts. A subaccounting system is available through the transfer agent
to minimize 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.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
Shares are redeemed at their net asset value next determined after Federated
Shareholder Services Company receives the redemption request. Redemptions will
be made on days on which the Trust computes its net asset value. Redemption
requests must be received in proper form and can be made as described below.
REDEEMING SHARES BY TELEPHONE. Redemptions in any amount may be made by calling
the Trust provided the Trust has a properly completed authorization form. These
forms can be obtained from Federated Securities Corp. Proceeds from redemption
requests received before 3:00 p.m. (Eastern time) will be wired the same day to
the shareholder's account at a domestic commercial bank which is a member of the
Federal Reserve System, but will not include that day's dividend. Proceeds from
redemption requests received after that time include that day's dividend but
will be wired the following business day. Proceeds from redemption requests on
holidays when wire transfers are restricted will be wired the following business
day. Questions about telephone redemptions on days when wire transfers are
restricted should be directed to your shareholder services representative at the
telephone number listed on your account statement.
Telephone instructions may be recorded and if reasonable procedures are not
followed by the Trust, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If this occurs, "Redeeming Shares By Mail"
should be considered. If at any time the Trust shall determine it necessary to
terminate or modify the telephone redemption privilege, shareholders would be
promptly notified.
REDEEMING SHARES BY MAIL. Shares may be redeemed in any amount by mailing a
written request to: Federated Shareholder Services Company, P.O. Box 8600,
Boston, MA 02266-8600. If share certificates have been issued, they should be
sent unendorsed with the written request by registered or certified mail to the
address noted above.
The written request should state: the Trust name; the account name as registered
with the Trust; the account number; and the number of shares to be redeemed or
the dollar amount requested. All owners of the account must sign the request
exactly as the shares are registered. Normally, a check for the proceeds is
mailed within one business day, but in no event more than seven days, after the
receipt of a proper written redemption request. Dividends are paid up to and
including the day that a redemption request is processed.
Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Trust or a redemption payable other than to
the shareholder of record must have their signatures guaranteed by a commercial
or savings bank, trust company or savings association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Trust does not accept signatures guaranteed by a notary public.
ACCOUNT AND SHARE INFORMATION
- --------------------------------------------------------------------------------
DIVIDENDS. Dividends are declared daily and paid monthly. Dividends are
automatically reinvested on payment dates in additional shares of the Trust
unless cash payments are requested by writing to the Trust. Shares purchased by
wire before 3:00 p.m. (Eastern time) begin earning dividends that day. Shares
purchased by check begin earning dividends the day after the check is converted
into federal funds.
CAPITAL GAINS. The Trust does not expect to realize any capital gains or
losses. If capital gains or losses were to occur, they could result in an
increase or decrease in dividends. The Trust will distribute in cash or
additional shares any realized net long-term capital gains at least once every
12 months.
CERTIFICATES AND CONFIRMATIONS. As transfer agent for the Trust, Federated
Shareholder Services Company maintains a share account for each shareholder.
Share certificates are not issued unless requested by contacting the Trust or
Federated Shareholder Services Company in writing. Monthly confirmations are
sent to report all transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Trust may redeem shares in any account, except accounts
maintained by retirement plans, and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $25,000 due to
shareholder redemptions. Before shares are redeemed to close an account, the
shareholder is notified in writing and allowed 30 days to purchase additional
shares to meet the minimum requirement.
VOTING RIGHTS. Each share of the Trust owned by a shareholder gives that
shareholder one vote in Trustee elections and other matters submitted to
shareholders for vote. The Trust is not required to hold annual shareholder
meetings. Shareholder approval will be sought only for certain changes in the
Trust's operation and for election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting shall be called by the Trustees upon the written request of
shareholders owning at least 10% of the outstanding shares of the Trust.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Trust will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
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.
STATE AND LOCAL TAXES
In the opinion of Houston, Donnelly & Meck, counsel to the Trust, Trust shares
may be subject to personal property taxes imposed by counties, municipalities,
and school districts in Pennsylvania to the extent that the portfolio securities
in the Trust would be subject to such taxes if owned directly by residents of
those jurisdictions.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Trust advertises its yield, effective yield and total
return.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment.
