AUTOMATED CASH MANAGEMENT TRUST
PROSPECTUS
A no-load, open-end, diversified management investment company (a mutual fund)
investing in money market instruments to achieve stability of principal and
current income consistent with stability of principal.
AN INVESTMENT IN AUTOMATED CASH MANAGEMENT TRUST (THE "TRUST") IS NEITHER
INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. 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.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY.
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 June 30,
1994 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 to make
inquiries about the Trust, contact the Trust at the address listed in the back
of this Prospectus.
The Trust aims to provide investors with a cost-effective, administratively
convenient, highly liquid, cash equivalent vehicle that can be integrated into
an existing or contemplated cash management system.
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 June 30, 1994
TABLE OF CONTENTS
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SUMMARY OF TRUST EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Acceptable Investments 3
Repurchase Agreements 4
Restricted and Illiquid Securities 4
When-Issued and Delayed
Delivery Transactions 4
Other Investment Techniques 5
Credit Enhancement 5
Demand Features 5
Investment Risks 5
Investment Limitations 5
Regulatory Compliance 6
TRUST INFORMATION 6
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Management of the Trust 6
Board of Trustees 6
Investment Adviser 6
Advisory Fees 7
Adviser's Background 7
Other Payments to Financial
Institutions 7
Distribution of Trust Shares 7
Administration of the Trust 7
Administrative Services 7
Shareholder Services Plan 8
Custodian 8
Transfer Agent and Dividend
Disbursing Agent 8
Legal Counsel 8
Independent Auditors 8
NET ASSET VALUE 8
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INVESTING IN THE TRUST 9
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Share Purchases 9
By Wire 9
By Mail 9
Minimum Investment Required 9
Cash Sweep Program 9
Participating Depository Institutions 9
What Shares Cost 10
Subaccounting Services 10
Certificates and Confirmations 10
Dividends 10
Capital Gains 10
Retirement Plans 11
REDEEMING SHARES 11
- ------------------------------------------------------
Telephone Redemption 11
Redeeming by Check 11
Using the Checking Account 12
Written Requests 12
Signatures 12
Receiving Payment 12
Accounts with Low Balances 12
Redemption in Kind 12
SHAREHOLDER INFORMATION 13
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Voting Rights 13
Massachusetts Partnership Law 13
TAX INFORMATION 13
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Federal Income Tax 13
Pennsylvania Corporate and Personal
Property Taxes 14
PERFORMANCE INFORMATION 14
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FINANCIAL STATEMENTS 15
- ------------------------------------------------------
REPORT OF ERNST & YOUNG,
INDEPENDENT AUDITORS 25
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ADDRESSES Inside Back Cover
- ------------------------------------------------------
I
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)............................................. 0.20%
12b-1 Fee.................................................................... None
Total Other Expenses......................................................... 0.37%
Shareholder Services Fee(2)........................................ 0.23%
Total Trust Operating Expenses(3)....................................... 0.57%
</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 0.50%.
(2) The maximum Shareholder Services Fee is 0.25%.
(3) The Total Operating Expenses in the table above are based on expenses
expected during the fiscal year ending April 30, 1995. The Total Trust Operating
Expenses were 0.57% for the fiscal year ended April 30, 1994, and were 0.64%
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
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<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment assuming (1) 5% annual return and
(2) redemption at the end of each time period........... $ 6 $ 18 $ 32 $ 71
</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.
AUTOMATED CASH MANAGEMENT TRUST
FINANCIAL HIGHLIGHTS
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(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young, Independent Auditors, on page
25.
