LIQUID CASH TRUST
PROSPECTUS
The shares of Liquid Cash Trust (the "Trust") offered by this prospectus
represent interests in an open-end, non-diversified management investment
company (a mutual fund), investing exclusively in certain securities which
qualify as short-term liquid assets under Section 566.1(h) 12 C.F.R. 566.1(h) of
the federal regulations applicable to federal savings associations to provide
stability of principal and current income consistent with stability of
principal. Pursuant to current interpretations by the Office of the Comptroller
of the Currency, the Trust will also serve as an appropriate vehicle for a
national bank as an investment for its own account.
The Trust's investors are limited to "depository institutions" as that term is
defined in Regulation D (12 C.F.R. Part 204) of the Board of Governors of the
Federal Reserve System.
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 May 31,
1995, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information
free of charge by calling 1-800-235-4669. To obtain other information, or make
inquiries about the Trust, contact the Trust at the address listed in the back
of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated May 31, 1995
TABLE OF CONTENTS
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SUMMARY OF TRUST EXPENSES 1
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FINANCIAL HIGHLIGHTS 2
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GENERAL INFORMATION 3
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INVESTMENT INFORMATION 3
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Investment Objective 3
Investment Policies 3
Acceptable Investments 3
Concentration of Investments 4
Loans of Federal Funds 4
Repurchase Agreements 5
Restricted and Illiquid Securities 5
When-Issued and Delayed Delivery
Transactions 5
Investment Risks 5
Investment Limitations 6
Regulatory Compliance 6
TRUST INFORMATION 6
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Management of the Trust 6
Board of Trustees 6
Investment Adviser 6
Advisory Fees 6
Adviser's Background 7
Distribution of Shares 7
Shareholder Services Plans 7
Other Payments to Financial
Institutions 7
Administration of the Trust 8
Administrative Services 8
Custodian 8
Transfer Agent and Dividend
Disbursing Agent 8
Independent Auditors 8
NET ASSET VALUE 8
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INVESTING IN THE TRUST 9
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Share Purchases 9
By Wire 9
By Mail 9
Minimum Investment Required 9
Certificates and Confirmations 9
Dividends 9
Capital Gains 10
REDEEMING SHARES 10
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By Mail 10
Telephone Redemption 11
Accounts with Low Balances 11
SHAREHOLDER INFORMATION 11
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Voting Rights 11
Massachusetts Partnership Law 11
TAX INFORMATION 12
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Federal Income Tax 12
Pennsylvania Corporate and
Personal Property Taxes 12
Other State and Local Taxes 12
PERFORMANCE INFORMATION 12
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FINANCIAL STATEMENTS 13
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INDEPENDENT AUDITORS' REPORT 21
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ADDRESSES 22
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SUMMARY OF TRUST EXPENSES
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<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price).............................. None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price).................................................................... None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable)........................................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)....................................... None
Exchange Fee............................................................................................. None
ANNUAL TRUST OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (1)........................................................................ 0.00%
12b-1 Fee................................................................................................ None
Total Other Expenses..................................................................................... 0.16%
Shareholder Services Fee (after waiver) (2).............................................. 0.00%
Total Trust Operating Expenses (3)............................................................. 0.16%
</TABLE>
(1) The Management Fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum management fee is
0.40%.
(2) The maximum Shareholder Services Fee is 0.25%.
(3) The Total Trust Operating Expenses in the table above are based on expenses
expected during the fiscal year ending March 31, 1996. The Total Trust
Operating Expenses were 0.16% for the fiscal year ended March 31, 1995, and
were 0.55% absent the voluntary waiver of a portion of the management fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Trust will bear, either
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "Trust Information." Wire-transferred redemptions of less than
$5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
--------- --------- --------- ----------
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time
period................................................................ $2 $5 $9 $20
</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.
LIQUID CASH TRUST
FINANCIAL HIGHLIGHTS
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(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Independent Auditors' Report on page 21.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <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
- ------------------------------
INCOME FROM INVESTMENT
OPERATIONS
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Net investment income 0.05 0.03 0.03 0.05 0.08 0.09 0.08 0.07 0.06
- ------------------------------
LESS DISTRIBUTIONS
- ------------------------------
Distributions from net
investment income (0.05) (0.03) (0.03) (0.05) (0.08) (0.09) (0.08) (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
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN (A) 4.88% 3.09% 3.35% 5.26% 7.93% 9.26% 8.57% 6.98% 6.58%
- ------------------------------
RATIOS TO AVERAGE NET ASSETS
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Expenses 0.16% 0.16% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.14%
- ------------------------------
Net investment income 4.64% 3.05% 3.33% 5.16% 7.62% 8.85% 8.17% 6.74% 6.36%
- ------------------------------
Expense waiver/
reimbursement (b) 0.39% 0.39% 0.35% 0.34% 0.34% 0.36% 0.31% 0.33% 0.31%
- ------------------------------
SUPPLEMENTAL DATA
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Net assets, end of period
(000 omitted) $313,679 $464,941 $611,124 $786,346 $856,624 $722,712 $551,184 $777,424 $1,084,623
- ------------------------------
<CAPTION>
<S> <C>
1986
NET ASSET VALUE, BEGINNING OF
PERIOD $ 1.00
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INCOME FROM INVESTMENT
OPERATIONS
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Net investment income 0.08
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LESS DISTRIBUTIONS
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Distributions from net
investment income (0.08)
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NET ASSET VALUE, END OF PERIOD $ 1.00
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TOTAL RETURN (A) 8.21%
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RATIOS TO AVERAGE NET ASSETS
- ------------------------------
Expenses 0.10%
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Net investment income 7.89%
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Expense waiver/
reimbursement (b) 0.40%
- ------------------------------
SUPPLEMENTAL DATA
- ------------------------------
Net assets, end of period
(000 omitted) $850,887
- ------------------------------
</TABLE>
(a) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
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The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated April 11, 1980. The Trust qualifies as a short-term liquid asset
pursuant to the regulations of the Office of Thrift Supervision. Since federal
funds are a permitted investment, shares of the Trust will be sold only to
"depository institutions" as that term is defined in Regulation D (12 C.F.R.
Part 204) of the Board of Governors of the Federal Reserve System, and the
portfolio of the Trust will be limited to those instruments which such
depository institutions may own directly. Shareholders of the Trust will not be
permitted to make third party payments from their accounts with the Trust. A
minimum initial investment of $25,000 over a 90-day period is required.
The Trust attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
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INVESTMENT OBJECTIVE
The investment objective of the Trust is stability of principal and current
income consistent with stability of principal. While there is no assurance that
the Trust will achieve its investment objective, it will endeavor to do so by
following the investment policies described in the prospectus. The investment
objective and the policies and limitations described below cannot be changed
without approval of shareholders.