Total return represents the change, over a specified period of time, in the
value of an investment in the Trust after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
From time to time, advertisements for the Trust may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Trust's performance to certain indices.
FEDERATED MASTER TRUST
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
BANK NOTES--1.3%
- -----------------------------------------------------------------------------------
BANKING--1.3%
----------------------------------------------------------------
$ 8,000,000 Harris Trust & Savings Bank, Chicago, 5.500%, 3/26/1997 $ 7,998,548
---------------------------------------------------------------- ------------
CERTIFICATE OF DEPOSIT--6.9%
- -----------------------------------------------------------------------------------
BANKING--6.9%
----------------------------------------------------------------
11,000,000 Dresdner Bank Ag, Frankfurt, 5.050%, 2/26/1997 10,998,971
----------------------------------------------------------------
32,000,000 Mellon Bank NA, Pittsburgh, 5.410%-5.620%, 2/18/1997-5/14/1997 32,000,000
---------------------------------------------------------------- ------------
TOTAL CERTIFICATES OF DEPOSIT 42,998,971
---------------------------------------------------------------- ------------
COMMERCIAL PAPER--41.1%
- -----------------------------------------------------------------------------------
BANKING--13.7%
----------------------------------------------------------------
5,000,000 ABN AMRO Bank N.V., Amsterdam, 5.794%, 3/6/1997 4,925,715
----------------------------------------------------------------
22,000,000 Bank of Nova Scotia, Toronto, 5.408%-5.510%, 12/4/1996-1/6/1997 21,955,328
----------------------------------------------------------------
14,000,000 Commerzbank U.S. Finance, Inc., (Guaranteed by Commerzbank AG,
Frankfurt), 5.709%, 3/18/1997 13,769,058
----------------------------------------------------------------
30,000,000 National Australia Funding, Inc., (Guaranteed by National
Australia Bank, Ltd., Melbourne), 5.492%-5.541%,
2/3/1997-2/4/1997 29,711,354
----------------------------------------------------------------
16,000,000 Societe Generale North America, Inc., (Guaranteed by Societe
Generale, Paris), 5.620%-5.708%, 3/17/1997-3/27/1997 15,725,694
---------------------------------------------------------------- ------------
Total 86,087,149
---------------------------------------------------------------- ------------
BROKERAGE--4.3%
----------------------------------------------------------------
27,000,000 Merrill Lynch & Co., Inc., 5.371%-5.372%, 2/11/1997-2/18/1997 26,697,311
---------------------------------------------------------------- ------------
FINANCE--COMMERCIAL--16.1%
----------------------------------------------------------------
20,000,000 Asset Securitization Cooperative Corp., 5.383%, 2/27/1997 19,740,400
----------------------------------------------------------------
5,000,000 Beta Finance, Inc., 5.552%-5.775%, 2/19/1997-3/13/1997 4,928,315
----------------------------------------------------------------
33,000,000 Falcon Asset Securitization Corp., 5.396%-5.510%,
12/12/1996-1/14/1997 32,859,209
----------------------------------------------------------------
23,000,000 General Electric Capital Corp., 5.508%-5.784%,
1/29/1997-4/10/1997 22,721,456
----------------------------------------------------------------
</TABLE>
FEDERATED MASTER TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMERCIAL PAPER--CONTINUED
- -----------------------------------------------------------------------------------
FINANCE--COMMERCIAL--CONTINUED
----------------------------------------------------------------
$10,699,000 Greenwich Funding Corp., 5.384%, 2/28/1997 $ 10,558,549
----------------------------------------------------------------
10,000,000 PREFCO-Preferred Receivables Funding Co., 5.429%, 1/15/1997 9,933,125
---------------------------------------------------------------- ------------
Total 100,741,054
---------------------------------------------------------------- ------------
FINANCE--RETAIL--5.4%
----------------------------------------------------------------
28,000,000 Associates Corp. of North America, 5.380%-5.381%,
2/4/1997-2/21/1997 27,693,938
----------------------------------------------------------------