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
---------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET
ASSET
VALUE,
BEGINNING
OF
PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -------
INCOME
FROM
INVESTMENT
OPERATIONS
- -------
Net
investment
income 0.03 0.03 0.05 0.07 0.08 0.08 0.07 0.06 0.07 0.10
- ------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
LESS
DISTRIBUTIONS
- -------
Dividends
to
shareholders
from
net
investment
income (0.03) (0.03) (0.05) (0.07) (0.08) (0.08) (0.07) (0.06) (0.07) (0.10)
- ------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
NET
ASSET
VALUE,
END OF
PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
TOTAL
RETURN* 2.84% 3.11% 5.02% 7.52% 8.69% 8.20% 6.72% 6.00% 7.69% 10.01%
- -------
RATIOS
TO
AVERAGE
NET
ASSETS
- -------
Expenses 0.57% 0.56% 0.56% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55%
- -------
Net
investment
income 2.80% 3.07% 4.88% 7.23% 8.32% 7.93% 6.53% 5.82% 7.43% 9.37%
- -------
Expense
waiver/
reimbursement(a) 0.07% 0.04% 0.03% 0.12% 0.09% 0.10% 0.04% 0.04% 0.06% 0.05%
- -------
SUPPLEMENTAL
DATA
- -------
Net
assets,
end of
period
(000
omitted) $975,453 $1,172,170 $1,220,212 $1,464,710 $1,164,013 $943,136 $924,558 $867,725 $764,841 $851,457
- -------
</TABLE>
* Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(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 November 17, 1981. The Trust is designed to permit shareholders
to take advantage of the economies and higher yields available to large
investors such as 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. Trust 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. The Trust pursues this investment
objective by investing in a portfolio of money market instruments maturing in
one year or less. The average maturity of money market instruments in the
Trust's portfolio, computed on a dollar weighted basis, will be 90 days or less.
While there is no assurance that the Trust will achieve its investment
objective, it endeavors to do so by following the investment policies described
in this prospectus. The investment objective and the policies and limitations
described below cannot be changed without approval of shareholders.
INVESTMENT POLICIES
ACCEPTABLE INVESTMENTS. The Trust invests in high quality money market
instruments which include, but are not limited to:
- instruments of domestic and foreign banks and savings and loans (such as
certificates of deposit, demand and time deposits, savings shares, and
bankers' acceptances) if they have capital, surplus, and undivided
profits of over $100,000,000, or if the principal amount of the
instrument is insured by the Bank Insurance Fund ("BIF") or the Savings
Association Insurance Fund ("SAIF"), both of which are administered by
the Federal Deposit Insurance Corporation (the "FDIC"). These instruments
may include Eurodollar Certificates of Deposit ("ECDs"), Yankee
Certificates of Deposit ("Yankee CDs"), and Eurodollar Time Deposits
("ETDs");
- commercial paper rated A-1 by Standard & Poor's Corporation, Prime-1 by
Moody's Investors Service, Inc., or F-1 by Fitch Investors Service, and
unrated but of comparable quality, including Canadian Commercial Paper
("CCPs"), and Europaper;
- marketable obligations issued or guaranteed by the U.S. government, its
agencies, or instrumentalities; and
- repurchase agreements.
The Trust will invest at least 25% of its assets in domestic and foreign bank
instruments unless the Trust assumes a defensive posture.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which banks,
broker/ dealers, and other recognized financial institutions sell securities or
certificates of deposit to the Trust and agree, at the time of sale, to
repurchase them at a mutually agreed upon time and price within one year from
the date of acquisition. The Trust or its custodian will take possession of the
securities subject to repurchase agreements and these securities will be marked
to market daily. To the extent that the original seller does not repurchase the
securities from the Trust, the Trust could receive less than the repurchase
price on any sale of such securities. In the event that such a defaulting seller
filed for bankruptcy or became insolvent, disposition of such securities by the
Trust might be delayed pending court action. The Trust believes that under the
regular procedures normally in effect for custody of the Trust's portfolio
securities subject to repurchase agreements, a court of competent jurisdiction
would rule in favor of the Trust and allow retention or disposition of such
securities. The Trust will only enter into repurchase agreements with banks and
other recognized financial institutions such as broker/dealers which are found
by the Trust's adviser to be creditworthy.
RESTRICTED AND ILLIQUID SECURITIES. The Trust intends to invest in
restricted securities. Restricted securities are any securities in which
the Trust may otherwise invest pursuant to its investment objective and
policies but which are subject to restrictions on resale under federal
securities law.