INVESTMENT POLICIES
The Trust pursues this investment objective by investing in a portfolio of money
market instruments maturing in one year or less which qualify as short-term
liquid assets under Section 566.1(h) 12 C.F.R. 566.1(h) of the Office of Thrift
Supervision Regulations "Section 566.1(h)". The Trust also complies with the
requirements of Circular 220, issued by the Office of the Comptroller of the
Currency, to provide national banks with an appropriate source of portfolio
liquidity through a mutual fund investment. The average maturity of money market
instruments in the Trust's portfolio, computed on a dollar weighted basis, will
be 90 days or less.
ACCEPTABLE INVESTMENTS. The Trust invests only in money market instruments
which qualify as short-term liquid assets under Section 566.1(h). These
securities currently include, but are not limited to:
time deposits in a Federal Home Loan Bank;
obligations of the United States;
obligations of U.S. government agencies or instrumentalities such as:
Federal Home Loan Banks, Federal National Mortgage Association,
Government National Mortgage Association, Banks for Cooperatives, Farm
Credit Banks, Export-Import Bank of the United States, Commodity Credit
Corporation, Federal Financing Bank, Student Loan Marketing Association,
Federal Home Loan Mortgage Corporation, or National Credit Union
Administration;
time and savings deposits (including certificates of deposit) in
commercial or savings banks whose accounts are insured by the Bank
Insurance Fund ("BIF") or the Savings Association Insurance Fund
("SAIF"), including certificates of deposit issued by and other time
deposits in foreign branches of BIF-insured banks which, if negotiable,
mature in one year or less or if not negotiable, either mature in 90 days
or less or are withdrawable upon notice not exceeding 90 days;
loans of federal funds and similar loans of unsecured day(s) funds,
maturing in six months or less, to BIF or SAIF-insured institutions which
are not subordinated to claims of the borrower's depositors; and
general obligations (other than gold-related obligations) of any state,
territory, or possession of the United States, or their political
subdivisions, so long as they are either: (1) rated in one of the four
highest grades by nationally recognized statistical rating organizations
("NRSROs"), or (2) issued by a public housing agency and have the full
faith and credit of the United States. A full description of the rating
categories is included in the Appendix to the Statement of Additional
Information.
As an operating policy which may be changed without shareholder approval, the
Trust will continue to limit its portfolio, within the parameters of Section
566.1(h), to legal investments for federal credit unions as set forth in
Sections 107(7) and (8) of the Federal Credit Union Act and Part 703 of the
National Credit Union Administration regulations. The Trust will provide the
National Credit Union Administration and all federal credit union shareholders
with sixty (60) days' written notice should the Trust intend to change such
operating policy.
The Trust may also enter into repurchase agreements or reverse repurchase
agreements secured by those obligations of the U.S. government and bank
instruments which but for their maturities qualify as short-term liquid assets.
CONCENTRATION OF INVESTMENTS. The Trust will invest at least 25% of its total
assets in bank instruments such as time and demand deposits and certificates of
deposit, or instruments secured by these instruments such as repurchase
agreements. It may invest less than 25% when, in the opinion of the investment
adviser, it is advisable to maintain a temporary defensive posture.
LOANS OF FEDERAL FUNDS. Federal funds are funds held by a regional Federal
Reserve Bank for the account of a bank which is member of that Federal Reserve
Bank. The member bank can lend federal funds to another member bank. These loans
are unsecured and are made at a negotiated interest rate for a negotiated time
period, generally overnight. Because reserves are not required to be maintained
on borrowed federal funds, member banks borrowing federal funds are willing to
pay interest rates which are generally higher than they pay on other deposits of
comparable size and maturity which are subject to reserve requirements. The
Trust sells it shares only to "depository institutions" as that term is defined
in Regulation D of the Board of Governors of the Federal Reserve System and
limits its portfolio only to instruments which "depository institutions" can
purchase directly. Therefore, the Trust can participate in the federal funds
market and in effect make loans of federal funds by instructing any willing
member bank at which the Trust maintains an account to loan federal funds on the
Trust's behalf. These transactions permit the Trust to obtain interest rates on
its assets which are comparable to those earned by member banks when they loan
federal funds. The Trust may engage in loans of federal funds and similar loans
of unsecured day(s) funds, maturing in six months or less, to BIF or
SAIF-insured institutions. As a matter of investment policy, which may be
changed without shareholder approval, the Trust will only lend federal funds to
financial institutions that the Trust's adviser determines to be adequately or
well capitalized. Financial institutions are deemed to be adequately or well
capitalized pursuant to guidelines established by the Trustees.
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.
RESTRICTED AND ILLIQUID SECURITIES. The Trust may invest up to 10% of its net
assets in illiquid securities, which may include restricted securities.
Restricted securities are any securities in which the Trust may otherwise invest
pursuant to its investment objective but which are subject to restriction on
resale under federal securities laws. To the extent these securities are deemed
to be illiquid, the Trust will limit its purchases, together with other
securities considered to be illiquid, to 10% of its net assets.
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.
INVESTMENT RISKS
Repurchase agreements with, loans of federal funds and other day(s) funds to,
and certain time deposits, such as savings accounts and certificates of deposit
over $100,000 of BIF or SAIF-insured institutions, and deposits in foreign
branches of domestic banks, are not insured by BIF or SAIF. The Trust does not
invest, however, in instruments issued by banks or savings associations unless
they have capital, surplus, and undivided profits of over $100,000,000 at the
time of investment or unless the principal amount of the instrument is insured
by BIF or SAIF and is determined by the Trust's adviser to be adequately or well
capitalized.
INVESTMENT LIMITATIONS
The Trust will not:
borrow money directly or through reverse repurchase agreements
(arrangements in which the Trust sells a money market instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Trust
may borrow up to one-third of the value of its total assets and pledge up
to 10% of the value of its assets to secure such borrowings; or
invest more than 5% of its total assets in securities of issuers that
have records of less than three years of continuous operations.
REGULATORY COMPLIANCE
The Trust may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in this
prospectus and its Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940, as amended. In particular, the Trust
will comply with the various requirements of Rule 2a-7, which regulates money
market mutual funds. For example, with limited exceptions, Rule 2a-7 prohibits
the investment of more than 5% of the Trust's total assets in the securities of
any one issuer, although the Trust's investment limitation only requires such 5%
diversification with respect to 75% of its assets. The Trust will invest more
than 5% of its assets in any one issuer only under the circumstances permitted
by Rule 2a-7. 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.
TRUST INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders. 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 Corp., the Trust's investment adviser, subject to direction by the
Trustees. The adviser continually conducts investment research and supervision
for the Trust and is responsible for the purchase and sale of portfolio
instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee
equal to .40 of 1% of the Trust's average daily net assets. The adviser has
undertaken to reimburse the Trust up to the amount of the advisory fee for
operating expenses in excess of limitations established by
certain states. The adviser also may voluntarily choose to waive a portion
of its fee or reimburse other expenses of the Trust, but reserves the right
to terminate such waiver or reimbursement at any time at its sole
discretion.