6,000,000 New Center Asset Trust, A1+/P1 Series, 5.402%, 1/27/1997 5,949,365
---------------------------------------------------------------- ------------
Total 33,643,303
---------------------------------------------------------------- ------------
OIL & OIL FINANCE--1.6%
----------------------------------------------------------------
10,000,000 Chevron Transport Corp., (Guaranteed by Chevron Corp.), 5.389%,
2/14/1997 9,889,375
---------------------------------------------------------------- ------------
TOTAL COMMERCIAL PAPER 257,058,192
---------------------------------------------------------------- ------------
CORPORATE NOTES--3.6%
- -----------------------------------------------------------------------------------
FINANCE--COMMERCIAL--0.8%
----------------------------------------------------------------
5,000,000 Beta Finance, Inc., 5.540%, 3/27/1997 5,000,000
---------------------------------------------------------------- ------------
FINANCE--EQUIPMENT--2.8%
----------------------------------------------------------------
17,435,584 Capita Equipment Receivables Trust 1996-1, 5.600%, 10/15/1997 17,435,584
---------------------------------------------------------------- ------------
TOTAL CORPORATE NOTES 22,435,584
---------------------------------------------------------------- ------------
(A)NOTES--VARIABLE--33.2%
- -----------------------------------------------------------------------------------
BANKING--19.4%
----------------------------------------------------------------
9,765,000 500 South Front St. L.P., Series A, (Huntington National Bank,
Columbus, OH LOC), 5.480%, 12/5/1996 9,765,000
----------------------------------------------------------------
15,000,000 Bank One, Columbus, N.A., 5.470%, 11/29/1996 14,991,636
----------------------------------------------------------------
6,000,000 Bank One, Milwaukee, WI N.A., 5.490%, 12/3/1996 5,996,261
----------------------------------------------------------------
17,800,000 Beverly Hills Nursing Center, Inc., Medilodge Project Series
1996, (KeyBank, N.A. LOC), 5.530%, 12/5/1996 17,800,000
----------------------------------------------------------------
2,330,000 Bissett, William K. and Sheryl B., Multi-Option Adjustable Rate
Notes, (Huntington National Bank, Columbus, OH LOC), 5.480%,
12/5/1996 2,330,000
----------------------------------------------------------------
</TABLE>
FEDERATED MASTER TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
(A)NOTES--VARIABLE--CONTINUED
- -----------------------------------------------------------------------------------
BANKING--CONTINUED
----------------------------------------------------------------
$ 1,455,000 Continental Commercial Properties, (Huntington National Bank,
Columbus, OH LOC), 5.480%, 12/5/1996 $ 1,455,000
----------------------------------------------------------------
2,380,000 Continental Downtown Properties, (Huntington National Bank,
Columbus, OH LOC), 5.480%, 12/5/1996 2,380,000
----------------------------------------------------------------
700,000 Dave White Chevrolet, Inc., Series 1996, (Huntington National
Bank, Columbus, OH LOC), 5.480%, 12/5/1996 700,000
----------------------------------------------------------------
7,135,000 Franklin County, OH, (Edison Wielding), (Series 1995),
(Huntington National Bank, Columbus, OH LOC), 5.610%, 12/5/1996 7,135,000
----------------------------------------------------------------
25,000,000 Liquid Asset Backed Securities Trust, Series 1996-3,
(Westdeutsche Landesbank Girozentrale Swap Agreement), 5.395%,
12/16/1996 25,000,000
----------------------------------------------------------------
19,000,000 SMM Trust, Series 1996-I, (Morgan Guaranty Trust Co., New York
Swap Agreement), 5.425%, 12/1/1996 19,000,000
----------------------------------------------------------------
3,500,000 SMM Trust, Series 1996-L, (Morgan Guaranty Trust Co., New York
Swap Agreement), 5.425%, 12/16/1996 3,500,000
----------------------------------------------------------------
2,975,000 Solon, OH, (Bank One, Cleveland, N.A. LOC), 5.480%, 12/5/1996 2,975,000
----------------------------------------------------------------
6,350,000 Wendys of Las Vegas and San Antonio, (Huntington National Bank,
Columbus, OH LOC), 5.480%, 12/4/1996 6,350,000
----------------------------------------------------------------