However, the Trust will limit investments in illiquid securities, including
restricted securities (except for Section 4(2) commercial paper, which is
described in the following paragraph) and repurchase agreements providing
for settlement in more than seven days after notice, to 10% of its net
assets. Certain instruments in which the Trust may invest, such as ETD's
and repurchase agreements, with maturities of more than seven days, could
be considered illiquid.
The Trust may invest in commercial paper issued in reliance on the
exemption from registration afforded by Section 4(2) of the Securities Act
of 1933. Section 4(2) paper is restricted as to disposition under federal
securities law and is generally sold to institutional investors, such as
the Trust, who agree that they are purchasing the paper for investment
purposes and not with a view to public distribution. Any resale by the
purchaser must be in an exempt transaction. Section 4(2) paper is normally
resold through or with the assistance of an issuer or investment dealers
who make a market in Section 4(2) paper, thus providing liquidity.
Therefore, the Trust's investment adviser considers the legally restricted
but quite saleable Section 4(2) paper to be liquid. The Trust understands
that members of the staff of the Securities and Exchange Commission are
reviewing the issue of mutual fund investments in restricted securities.
Therefore, until this issue has been resolved by the Securities and
Exchange Commission, the Trust will temporarily limit its investment in
Section 4(2) paper and illiquid securities to 10% of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Trust may purchase
short-term U.S. government obligations on a when-issued or delayed delivery
basis. These transactions are arrangements in which the Trust purchases
securities with payment and delivery scheduled for a future time. The Trust
engages in when-issued and delivery transactions only for the purpose of
acquiring portfolio securities consistent with the Trust's investment objective
and policies, not for investment leverage. In when-issued and delayed delivery
transactions, the Trust relies on the seller to complete the transaction. The
seller's failure to deliver the securities may cause the Trust to miss a price
or yield considered to be advantageous.
OTHER INVESTMENT TECHNIQUES
CREDIT ENHANCEMENT. The Trust may acquire securities that have been credit
enhanced by a guaranty, letter of credit or insurance. The Trust typically
evaluates the credit quality and ratings of credit enhanced securities based
upon the financial condition and ratings of the party providing the credit
enhancement (the "credit enhancer"), rather than the issuer. Generally, the
Trust will not treat credit enhanced securities as having been issued by the
credit enhancer for diversification purposes. However, under certain
circumstances applicable regulations may require the Trust to treat the
securities as having been issued by both the issuer and the credit enhancer. The
bankruptcy, receivership or default of the credit enhancer will adversely affect
the quality and marketability of the underlying security.
DEMAND FEATURES. The Trust may acquire securities that are subject to puts and
standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period (usually
seven days) following a demand by the Trust. The demand feature may be issued by
the issuer of the underlying securities, a dealer in the securities or by
another third party, and may not be transferred separately from the underlying
security. The Trust uses these arrangements to provide the Trust with liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership or default by the issuer of the demand
feature, or a default on the underlying security or other event that terminates
the demand feature before its exercise, will adversely affect the liquidity of
the underlying security. Demand features that are exercisable even after a
payment default on the underlying security may be treated as a form of credit
enhancement.
INVESTMENT RISKS
ECDs, ETDs, Yankee CDs, CCPs, and Europaper are subject to somewhat different
risks than domestic obligations of domestic banks. Examples of these risks
include international economic and political developments, foreign governmental
restrictions that may adversely affect the payment of principal or interest,
foreign withholding or other taxes on interest income, difficulties in obtaining
or enforcing a judgment against the issuing bank, and the possible impact of
interruptions in the flow of international currency transactions. Different
risks may also exist for ECDs, ETDs, and Yankee CDs because the banks issuing
these instruments, or their domestic or foreign branches, are not necessarily
subject to the same regulatory requirements that apply to domestic banks, such
as reserve requirements, loan limitations, examinations, accounting, auditing,
and recordkeeping, and the public availability of information. These factors
will be carefully considered by the Trust's adviser in selecting investments for
the Trust.