ADVISER'S BACKGROUND. Federated Research Corp., a Maryland corporation,
organized on May 23, 1958, is a registered investment adviser under the
Investment Advisers Act of 1940, as amended. It is a subsidiary of
Federated Investors. All of the Class A (voting) shares of Federated
Investors are owned by a trust, the trustees of which are John F. Donahue,
Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and Mr.
Donahue's son, J. Christopher Donahue, who is President and Trustee of
Federated Investors.
Federated Research Corp. and other subsidiaries of Federated Investors
serve as investment advisers to a number of investment companies and
private accounts. Certain other subsidiaries also provide administrative
services to a number of investment companies. Total assets under management
or administration by these and other subsidiaries of Federated Investors
are approximately $70 billion. Federated Investors, which was founded in
1956 as Federated Investors, Inc., develops and manages mutual funds
primarily for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for shares of the Trust.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
SHAREHOLDER SERVICES PLAN. The Trust has adopted a Shareholder Services Plan
(the "Services Plan") under which it will pay Federated Shareholder Services, a
subsidiary of Federated Investors, an amount not exceeding .25 of 1% of the
average daily net asset value of the Trust to provide personal services and/or
maintenance of shareholder accounts to the Trust and its shareholders. From time
to time and for such periods as deemed appropriate, the amount stated above may
be reduced voluntarily.
Federated Shareholder Services may elect to pay financial institutions fees
based upon shares owned by their clients or customers for services provided to
those clients or customers. The schedules of such fees and the basis upon which
such fees will be paid will be determined from time to time by Federated
Shareholder Services.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to periodic payments
to financial institutions under the Shareholder Services Plan, certain
financial institutions may be compensated by the adviser or its affiliates
for the continuing investment of customers' assets in certain funds,
including the Trust, advised by those entities. These payments will be made
directly by the distributor or adviser from their assets, and will not be
made from the assets of the Trust or by the assessment of a sales charge on
shares.
ADMINISTRATION OF THE TRUST
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Trust.
Federated Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares. Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may choose
voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Trust.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Boston, Massachusetts, is transfer agent for the shares of, and dividend
disbursing agent for, the Trust. Federated Services Company is a subsidiary of
Federated Investors.
INDEPENDENT AUDITORS. The independent auditors for the Trust are Deloitte &
Touche LLP, Pittsburgh, Pennsylvania.
NET ASSET VALUE
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The Trust attempts to stabilize the net asset value of its shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per share is determined by subtracting total liabilities from total assets
and dividing the remainder by the number of shares outstanding. The Trust cannot
guarantee that its net asset value will always remain at $1.00 per share.
The net asset value is determined at 2:00 p.m., 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 each day the New York Stock Exchange is open.
INVESTING IN THE TRUST
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SHARE PURCHASES
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange and the Federal Reserve Wire System are open for business. Investors
who purchase Shares through a non-affiliated bank or broker may be charged an
additional service fee by that bank or broker. Shares may be purchased either by
wire or mail. The Trust reserves the right to reject any purchase request.
To make a purchase, open an account by calling Federated Securities Corp.
Information needed to establish the account will be taken by telephone.
BY WIRE. To purchase by Federal Reserve wire, call the Trust before 3:00 p.m.
(Eastern time) to place an order. The order is considered received immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern time) that
day. Federal funds should be wired as follows: Federated Services Company, c/o
State Street Bank and Trust Company, Boston, Massachusetts; Attention: EDGEWIRE;
for credit to: Liquid Cash 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.
BY MAIL. To purchase by mail, send a check made payable to Liquid Cash Trust
to: Federated Services Company, Liquid Cash Trust, P.O. Box 8602, Boston,
Massachusetts 02266-8602. Orders by mail are considered received when payment by
check is converted into federal funds. This is normally the next business day
after the check is received.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment is $25,000. However, an account may be opened
with a smaller amount as long as the minimum is reached within 90 days. Minimum
investments will be calculated by combining all accounts maintained with the
Trust. Financial institutions may impose different minimum investment
requirements on their customers.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Trust, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Trust or Federated Services Company in writing.
Monthly confirmations are sent to report transactions such as all purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are automatically
reinvested on payment dates in additional shares of the Trust unless cash
payments are requested by writing to the Trust. Dividends are compounded, which
is accomplished by adding the month-to-date accrued dividends to the current
share balance when calculating the daily dividend. Shares purchased by wire
before 3:00 p.m. (Eastern time) begin earning dividends that day. Shares
purchased by check begin earning dividends the day after the check is converted
into federal funds.
CAPITAL GAINS
The Trust does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Trust will distribute in cash or additional shares any realized
net long-term capital gains at least once every 12 months.
REDEEMING SHARES
- --------------------------------------------------------------------------------
Shares are redeemed at their net asset value next determined after Federated
Services Company receives the redemption request. Redemptions will be made on
days on which the Trust computes its net asset value. Redemption requests must
be received in proper form and can be made as described below.
BY MAIL
Shares may be redeemed by sending a written request to the Trust. The written
request should state: Liquid Cash Trust; shareholder's name; the account number;
and the share or dollar amount requested. Sign the request exactly as the shares
are registered. Shareholders should call the Trust for assistance in redeeming
by mail.
Shareholders requesting a redemption of $50,000 or more, a redemption of any
amount to be sent to an address other than that on record with the Trust, or a
redemption payable other than to the shareholder of record must have their
signatures guaranteed by:
a trust company or commercial bank whose deposits are insured by BIF,
which is administered by the Federal Deposit Insurance Corporation
("FDIC");
a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges;
a savings bank or savings association whose deposits are insured by SAIF,
which is administered by the FDIC; or
any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934, as amended.
The Trust does not accept signatures guaranteed by a notary public.
The Trust and the transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Trust may elect in the future to
limit eligible signature guarantors to institutions that are members of the
signature guarantee program. The Trust and its transfer agent reserve the right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request. Dividends are paid up to and including the day that a redemption
request is processed.
TELEPHONE REDEMPTION
Shares may be redeemed by telephoning the Trust. Telephone instructions may be
recorded and if reasonable procedures are not followed by the Trust, it may be
liable for losses due to unauthorized or fraudulent telephone instructions. An
authorization form permitting the Trust to accept telephone requests must first
be completed. Authorization forms and information on this service are available
from Federated Securities Corp.
A daily dividend will be paid on shares redeemed if the redemption request is
received after 3:00 p.m. (Eastern time). However, the proceeds are not wired
until the following business day. Redemption requests received before 3:00 p.m.
(Eastern time) will be paid the same day but will not be entitled to that day's
dividends.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as "By Mail", should be considered. If at any time
the Trust shall determine it necessary to terminate or modify this method of
redemption, shareholders would be promptly notified.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Trust may
redeem shares in any account, 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.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Trust gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust's
operation and for election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the Trust shall be called by the Trustees upon the written
request of shareholders owning at least 10% of the Trust's outstanding shares.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust. These documents require notice of this disclaimer to be given in each
agreement, obligation, or instrument the Trust or its Trustees enter into or
sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for any act or
obligation of the Trust. Therefore, financial loss resulting from liability as a
shareholder will occur only if the Trust itself cannot meet its obligations to
indemnify shareholders and pay judgments against them.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Trust will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional shares.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston, & Donnelly, 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.