1,600,000 White Brothers Properties, Series 1996, (Huntington National
Bank, Columbus, OH LOC), 5.480%, 12/5/1996 1,600,000
---------------------------------------------------------------- ------------
Total 120,977,897
---------------------------------------------------------------- ------------
ELECTRICAL EQUIPMENT--4.1%
----------------------------------------------------------------
25,750,498 Northwest Airlines, Inc., (Guaranteed by General Electric Co.),
5.434%, 12/2/1996 25,750,498
---------------------------------------------------------------- ------------
FINANCE--RETAIL--4.3%
----------------------------------------------------------------
27,000,000 Carco Auto Loan Master Trust 1993-2, (Series 1993-2 Class A1),
5.555%, 12/16/1996 27,000,000
---------------------------------------------------------------- ------------
INSURANCE--3.8%
----------------------------------------------------------------
24,000,000 (b) Peoples Security Life Insurance, 5.650%, 12/1/1996 24,000,000
---------------------------------------------------------------- ------------
</TABLE>
FEDERATED MASTER TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
(A)NOTES--VARIABLE--CONTINUED
- -----------------------------------------------------------------------------------
SOVEREIGN GOVERNMENT--1.6%
----------------------------------------------------------------
$10,000,000 (b) Short Term Asset Corp., Secured Class F-1 Bonds, (European Bank
for Reconstruction and Development LIQ), 5.407%, 4/16/1997 $ 10,000,000
---------------------------------------------------------------- ------------
TOTAL NOTES--VARIABLE 207,728,395
---------------------------------------------------------------- ------------
U.S. TREASURY--2.4%
- -----------------------------------------------------------------------------------
5,100,000 United States Treasury Notes, 6.875%, 2/28/1997 5,120,065
----------------------------------------------------------------
10,000,000 United States Treasury Notes, 7.500%, 1/31/1997 10,037,959
---------------------------------------------------------------- ------------
TOTAL U.S. TREASURY 15,158,024
---------------------------------------------------------------- ------------
REPURCHASE AGREEMENTS--13.5%
- -----------------------------------------------------------------------------------
28,000,000 (c) CIBC Wood Gundy Securities Corp., 5.65%, dated 11/29/1996, due
12/2/1996 28,000,000
----------------------------------------------------------------
12,000,000 (d) CS First Boston, Inc., 6.50%, dated 11/19/1996, due 1/2/1997 12,000,000
----------------------------------------------------------------
400,000 (c) Donaldson, Lufkin and Jenrette Securities Corp., 5.65%, dated
11/29/1996, due 12/2/1996 400,000
----------------------------------------------------------------
17,098,000 (c) Fuji Government Securities, Inc., 5.73%, dated 11/29/1996, due
12/2/1996 17,098,000
----------------------------------------------------------------
12,000,000 (c) Goldman Sachs Group, LP, 5.75%, dated 11/29/1996, due 12/2/1996 12,000,000
----------------------------------------------------------------
15,000,000 (c) PaineWebber Group, Inc., 5.73%, dated 11/29/1996, due 12/2/1996 15,000,000
---------------------------------------------------------------- ------------
TOTAL REPURCHASE AGREEMENTS 84,498,000
---------------------------------------------------------------- ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(E) $637,875,714
---------------------------------------------------------------- ------------
</TABLE>
(a) Current rate and next reset date shown.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At the end of the period these securities
amounted to $34,000,000 which represents 5.4% of net assets.
(c) The 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 the repurchase agreements are through participation in joint
accounts with other Federated funds.
(d) Represents a forward commitment for the delayed delivery of securities,
which will settle and be collateralized on December 31, 1996. The fair value
of the forward commitment approximates the contract amount at November 30,
1996. Risks may arise upon entering these contracts from the potential
inability of counterparts to meet the terms of their contracts and from
unanticipated movements in security prices.