INVESTMENT LIMITATIONS
The Trust will not:
- borrow money 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 total assets to secure such borrowings;
- with respect to 75% of its total assets, purchase securities issued by
any one banking institution, including repurchase agreements secured by
certificates of deposit, having a value of more than 15% of the Trust's
total assets; 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
Rule 2a-7 under the Investment Company Act of 1940 governs a money market fund's
use of the amortized cost method of accounting. (The section of the Statement of
Additional Information entitled "Determining Net Asset Value" provides a more
complete discussion of the amortized cost method of accounting.) In order to
comply with Rule 2a-7, the Trust will adhere to certain non-fundamental
operating policies, which can be changed without shareholder approval. Since the
Trust may follow such operating policies without violating its fundamental
investment policies and limitations, the Trust does not presently intend to ask
for shareholder approval to make these changes to the Trust's investment
policies or limitations.
The Trust will invest in money market instruments (as described under
"Acceptable Investments" above) that are either rated in the highest short-term
rating categories by one or more nationally recognized statistical rating
organizations ("NRSROs") or are not rated but are of comparable quality to
securities having such ratings. A description of the rating categories is
contained in the Statement of Additional Information. The Trust will follow
applicable regulations in determining whether a security rated by more than one
NRSRO can be treated as being in the highest short-term rating category.
In addition, the Trust generally will not invest more than 5% of the Trust's
total assets in the securities of any one issuer, although the Trust's
investment limitation requires such 5% diversification with respect to 75% of
its assets. 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 operating policies to reflect changes in the laws and
regulations without the approval of its shareholders, unless such changes are
more permissive than the Trust's fundamental policies.
TRUST INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees (the
"Trustees"). The Trustees are responsible for managing the Trust's business
affairs and for exercising all the Trust's powers except those reserved for the
shareholders. The Executive Committee of the Board of Trustees handles the
Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Trust are made by Federated
Management, the Trust's investment adviser (the "Adviser"), subject to direction
by the Trustees. The Adviser continually conducts investment research and
supervision for the Trust and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the Trust.
ADVISORY FEES. The Adviser receives an annual investment advisory fee
equal to .50 of 1% of the Trust's average daily net assets. Under the
investment advisory contract, which provides for voluntary waivers of the
advisory fee by the Adviser, the Adviser will voluntarily waive some or all
of its advisory fee, to the extent that the Trust's aggregate annual
operating expenses, including its investment advisory fee but excluding
interest, taxes, brokerage commissions, insurance premiums, expenses of
withholding taxes, expenses of registering and qualifying the Trust and its
Shares under federal and state laws, and extraordinary expenses exceed a
certain percentage of its average daily net assets. This does not include
reimbursement to the Trust of any expenses incurred by shareholders who use
the transfer agent's subaccounting facilities. The Adviser can terminate
this voluntary waiver of expenses at any time in its sole discretion. The
Adviser has also undertaken to reimburse the Trust for operating expenses
in excess of limitations established by certain states.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
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 Management 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 adverse 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.
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.
DISTRIBUTION OF TRUST SHARES
Federated Securities Corp. is the principal distributor for shares of the Trust.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
ADMINISTRATION OF THE TRUST
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting ser-
vices) necessary to operate the Trust. Federated Administrative Services
provides these at an annual rate which relates to the average aggregate daily
net assets of all funds advised by subsidiaries of Federated Investors
("Federated Funds") as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY NET
ADMINISTRATIVE FEE ASSETS OF THE FEDERATED FUNDS
- ------------------------------ ------------------------------------------------------------
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 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.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
SHAREHOLDER SERVICES PLAN. The Trust has adopted a Shareholder Services Plan
(the "Services Plan") under which it may make payments up to 0.25 of 1% of the
average daily net asset value of the Trust to obtain certain personal services
for shareholders and the maintenance of shareholder accounts ("shareholder
services"). The Trust has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
Federated Shareholder Services will either perform shareholder services directly
or will select financial institutions to perform shareholder services. Financial
institutions will receive fees based upon shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined, from time to time, by the Trust and Federated
Shareholder Services.