OTHER STATE AND LOCAL TAXES. Shareholders are urged to consult their own tax
advisers regarding the status of their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Trust advertises its yield and effective yield.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment.
Advertisements and sales literature may also refer to total return. Total return
represents the change, over a specified period of time, in the value of an
investment in the Trust after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed as
a percentage.
From time to time, advertisements for the Trust may refer to ratings, rankings,
and other information in certain financial publications and/or compare its
performance to certain indices.
LIQUID CASH TRUST
PORTFOLIO OF INVESTMENTS
MARCH 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ---------------------------------------------------------------------------------- --------------
*REPURCHASE AGREEMENTS--84.2%
- -------------------------------------------------------------------------------------------------
$ 50,000,000 BT Securities Inc., 6.25%, dated 3/31/1995, due 4/3/1995 $ 50,000,000
----------------------------------------------------------------------------------
54,000,000 BZW Securities, Inc., 6.28%, dated 3/31/1995, due 4/3/1995 54,000,000
----------------------------------------------------------------------------------
10,000,000 Chemical Government Securities, 6.30%, dated 3/31/1995,
due 4/3/1995 10,000,000
----------------------------------------------------------------------------------
10,000,000 Deutsche Bank Government Securities, Inc., 6.32%, dated 3/31/1995, due 4/3/1995 10,000,000
----------------------------------------------------------------------------------
10,000,000 First Chicago Capital Markets, Inc., 6.30%, dated 3/31/1995,
due 4/3/1995 10,000,000
----------------------------------------------------------------------------------
10,000,000 Fuji Securities, Inc., 6.32%, dated 3/31/1995, due 4/3/1995 10,000,000
----------------------------------------------------------------------------------
10,000,000 Goldman, Sachs & Co., 6.35%, dated 3/31/1995, due 4/3/1995 10,000,000
----------------------------------------------------------------------------------
10,000,000 Greenwich Capital Markets, Inc., 6.35%, dated 3/31/1995, due 4/3/1995 10,000,000
----------------------------------------------------------------------------------
10,000,000 HSBC Securities, Inc., 6.35%, dated 3/31/1995, due 4/3/1995 10,000,000
----------------------------------------------------------------------------------
10,000,000 Harris, Nesbitt, Thomson Securities, Inc., 6.35%, dated 3/31/1995,
due 4/3/1995 10,000,000
----------------------------------------------------------------------------------
10,000,000 J.P. Morgan Securities, Inc., 6.35%, dated 3/31/1995, due 4/3/1995 10,000,000
----------------------------------------------------------------------------------
10,000,000 Morgan Stanley & Co., Inc., 6.35%, dated 3/31/1995, due 4/3/1995 10,000,000
----------------------------------------------------------------------------------
10,000,000 NationsBank of North Carolina, 6.30%, dated 3/31/1995, due 4/3/1995 10,000,000
----------------------------------------------------------------------------------
10,000,000 PaineWebber, Inc., 6.30%, dated 3/31/1995, due 4/3/1995 10,000,000
----------------------------------------------------------------------------------
10,000,000 Sanwa BGK Securities Co., L.P., 6.25%, dated 3/31/1995, due 4/3/1995 10,000,000
----------------------------------------------------------------------------------
10,000,000 Smith Barney Shearson, Inc., 6.35%, dated 3/31/1995, due 4/3/1995 10,000,000
----------------------------------------------------------------------------------
10,000,000 SBC Capital Markets, 6.25%, dated 3/31/1995, due 4/3/1995 10,000,000
----------------------------------------------------------------------------------
10,000,000 UBS Securities, Inc., 6.30%, dated 3/31/1995, due 4/3/1995 10,000,000
---------------------------------------------------------------------------------- --------------
Total Repurchase Agreements 264,000,000
---------------------------------------------------------------------------------- --------------
FEDERAL FUNDS--15.9%
- -------------------------------------------------------------------------------------------------
10,000,000 Huntington National Bank, 6.375%, dated 3/31/1995, due 4/3/1995 10,000,000
----------------------------------------------------------------------------------
</TABLE>
LIQUID CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ---------------------------------------------------------------------------------- --------------
FEDERAL FUNDS--CONTINUED
- -------------------------------------------------------------------------------------------------
$ 10,000,000 National City Bank of Cleveland, 6.375%, dated 3/31/1995,
due 4/3/1995 $ 10,000,000
----------------------------------------------------------------------------------
10,000,000 National City Bank of Columbus, 6.375%, dated 3/31/95, due 4/3/1995 10,000,000
----------------------------------------------------------------------------------
10,000,000 Trust Company Bank, 6.375%, dated 3/31/1995, due 4/3/1995 10,000,000
----------------------------------------------------------------------------------
10,000,000 Wachovia Bank & Trust Co., N.A., 6.375%, dated 3/31/1995,
due 4/3/1995 10,000,000
---------------------------------------------------------------------------------- --------------
Total Federal Funds 50,000,000
---------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS, AT AMORTIZED COST (A) $ 314,000,000
---------------------------------------------------------------------------------- --------------
</TABLE>
* Repurchase agreements are fully collateralized by U.S. government and/or
agency obligations, based on market prices at the date of the portfolio. The
investments in repurchase agreements are through participation in joint
accounts with other Federated funds.
(a) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($313,678,532) at March 31, 1995.