FEDERATED MASTER TRUST
- --------------------------------------------------------------------------------
(e) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($626,764,385) at November 30, 1996.
The following acronyms are used throughout this portfolio:
<TABLE>
<S> <C>
LIQ -- Liquidity Agreement
LOC -- Letter of Credit
LP -- Limited Partnership
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED MASTER TRUST
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments in repurchase agreements $ 84,498,000
- -----------------------------------------------------------------
Investments in securities 553,377,714
- ----------------------------------------------------------------- ------------
Total investments in securities, at amortized cost and value $637,875,714
- --------------------------------------------------------------------------------
Cash 99,095
- --------------------------------------------------------------------------------
Income receivable 2,644,474
- --------------------------------------------------------------------------------
Receivable for shares sold 22,587
- -------------------------------------------------------------------------------- ------------
Total assets 640,641,870
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for investments purchased 12,000,000
- -----------------------------------------------------------------
Payable for shares redeemed 17,458
- -----------------------------------------------------------------
Income distribution payable 1,781,316
- -----------------------------------------------------------------
Accrued expenses 78,711
- ----------------------------------------------------------------- ------------
Total liabilities 13,877,485
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 626,764,385 shares outstanding $626,764,385
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
($626,764,385 / 626,764,385 shares 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, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------
Interest $38,547,373
- -----------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------------------
Investment advisory fee $ 2,804,812
- --------------------------------------------------------------------
Administrative personnel and services fee 530,087
- --------------------------------------------------------------------
Custodian fees 118,883
- --------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 48,788
- --------------------------------------------------------------------
Directors'/Trustees' fees 20,220
- --------------------------------------------------------------------
Auditing fees 16,006
- --------------------------------------------------------------------
Legal fees 5,312
- --------------------------------------------------------------------
Portfolio accounting fees 107,337
- --------------------------------------------------------------------
Shareholder services fee 1,753,008
- --------------------------------------------------------------------
Share registration costs 26,117
- --------------------------------------------------------------------
Printing and postage 16,614
- --------------------------------------------------------------------
Insurance premiums 7,550
- --------------------------------------------------------------------
Taxes 29,629
- --------------------------------------------------------------------
Miscellaneous 2,530
- -------------------------------------------------------------------- -----------
Total expenses 5,486,893
- --------------------------------------------------------------------
Waivers--
- --------------------------------------------------------------------
Waiver of investment advisory fee $ (876,351)
- ------------------------------------------------------
Waiver of shareholder services fee (1,402,406)
- ------------------------------------------------------ -----------
Total waivers (2,278,757)
- -------------------------------------------------------------------- -----------
Net expenses 3,208,136
- ----------------------------------------------------------------------------------- -----------
Net investment income $35,339,237
- ----------------------------------------------------------------------------------- -----------
</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,
----------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------
Net investment income $ 35,339,237 $ 45,982,852
- ------------------------------------------------------------ --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------------------
Distributions from net investment income (35,339,237) (45,982,852)
- ------------------------------------------------------------ --------------- ---------------
SHARE TRANSACTIONS--
- ------------------------------------------------------------
Proceeds from sale of shares 2,907,437,242 3,261,351,161
- ------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of
distributions declared 8,736,617 11,188,290
- ------------------------------------------------------------
Cost of shares redeemed (3,018,553,749) (3,316,655,250)
- ------------------------------------------------------------ --------------- ---------------
Change in net assets resulting from share transactions (102,379,890) (44,115,799)
- ------------------------------------------------------------ --------------- ---------------
Change in net assets (102,379,890) (44,115,799)
- ------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------
Beginning of period 729,144,275 773,260,074
- ------------------------------------------------------------ --------------- ---------------
End of period $ 626,764,385 $ 729,144,275
- ------------------------------------------------------------ --------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED MASTER TRUST
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Master Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end management investment
company. The investment objective of the Trust is current income consistent with
stability of principal.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Trust's use of the amortized cost method to
value its portfolio securities is in accordance with Rule 2a-7 under the
Act.