CUSTODIAN. State Street Bank and Trust Company ("State Street Bank"), Boston,
Massachusetts, is custodian for the securities and cash of the Trust. State
Street London Limited is custodian for all foreign instruments purchased by the
Trust.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Boston, Massachusetts, is transfer agent for the shares of the Trust and
dividend disbursing agent for the Trust.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania and Dickstein, Shapiro & Morin, L.L.P., Washington,
D.C.
INDEPENDENT AUDITORS. The independent auditors for the Trust are Ernst & Young,
Pittsburgh, Pennsylvania.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Trust attempts to stabilize the net asset value of its shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per share is determined by subtracting total liabilities from total assets
and dividing the remainder by the number of shares outstanding. The Trust, of
course, cannot guarantee that its net asset value will always remain at $1.00
per share.
INVESTING IN THE TRUST
- --------------------------------------------------------------------------------
SHARE PURCHASES
Trust shares are sold on days on which the New York Stock Exchange is open.
Shares may be purchased either by wire or mail.
To purchase shares of the Trust, open an account by calling Federated Securities
Corp. Information needed to establish the account will be taken over the
telephone. The Trust reserves the right to reject any purchase request.
BY WIRE. To purchase shares of the Trust by Federal Reserve wire, call the
Trust before 3:00 p.m. (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 same 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: Automated Cash Management
Trust; Fund Number 75; Group Number or Order Number; Nominee or Institution
Name; ABA 011000028. Shares cannot be purchased by Federal Reserve wire on
Columbus Day, Veteran's Day, or Martin Luther King Day.
BY MAIL. To purchase shares of the Trust by mail, send a check made payable to
Automated Cash Management Trust to the Trust's transfer agent, Federated
Services Company, P.O. Box 8604, Boston, Massachusetts 02266-8604. Orders by
mail are considered received after payment by check is converted by the transfer
agent's bank, State Street Bank, into federal funds. This is generally the next
business day after State Street Bank receives the check.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Trust is $25,000. However, an account may
be opened with a smaller amount as long as the $25,000 minimum is reached within
90 days. An institutional investor's minimum investment will be calculated by
combining all accounts it maintains with the Trust. Accounts established through
a non-affiliated bank or broker may be subject to a smaller minimum investment.
CASH SWEEP PROGRAM
Cash accumulations in demand deposit accounts with depository institutions such
as banks and savings and loan associations may be automatically invested in
shares of the Trust on a day selected by the depository institution and its
customer, or when the demand deposit account reaches a predetermined dollar
amount (e.g., $5,000).
PARTICIPATING DEPOSITORY INSTITUTIONS. Participating depository institutions are
responsible for prompt transmission of orders relating to the program. These
depository institutions are the record owners of the shares of the Trust.
Depository institutions participating in this program may charge their customers
for their services relating to the program. This prospectus should, therefore,
be read together with any agreement between the customer and the depository
institution with regard to the services provided, the fees charged for those
services, and any restrictions and limitations imposed.
WHAT SHARES COST
Trust shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Trust.
The net asset value is determined at 12:00 noon (Eastern time), 3:00 p.m.
(Eastern time), and 4:00 p.m. (Eastern time), Monday through Friday, except on:
(i) days on which there are not sufficient changes in the value of the Trust's
portfolio securities that its net asset value might be materially affected; (ii)
days during which no shares are tendered for redemption and no orders to
purchase shares are received; and (iii) the following holidays: New Year's Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
SUBACCOUNTING SERVICES
Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. The transfer agent charges a
fee based on the level of subaccounting services rendered. Institutions holding
Trust shares in a fiduciary, agency, custodial, or similar capacity may charge
or pass through subaccounting fees as part of or in addition to normal trust or
agency account fees. They may also charge fees for other services provided which
may be related to the ownership of Trust shares. This prospectus should,
therefore, be read together with any agreement between the customer and the
institution with regard to the services provided, the fees charged for those
services, and any restrictions and limitations imposed.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Trust, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting Federated Services Company in writing.