(See Notes which are an integral part of the Financial Statements)
LIQUID CASH TRUST
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------------------
Investments in repurchase agreements $ 264,000,000
- ---------------------------------------------------------------------------------
Investments in securities 50,000,000
- --------------------------------------------------------------------------------- --------------
Total investments in securities, at amortized cost and value $ 314,000,000
- -------------------------------------------------------------------------------------------------
Cash 17,082
- -------------------------------------------------------------------------------------------------
Income receivable 55,035
- -------------------------------------------------------------------------------------------------
Receivable for shares sold 69,600
- ------------------------------------------------------------------------------------------------- --------------
Total assets 314,141,717
- -------------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------------------
Income distribution payable $ 449,868
- ---------------------------------------------------------------------------------
Accrued expenses 13,317
- --------------------------------------------------------------------------------- --------------
Total liabilities 463,185
- ------------------------------------------------------------------------------------------------- --------------
NET ASSETS for 313,678,532 shares outstanding $ 313,678,532
- ------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
($313,678,532 / 313,678,532 shares outstanding) $1.00
- ------------------------------------------------------------------------------------------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
LIQUID CASH TRUST
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Interest $ 18,000,242
- ---------------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------------------
Investment advisory fee $ 1,500,586
- -------------------------------------------------------------------------------------
Administrative personnel and services fee 284,029
- -------------------------------------------------------------------------------------
Custodian fees 147,590
- -------------------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 19,470
- -------------------------------------------------------------------------------------
Directors/Trustees fees 9,391
- -------------------------------------------------------------------------------------
Auditing fees 13,650
- -------------------------------------------------------------------------------------
Legal fees 8,681
- -------------------------------------------------------------------------------------
Portfolio accounting fees 5,385
- -------------------------------------------------------------------------------------
Share registration costs 19,159
- -------------------------------------------------------------------------------------
Printing and postage 8,389
- -------------------------------------------------------------------------------------
Insurance premiums 10,183
- -------------------------------------------------------------------------------------
Taxes 1,192
- -------------------------------------------------------------------------------------
Miscellaneous 7,833
- ------------------------------------------------------------------------------------- ------------
Total expenses 2,035,538
- -------------------------------------------------------------------------------------
Deduct--Waiver of investment advisory fee 1,444,401
- ------------------------------------------------------------------------------------- ------------
Net expenses 591,137
- --------------------------------------------------------------------------------------------------- -------------
Net investment income $ 17,409,105
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
LIQUID CASH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1995 1994
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------------
Net investment income $ 17,409,105 $ 18,187,834
- ---------------------------------------------------------------------------- ----------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------------------------
Distributions from net investment income (17,409,105) (18,187,834)
- ---------------------------------------------------------------------------- ----------------- -----------------
SHARE TRANSACTIONS--
- ----------------------------------------------------------------------------
Proceeds from sale of Shares 4,381,006,659 6,185,652,929
- ----------------------------------------------------------------------------
Net asset value of Shares issued to shareholders in payment of distributions
declared 11,516,719 11,070,167
- ----------------------------------------------------------------------------
Cost of Shares redeemed (4,543,785,385) (6,342,906,192)
- ---------------------------------------------------------------------------- ----------------- -----------------
Change in net assets resulting from share transactions (151,262,007) (146,183,096)
- ---------------------------------------------------------------------------- ----------------- -----------------
Change in net assets (151,262,007) (146,183,096)
- ----------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------
Beginning of period 464,940,539 611,123,635
- ---------------------------------------------------------------------------- ----------------- -----------------
End of period $ 313,678,532 $ 464,940,539
- ---------------------------------------------------------------------------- ----------------- -----------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
LIQUID CASH TRUST
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Liquid Cash Trust (the "Trust") is registered under the Investment Company Act
of 1940, as amended (the "Act"), as a non-diversified, open-end management
investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--The Trust's use of the amortized cost method to
value its portfolio securities is in accordance with Rule 2a-7 under the
Act.
B. REPURCHASE AGREEMENTS--It is the policy of the Trust to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement transactions. Additionally, procedures have been
established by the Trust to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure that the value
of collateral at least equals the 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
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.
C. INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS--Interest income and
expenses are accrued daily. Bond premium and discount, if applicable, are
amortized as required by the Internal Revenue Code, as amended (the
"Code"). Distributions to shareholders are recorded on the ex-dividend
date.
D. FEDERAL TAXES--It is the Trust's policy to comply with the provisions of
the Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Trust may engage in
when-issued or delayed delivery transactions. The Trust records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or
delayed delivery basis are marked to market daily and begin earning
interest on the settlement date.
F. 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 March
31, 1995, capital paid-in aggregated $313,678,532. Transactions in Trust shares
were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1995 1994
<S> <C> <C>
Shares sold 4,381,006,659 6,185,652,929
- ------------------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 11,516,719 11,070,167
- ------------------------------------------------------------------------------
Shares redeemed (4,543,785,385) (6,342,906,192)
- ------------------------------------------------------------------------------ ---------------- ----------------
Net change resulting from Trust share transactions (151,262,007) (146,183,096)
- ------------------------------------------------------------------------------ ---------------- ----------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Research Corp., the Trust's investment
adviser (the "Adviser"), receives for its services an annual investment advisory
fee equal to .40 of 1% of the Trust's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee and reimburse certain operating
expenses of the Trust. The Adviser can modify or terminate this voluntary waiver
and reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Trust with administrative
personnel and services. The FAS fee is based on the level of average aggregate
daily net assets of all funds advised by subsidiaries of Federated Investors for
the period. The administrative fee received during the period of the
Administrative Services Agreement shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Trust will pay FSS up to .25 of
1% of average daily net assets of the Trust for the period. This fee is to
obtain certain services for shareholders and to maintain shareholder accounts.
For the year ended March 31, 1995, the Trust did not incur a Shareholder
Services fee.
LIQUID CASH TRUST
- --------------------------------------------------------------------------------
TRANSFER AGENT FEE--Federated Services Company ("FServ") serves as transfer and
dividend disbursing agent for the Trust. This fee is based on the size, type,
and number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEE--FServ also maintains the Trust's accounting records,
for which it receives a fee. This fee is based on the level of the Trust's
average 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
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of
LIQUID CASH TRUST:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Liquid Cash Trust as of March 31, 1995, the
related statement of operations for the year then ended, the statements of
changes in net assets for the years ended March 31, 1995 and 1994, and the
financial highlights for each of the periods in the ten-year period ended March
31, 1995. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at March
31, 1995 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 Liquid Cash Trust as
of March 31, 1995, 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
May 15, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Liquid Cash Trust
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Investment Adviser
Federated Research Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Custodian
State Street Bank P.O. Box 8602
and Trust Company Boston, Massachusetts 02266-8602
- ---------------------------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8602
Boston, Massachusetts 02266-8602
- ---------------------------------------------------------------------------------------------------------------------
Independent Public Accountants
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
LIQUID CASH TRUST
PROSPECTUS
An Open-End, Non-Diversified,
Management Investment Company
Prospectus dated May 31, 1995
[LOGO] FEDERATED SECURITIES CORP.
---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
536319106
8050206A (5/95)
LIQUID CASH TRUST
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of Liquid Cash Trust (the "Trust"), dated May 31, 1995.
This Statement is not a prospectus. To receive a copy of a prospectus,
write or call the Trust.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated May 31, 1995
[LOGO] FEDERATED SECURITIES CORP.
---------------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
TRUST HISTORY 1
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ---------------------------------------------------------------
Types of Investments 1
Bank Instruments 1
Banker's Acceptance 1
U.S. Government Obligations 1
When-Issued and Delayed
Delivery Transactions 1
Repurchase Agreements 1
Reverse Repurchase Agreements 2
INVESTMENT LIMITATIONS 2
- ---------------------------------------------------------------
LIQUID CASH TRUST MANAGEMENT 3
- ---------------------------------------------------------------
The Funds 6
Share Ownership 7
Trustees' Compensation 7
Trustee Liability 8
INVESTMENT ADVISORY SERVICES 8
- ---------------------------------------------------------------
Investment Adviser 8
Advisory Fees 8
Other Related Services 8
TRUST ADMINISTRATION 8
- ---------------------------------------------------------------
SHAREHOLDER SERVICES PLAN 8
- ---------------------------------------------------------------
BROKERAGE TRANSACTIONS 9
- ---------------------------------------------------------------
DETERMINING NET ASSET VALUE 9
- ---------------------------------------------------------------
REDEMPTION IN KIND 10
- ---------------------------------------------------------------
THE TRUST'S TAX STATUS 10
- ---------------------------------------------------------------
PERFORMANCE INFORMATION 10
- ---------------------------------------------------------------
YIELD 10
- ---------------------------------------------------------------
EFFECTIVE YIELD 10
- ---------------------------------------------------------------
PERFORMANCE COMPARISONS 10
- ---------------------------------------------------------------
TRUST HISTORY
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated April 11, 1980.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Trust's investment objective is to provide stability of principal and
current income consistent with stability of principal.