REPURCHASE AGREEMENTS--It is the policy of the Trust to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Trust to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
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 the guidelines and/or
standards reviewed or established by the Board of Trustees (the
"Trustees"). Risks may arise from the potential inability of counterparties
to honor the terms of the repurchase agreement. Accordingly, the Trust
could receive less than the repurchase price on the sale of collateral
securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Trust's policy to comply with the provisions of
the Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
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
FEDERATED MASTER TRUST
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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.
RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under federal securities laws or in
transactions exempt from such registration. Many restricted securities may
be resold in the secondary market in transactions exempt from registration.
In some cases, the restricted securities may be resold without registration
upon exercise of a demand feature. Such restricted securities may be
determined to be liquid under criteria established by the Board of
Trustees. The Trust will not incur any registration costs upon such
resales. Restricted securities are valued at amortized cost in accordance
with Rule 2a-7 under the Investment Company Act of 1940.
Additional information on each restricted security held at November 30,
1996 is as follows:
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
SECURITY DATE COST
--------------------------------------------------- --------------------- -----------
<S> <C> <C>
Peoples Security Life Insurance, 5.650%, 12/1/1996 5/25/1989-12/13/1996 24,000,000
Short Term Asset Corp., 5.407%, 4/16/1997 5/7/1996 10,000,000
</TABLE>
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
OTHER--Investment transactions are accounted for on the trade date.
(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, 1996, capital paid-in aggregated $626,764,385.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
---------------------------------
1996 1995
- ------------------------------------------------------------ -------------- --------------
<S> <C> <C>
Shares sold 2,907,437,242 3,261,351,161
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Shares issued to shareholders in payment of distributions
declared 8,736,617 11,188,290
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Shares redeemed (3,018,553,749) (3,316,655,250)
- ------------------------------------------------------------ -------------- --------------
Net change resulting from share transactions (102,379,890) (44,115,799)
- ------------------------------------------------------------ -------------- --------------
</TABLE>
FEDERATED MASTER TRUST
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(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Research, the Trust's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
0.40% of the Trust's average daily net assets. The Adviser will waive, to the
extent of its advisory fee, the amount, if any, by which the Trust's aggregate
annual operating expenses exceed 0.45% of average daily net assets of the Trust.
ADMINISTRATIVE FEE--Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Trust with administrative
personnel and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of Federated
Investors for the period. The administrative fee received during the period of
the Administrative Services Agreement shall be at least $125,000 per portfolio
and $30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Trust will pay FSS up to 0.25%
of average daily net assets of the Trust for the period. The fee paid to FSS is
used to finance certain services for shareholders and to maintain shareholder
accounts. FSS may voluntarily choose to waive any portion of its fee. FSS can
modify or terminate this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--FServ, through its
subsidiary, Federated Shareholder Services Company ("FSSC") serves as transfer
and dividend disbursing agent for the Trust. The fee paid to FSSC is based on
the size, type, and number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Trust's accounting records for
which it receives a fee. The fee is based on the level of the Trust's average
daily net assets for the period, plus out-of-pocket expenses.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
INDEPENDENT AUDITORS' REPORT
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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, 1996,
and the related statement of operations for the year then ended, the statements
of changes in net assets for the years ended November 30, 1996 and 1995, and the
financial highlights for the periods presented. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
November 30, 1996 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated Master
Trust as of November 30, 1996, the results of its operations, the changes in its
net assets and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
January 10, 1997
ADDRESSES
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<TABLE>
<S> <C> <C>
Federated Master Trust
Federated Investors Tower
Pittsburgh, PA 15222-3779
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Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
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Investment Adviser
Federated Research Federated Investors Tower
Pittsburgh, PA 15222-3779
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Custodian
State Street Bank & Trust Company P.O. Box 8600
Boston, MA 02266-8600
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Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company P.O. Box 8600
Boston, MA 02266-8600
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Independent Auditors
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, PA 15222-5401
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</TABLE>
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FEDERATED MASTER TRUST
PROSPECTUS
An Open-End, Management
Investment Company
Prospectus dated January 31, 1997
LOGO
Cusip 314214107
8010411A (1/97)