Monthly confirmations are sent to report transactions such as purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Shares purchased by wire before
3:00 p.m. (Eastern time) begin earning dividends that day. Shares purchased by
check begin earning dividends on the day after the check is converted, upon
instruction of the transfer agent, into federal funds. Dividends are
automatically reinvested on payment dates in additional shares of the Trust
unless cash payments are requested by contacting the Trust.
CAPITAL GAINS
Since the Trust's policy is, under normal circumstances, to hold portfolio
securities to maturity and to value portfolio securities at amortized cost, it
does not expect any capital gains or losses. If the Trust does experience gains,
however, it could result in an increase in dividends. Capital losses could
result in a decrease in dividends. If for some extraordinary reason the Trust
realizes net long-term capital gains, it will distribute them at least once
every 12 months.
RETIREMENT PLANS
Shares of the Trust can be purchased as an investment for retirement plans or
for IRA accounts. For further details, including prototype retirement plans,
contact Federated Securities Corp. and consult a tax adviser.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Trust redeems shares at their net asset value next determined after the
Trust receives the redemption request. Redemptions will be made on days on which
the Trust computes its net asset value. Redemption requests must be received in
proper form and can be made:
- by telephone request;
- by writing a check; or
- by written request.
TELEPHONE REDEMPTION
Shareholders may redeem their shares by telephoning the Trust before 3:00 p.m.
(Eastern time). The minimum amount for telephone redemption is $1,000. The
proceeds will be wired the same day to the shareholder's account at a domestic
commercial bank that is a member of the Federal Reserve System. If at any time
the Trust shall determine it necessary to terminate or modify this method of
redemption, shareholders would be promptly notified.
A daily dividend will be paid on shares redeemed if the redemption request is
received after 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
dividend.
An authorization form permitting the Trust to accept telephone requests must
first be completed. Telephone redemption instructions may be recorded.
Authorization forms and information on this service are available from Federated
Securities Corp. In the event of drastic economic or market changes, a
shareholder may experience difficulty in redeeming by telephone. If such a case
should occur, another method of redemption, such as "Written Requests" should be
considered. If reasonable procedures are not followed by the Trust, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
REDEEMING BY CHECK
At the shareholder's request, Federated Services Company will establish a
checking account for redeeming Trust shares. For further information, contact a
representative of Federated Services Company.
USING THE CHECKING ACCOUNT. With a Trust checking account, shares may be
redeemed simply by writing a check for $100 or more. The redemption will be made
at the net asset value on the date that Federated Services Company presents the
check to the Trust. A check may not be written to close an account. In addition,
if a shareholder wishes to redeem shares and have the proceeds available, a
check may be written and negotiated through the shareholder's local bank. Checks
should never be sent to State Street Bank to redeem shares. Cancelled checks are
sent to the shareholder each month.
WRITTEN REQUESTS
Trust shares may also be redeemed by sending a written request to the Trust.
Call the Trust for specific instructions before redeeming by letter. The
shareholder will be asked to provide in the request his name, the Trust name,
his account number, and the share or dollar amount requested. If share
certificates have been issued, they must be properly endorsed and should be sent
by registered or certified mail with the written request.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Trust, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by the BIF,
which is administered by the FDIC;
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges;
- a savings bank or savings and loan association whose deposits are insured
by SAIF, which is administered by the FDIC; or
- any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Trust does not accept signatures guaranteed by a notary public.
The Trust and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Trust may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Trust and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Trust may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $25,000 due to
shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
REDEMPTION IN KIND
The Trust is obligated to redeem shares solely in cash up to $250,000 or 1% of
the Trust's net asset value, whichever is less, for any one shareholder within a
90-day period.
Any redemption beyond this amount will also be in cash unless the Trustees
determine that further cash payments will have a material adverse effect on
remaining shareholders. In such a case, the Trust will pay all or a portion of
the remainder of the redemption in portfolio instruments, valued in the same way
as the Trust determines net asset value. The portfolio instruments will be
selected in a manner that the Trustees deem fair and equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Trust gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust's
operation and for the election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the Trust shall be called by the Trustees upon the written
request of shareholders owning at least 10% of the Trust's outstanding shares.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust. These documents require notice of this disclaimer to be given in each
agreement, obligation, or instrument the Trust or its Trustees enter into or
sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required to use its property to protect or compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder for any act or obligation of the Trust.