TYPES OF INVESTMENTS
The Trust invests in money market instruments which mature in one year or less.
The Trust may only purchase securities which qualify as short-term liquid assets
under Section 566.1(h) 12 C.F.R. 566.1(h) of the Office of Thrift Supervision
regulations.
The above investment objective and policies cannot be changed without approval
of shareholders.
BANK INSTRUMENTS
The Trust may invest more than $100,000 in savings accounts and in certificates
of deposits and other time deposits in Bank Insurance Fund-insured banks and
Savings Association Insurance Fund-insured institutions. Investments in such
accounts over $100,000 and the interest paid on these investments are not
insured.
BANKER'S ACCEPTANCE
Although the Trust may invest in banker's acceptance of Edge Act corporations,
the Board of Trustees has undertaken not to purchase these securities as long as
federally chartered credit unions are not permitted to own them.
U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Trust may invest generally
include direct obligations of the U.S. Treasury (such as U.S. Treasury bills,
notes, and bonds) and obligations issued or guaranteed by U.S. government
agencies or instrumentalities. These securities are backed by:
.the full faith and credit of the U.S. Treasury;
.the issuer's right to borrow from the U.S. Treasury;
.the discretionary authority of the U.S. government to purchase certain
obligations of agencies or
instrumentalities; or
.the credit of the agency or instrumentality issuing the obligations
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
.Farm Credit Banks;
.Federal Home Loan Banks;
.Federal National Mortgage Association;
.Student Loan Marketing Association; and
.Federal Home Loan Mortgage Corporation.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
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. The Trust does not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.
REPURCHASE AGREEMENTS
The Trust or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market daily. In
the event that a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Trust might be delayed pending court
action. The Trust believes that under the regular procedures normally in effect
for custody of the Trust's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the Trust
and allow retention or disposition of such securities. The Trust will only enter
into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are deemed by the Trust's adviser to
be creditworthy pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Trust may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Trust
transfers possession of a portfolio instrument in return for a percentage of the
instrument's market value in cash and agrees that on a stipulated date in the
future the Trust will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Trust to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but does
not ensure this result. When effecting reverse repurchase agreements, liquid
assets of the Trust, in a dollar amount sufficient to make payment for the
obligations to be purchased, are: segregated on the Trust's records at the trade
date; marked to market daily; and maintained until the transaction is settled.
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
The Trust will not change any of the investment limitations described below
without approval of shareholders.
SELLING SHORT AND BUYING ON MARGIN
The Trust will not sell any money market instruments short or purchase any money
market instruments on margin but may obtain such short-term credits as may be
necessary for clearance of purchases and sales of money market instruments.
BORROWING MONEY
The Trust will not borrow money except as a temporary measure for extraordinary
or emergency purposes and then only in amounts not in excess of 5% of the value
of its total assets. In addition, the Trust may enter into reverse repurchase
agreements and otherwise borrow up to one-third of the value of its total
assets, including the amount borrowed, in order to meet redemption requests
without immediately selling portfolio instruments. This latter practice is not
for investment leverage but solely to facilitate management of the portfolio by
enabling the Trust to meet redemption requests when the liquidation of portfolio
instruments would be inconvenient or disadvantageous.
Interest paid on borrowed funds will not be available for investment. The Trust
will liquidate any such borrowings as soon as possible and may not purchase any
portfolio instruments while any borrowings are outstanding. However, during the
period any reverse repurchase agreements are outstanding, but only to the extent
necessary to assure completion of the reverse repurchase agreements, the Trust
will restrict the purchase of portfolio instruments to money market instruments
maturing on or before the expiration date of the reverse repurchase agreements.
PLEDGING ASSETS
The Trust will not mortgage, pledge, or hypothecate any assets except to secure
permitted borrowings. In those cases, it may mortgage, pledge, or hypothecate
assets having a market value not exceeding the lesser of the dollar amounts
borrowed or 10% of the value of total assets at the time of the borrowing.
INVESTING IN COMMODITIES, MINERALS, OR REAL ESTATE
The Trust will not invest in commodities, commodity contracts, oil, gas, or
other mineral programs or leases, or real estate including limited partnership
interests, except that it may purchase money market instruments issued by
companies that invest in or sponsor such interests.
UNDERWRITING
The Trust will not engage in underwriting of securities issued by others.
LENDING CASH OR SECURITIES
The Trust will not lend any of its assets, except that it may participate in the
federal funds market and purchase or hold money market instruments, including
repurchase agreements, permitted by its investment objective and policies.
ACQUIRING SECURITIES
The Trust will not acquire the voting securities of any issuer. It will not
invest in securities issued by any other investment company, except as part of a
merger, consolidation, or other acquisition. It will not invest in securities of
a company for the purpose of exercising control or management.
INVESTING IN RESTRICTED SECURITIES
The Trust will not invest in money market instruments which are subject to
restrictions on resale under federal securities law.
INVESTING IN NEW ISSUERS
The Trust will not invest more than 5% of the value of its total assets in money
market instruments of unseasoned issuers, including their predecessors, that
have been in operation for less than three years.
DEALING IN PUTS AND CALLS
The Trust will not invest in puts, calls, straddles, spreads, or any combination
thereof.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS OF THE TRUST
The Trust will not purchase or retain the securities of any issuer if the
officers and Trustees of the Trust or its investment adviser owning individually
more than 1/2 of 1% of the issuer's securities together own more than 5% of the
issuer's securities.
ISSUING SENIOR SECURITIES
The Trust will not issue senior securities, except as permitted by the
investment objective and policies and investment limitations of the Trust.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
The Trust did not borrow money, pledge securities, or invest in reverse
repurchase agreements in excess of 5% of the value of its net assets during the
last fiscal year and has no present intent to do so in the coming fiscal year.
LIQUID CASH TRUST MANAGEMENT
- --------------------------------------------------------------------------------
Officers and Trustees are listed with their addresses, present positions with
Liquid Cash Trust, and principal occupations.
- --------------------------------------------------------------------------------
John F. Donahue+*
Federated Investors Tower
Pittsburgh, Pennsylvania
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or Managing General
Partner of the Funds. Mr. Donahue is the father of J. Christopher Donahue, Vice
President of the Trust.
- --------------------------------------------------------------------------------
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, Pennsylvania
Birthdate: February 3, 1934
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's Hospital of
Pittsburgh; Director, Trustee, or Managing General Partner of the Funds;
formerly, Senior Partner, Ernst & Young LLP.
- --------------------------------------------------------------------------------
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, Florida
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate ventures in Southwest
Florida; Director, Trustee, or Managing General Partner of the Funds; formerly,
President, Naples Property Management, Inc.
- --------------------------------------------------------------------------------
William J. Copeland
One PNC Plaza--23rd Floor
Pittsburgh, Pennsylvania
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice Chairman and
Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.
- --------------------------------------------------------------------------------
James E. Dowd
571 Hayward Mill Road
Concord, Massachusetts
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; and Director,
Trustee, or Managing General Partner of the Funds.
- --------------------------------------------------------------------------------
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, Pennsylvania
Birthdate: October 11, 1932
Trustee
Professor of Medicine and Member, Board of Trustees, University of Pittsburgh;
Medical Director, University of Pittsburgh Medical Center--Downtown; Member,
Board of Directors, University of Pittsburgh Medical Center; formerly,
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore Hospitals;
Director, Trustee, or Managing General Partner of the Funds.
- --------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center--Suite 674
Pittsburgh, Pennsylvania
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Partner, Henny, Kochuba, Meyer and Flaherty; Director, Eat'N
Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
- --------------------------------------------------------------------------------
Peter E. Madden
70 Westcliff Road
Westin, Massachusetts
Birthdate: March 16, 1942
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President, State
Street Bank and Trust Company and State Street Boston Corporation.
- --------------------------------------------------------------------------------
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center--Suite 674
Pittsburgh, Pennsylvania
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Partner, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds; formerly, Vice Chairman, Horizon
Financial, F.A.
- --------------------------------------------------------------------------------
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, Pennsylvania
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
- --------------------------------------------------------------------------------
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, Pennsylvania
Birthdate: September 14, 1925
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie Endowment
for International Peace, RAND Corporation, Online Computer Library Center, Inc.,
and U.S. Space Foundation; Chairman, Czecho Slovak Management Center; Director,
Trustee, or Managing General Partner of the Funds; President Emeritus,
University of Pittsburgh; formerly, Chairman, National Advisory Council for
Environmental Policy and Technology.
- --------------------------------------------------------------------------------
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, Pennsylvania
Birthdate: July 21, 1935
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing General
Partner of the Funds.
- --------------------------------------------------------------------------------
Glen R. Johnson
Federated Investors Tower
Pittsburgh, Pennsylvania
Birthdate: May 2, 1929
President
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Administrative Services.
- --------------------------------------------------------------------------------
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, Pennsylvania
Birthdate: April 11, 1949
Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp.; President, Passport Research, Ltd.; Trustee, Federated Administrative
Services, Federated Services Company, and Federated Shareholder Services;
President or Vice President of the Funds; Director, Trustee, or Managing General
Partner of some of the Funds. Mr. Donahue is the son of John F. Donahue,
Chairman and Trustee of the Trust.
- --------------------------------------------------------------------------------
Richard B. Fisher
Federated Investors Tower
Pittsburgh, Pennsylvania
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Director, Federated
Research Corp.; Chairman and Director, Federated Securities Corp.; President or
Vice President of some of the Funds; Director or Trustee of some of the Funds.
- --------------------------------------------------------------------------------
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, Pennsylvania
Birthdate: October 22, 1930
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice President and
Treasurer, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Executive Vice President,
Treasurer, and Director, Federated Securities Corp.; Trustee, Federated Services
Company and Federated Shareholder Services; Chairman, Treasurer, and Trustee,
Federated Administrative Services; Trustee or Director of some of the Funds;
Vice President and Treasurer of the Funds.
- --------------------------------------------------------------------------------
John W. McGonigle
Federated Investors Tower
Pittsburgh, Pennsylvania
Birthdate: October 26, 1938
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated Investors;
Vice President, Secretary, and Trustee, Federated Advisers, Federated
Management, and Federated Research; Vice President and Secretary, Federated
Research Corp. and Passport Research, Ltd.; Trustee, Federated Services Company;
Executive Vice President, Secretary, and Trustee, Federated Administrative
Services; Secretary and Trustee, Federated Shareholder Services; Executive Vice
President and Director, Federated Securities Corp.; Vice President and Secretary
of the Funds.
- --------------------------------------------------------------------------------
*This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
+Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board of Trustees between meetings
of the Board.
THE FUNDS
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Cash Management Trust; Automated Government Money Trust;
California Municipal Cash Trust; Cash Trust Series II; Cash Trust Series, Inc.;
DG Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
ARMs Fund; Federated Exchange Fund, Ltd.; Federated GNMA Trust; Federated
Government Trust; Federated Growth Trust; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Intermediate Government Trust;
Federated Master Trust; Federated Municipal Trust;
Federated Short-Intermediate Government Trust; Federated Short-Term U.S.
Government Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated
U.S. Government Bond Fund; First Priority Funds; Fixed Income Securities, Inc.;
Fortress Adjustable Rate U.S. Government Fund, Inc.; Fortress Municipal Income
Fund, Inc.; Fortress Utility Fund, Inc.; Fund for U.S. Government Securities,
Inc.; Government Income Securities, Inc.; High Yield Cash Trust; Insight
Institutional Series, Inc.; Insurance Management Series; Intermediate Municipal
Trust; International Series, Inc.; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Equity Income Fund, Inc.; Liberty High Income Bond Fund,
Inc.; Liberty Municipal Securities Fund, Inc.; Liberty U.S. Government Money
Market Trust; Liberty Term Trust, Inc.--1999; Liberty Utility Fund, Inc.;
Managed Series Trust; Money Market Management, Inc.; Money Market Obligations
Trust; Money Market Trust; Municipal Securities Income Trust; Newpoint Funds;
New York Municipal Cash Trust; 111 Corcoran Funds; Peachtree Funds; The Planters
Funds; RIMCO Monument Funds; The Shawmut Funds; Short-Term Municipal Trust; Star
Funds; The Starburst Funds; The Starburst Funds II; Stock and Bond Fund, Inc.;
Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments Trust; Trademark
Funds; Trust for Financial Institutions; Trust For Government Cash Reserves;
Trust for Short-Term U.S. Government Securities; Trust for U.S. Treasury
Obligations; The Virtus Funds; World Investment Series, Inc.
SHARE OWNERSHIP
Officers and Trustees as a group own less than 1% of the Trust's outstanding
shares.
As of May 5, 1995, the following shareholders of record owned 5% or more of the
outstanding shares of the Trust: Central Bank & Trust Company, Lexington,
Kentucky, owned approximately 30,000,000 shares (8.02%); and Dearborn Federal
Credit Union, Dearborn, Michigan, owned approximately 28,894,452 shares (7.73%).
TRUSTEES' COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
NAME, POSITION COMPENSATION TOTAL COMPENSATION PAID
WITH FUND FROM TRUST* FROM FUND COMPLEX+
<S> <C> <C>
John F. Donahue, $0 $0 for the Trust and
Chairman and Trustee 68 other investment companies in the Fund Complex
Thomas Bigley, $707 $20,688 for the Trust and
Trustee 49 other investment companies in the Fund Complex
John T. Conroy, Jr., $1,622 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund Complex
William J. Copeland, $1,622 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund Complex
James E. Dowd, $1,622 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D., $1,473 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Edward L. Flaherty, Jr., $1,622 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Peter E. Madden, $1,255 $90,563 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Gregor F. Meyer, $1,473 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund Complex
John E. Murray, Jr., $0 $0 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Wesley W. Posvar, $1,473 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Marjorie P. Smuts, $1,473 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund Complex
</TABLE>
*Information is furnished for the fiscal year ended March 31, 1995.
+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 Corp. 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 Corp. receives an annual
investment advisory fee as described in the prospectus. For the fiscal years
ended March 31, 1995, 1994, and 1993, the adviser earned $1,500,586, $2,385,038,
and $3,029,432, respectively, of which $1,444,401, $2,293,761, and $2,618,883,
respectively, were waived.
STATE EXPENSE LIMITATIONS
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Trust's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2-1/2% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1-1/2% per
year of the remaining average net assets, the adviser will reimburse the
Trust for its expenses over the limitation.
If the Trust's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fees.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
OTHER RELATED SERVICES
Affiliates and the adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of shares of funds offered by Federated Securities Corp.
TRUST ADMINISTRATION
- --------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Trust for a fee as described in the
prospectus. Prior to March 1, 1994, Federated Administrative Services, Inc.,
also a subsidiary of Federated Investors, served as the Trust's Administrator.
(For purposes of this Statement of Additional Information, Federated
Administrative Services and Federated Administrative Services, Inc. may
hereinafter collectively be referred to as the "Administrators".) For the fiscal
years ended March 31, 1995, 1994, and 1993, the Administrators earned $284,029,
$485,302, and $424,176, respectively. Dr. Henry J. Gailliot, an officer of
Federated Research, the adviser to the Trust, holds approximately 20% of the
outstanding common stock and serves as a director of Commercial Data Services,
Inc., a company which provides computer processing services to Federated
Administrative Services.
SHAREHOLDER SERVICES PLAN
- --------------------------------------------------------------------------------
This arrangement permits the payment of fees to Federated Shareholder Services
and financial institutions to cause services to be provided which are necessary
for the maintenance of shareholder accounts and to encourage personal services
to shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. These activities and services may include,
but are not limited to: providing office
space, equipment, telephone facilities, and various clerical, supervisory,
computer, and other personnel as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and redemption
transactions and automatic investments of client account cash balance; answering
routine client inquiries; and assisting clients in changing dividend options,
account designations, and addresses. By adopting the Shareholder Services Plan,
the Board of Trustees expects that the Trust will benefit by: (1) providing
personal services to shareholders; (2) investing shareholder assets with a
minimum of delay and administrative detail; (3) enhancing shareholder
recordkeeping systems; and (4) responding promptly to shareholders' requests and
inquiries concerning their accounts. For the fiscal period ending March 31,
1995, no payments were made pursuant to the Shareholder Services Plan.
CUSTODIAN AND PORTFOLIO RECORDKEEPER
State Street Bank and Trust Company, Boston, Massachusetts, is custodian
for the securities and cash of the Trust. Federated Services Company,
Pittsburgh, Pennsylvania, provides certain accounting and recordkeeping
services with respect to the Trust's portfolio investments.
TRANSFER AGENT
As transfer agent, Federated Services Company maintains all necessary
shareholder records. For its services, the transfer agent receives a fee
based on the number of shareholder accounts.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
guidelines established by the Board of Trustees. The adviser may select brokers
and dealers who offer brokerage and research services. These services may be
furnished directly to the Trust or to the adviser and may include: advice as to
the advisability of investing in securities; security analysis and reports;
economic studies; industry studies; receipt of quotations for portfolio
evaluations; and similar services. Research services provided by brokers and
dealers may be used by the adviser or its affiliates in advising the Trust and
other accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The adviser and its affiliates exercise
reasonable business judgment in selecting brokers who offer brokerage and
research services to execute securities transactions. They determine in good
faith that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided. During the fiscal
years ended 1993, 1994, and 1995, 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.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
Accordingly, neither the amount of daily income nor the net asset value is
affected by any unrealized appreciation or depreciation of the portfolio. In
periods of declining interest rates, the indicated daily yield on shares of the
Trust computed by dividing the annualized daily income on the Trust's portfolio
by the net asset value computed as above may tend to be higher than a similar
computation made by using a method of valuation based upon market prices and
estimates. In periods of rising interest rates, the opposite may be true.
The Trust's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in Rule 2a-7 (the "Rule")
promulgated by the Securities and Exchange Commission under the Investment
Company Act of 1940. Under the Rule, the Trustees must establish procedures
reasonably designed
to stabilize the net asset value per share, as computed for purposes of
distribution and redemption, at $1.00 per share, taking into account current
market conditions and the Trust's investment objective. The procedures include
monitoring the relationship between the amortized cost value per share and the
net asset value per share based upon available indications of market value. The
Trustees will decide what, if any, steps should be taken if there is a
difference of more than 0.5 of 1% between the two values. The Trustees will take
any steps they consider appropriate (such as redemption in kind or shortening
the average portfolio maturity) to minimize any material dilution or other
unfair results arising from differences between the two methods of determining
net asset value.
REDEMPTION IN KIND
- --------------------------------------------------------------------------------
The Trust is obligated to redeem shares solely in cash up to $250,000 or 1% of
the Trust's net asset value, whichever is less, for any one shareholder within a
90-day period. Any redemption beyond this amount will also be in cash unless the
Trustees determine that further payments should be in kind. In such cases, the
Trust will pay all or a portion of the remainder of the redemption in portfolio
instruments valued in the same way as the Trust determines net asset value. The
portfolio instruments will be selected in a manner that the Trustees deem fair
and equitable. Redemption in kind is not as liquid as a cash redemption. If
redemption is made in kind, shareholders who sell these securities could receive
less than the redemption value and could incur certain transaction costs.
THE TRUST'S TAX STATUS
- --------------------------------------------------------------------------------
To qualify for the special tax treatment afforded to regulated investment
companies, the Trust must, among other requirements: derive at least 90% of its
gross income from dividends, interest, and gains from the sale of securities;
derive less than 30% of its gross income from the sale of securities held less
than three months; invest in securities within certain statutory limits; and
distribute to its shareholders at least 90% of its net income earned during the
year.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
Performance depends upon such variables as: portfolio quality; average portfolio
maturity; type of instruments in which the portfolio is invested; changes in
interest rates; changes in expenses; and the relative amount of cash flow. To
the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in shares of
the Trust, the performance will be reduced for those shareholders paying those
fees.
YIELD
- --------------------------------------------------------------------------------
The 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 March 31, 1995, was 6.05%.
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 March 31, 1995, was
6.23%.
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:
.LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories based
on total return, which assumes the reinvestment of all income dividends and
capital gains distributions, if any.
.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.
.MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
8050602B (5/95)