Therefore, financial loss resulting from liability as a shareholder will occur
only if the Trust itself cannot meet its obligations to indemnify shareholders
and pay judgments against them.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Trust will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional shares.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Trust:
- the Trust is not subject to Pennsylvania corporate or personal property
taxes; and
- Trust shares may be subject to personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania to the
extent that the portfolio securities in the Trust would be subject to
such taxes if owned directly by residents of those jurisdictions.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Trust advertises its yield and effective yield.
The yield of the Trust represents the annualized rate of income earned on an
investment in the Trust over a seven-day period. It is the annualized dividends
earned during the period on the investment shown as a percentage of the
investment. The effective yield is calculated similarly to the yield, but, when
annualized, the income earned by an investment in the Trust is assumed to be
reinvested daily. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.
Advertisements and other sales literature may also refer to total return. Total
return represents the change, over a specified period of time, in the value of
an investment in the Trust after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed as
a percentage.
From time to time, the Trust may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
AUTOMATED CASH MANAGEMENT TRUST
PORTFOLIO OF INVESTMENTS
APRIL 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------------ ------------
<C> <S> <C>
BANK NOTE--0.8%
- ---------------------------------------------------------------------------------
$ 8,000,000 NBD Bank N.A. Detroit, 3.30%, 7/11/94 $ 8,000,452
------------------------------------------------------------------ ------------
CERTIFICATES OF DEPOSIT--3.1%
- ---------------------------------------------------------------------------------
BANKING--3.1%
------------------------------------------------------------------
12,000,000 Banque Nationale de Paris, 3.35%, 7/7/94 11,998,367
------------------------------------------------------------------
18,000,000 Canadian Imperial Bank of Commerce, 3.37-3.40%, 6/27/94-7/8/94 18,000,000
------------------------------------------------------------------ ------------
TOTAL CERTIFICATES OF DEPOSIT 29,998,367
------------------------------------------------------------------ ------------
* COMMERCIAL PAPER--50.9%
- ---------------------------------------------------------------------------------
BANKING--8.8%
------------------------------------------------------------------
14,000,000 Abbey National N.A. Corp. (Guaranteed by Abbey National Bank PLC),
3.33%-3.39%, 5/24/94-6/9/94 13,963,912
------------------------------------------------------------------
10,000,000 Bayerische Vereinsbank AG, 3.25%, 7/18/94 9,929,583
------------------------------------------------------------------
12,000,000 BNP U.S. Finance Corp., 3.23%, 7/25/94 11,908,483
------------------------------------------------------------------
15,000,000 Canadian Imperial Holdings, Inc., 3.29%-3.30%, 8/9/94-8/11/94 14,861,861
------------------------------------------------------------------
5,000,000 PEMEX Capital, Inc. (Swiss Bank Corp. LOC), 3.38%, 8/2/94 4,956,341
------------------------------------------------------------------
5,000,000 Queensland Alumina Ltd. (Credit Suisse LOC), 3.90%, 7/12/94 4,961,000
------------------------------------------------------------------
5,000,000 Royal Bank of Canada, 3.36%, 5/12/94 4,994,866
------------------------------------------------------------------
11,431,000 Southeast Paper Manufacturing Co. (Banque Paribas NY LOC), 4.27%,
10/5/94 11,218,132
------------------------------------------------------------------
2,000,000 Svenska Handelsbanken, Inc., 3.40%, 5/11/94 1,998,111
------------------------------------------------------------------
7,000,000 Toronto Dominion Holdings (USA), Inc., 3.25%, 7/13/94 6,953,868
------------------------------------------------------------------ ------------
Total 85,746,157
------------------------------------------------------------------ ------------
ECOLOGICAL SERVICES--3.1%
------------------------------------------------------------------
30,000,000 WMX Technologies, 3.30%, 5/17/94 29,956,000
------------------------------------------------------------------ ------------
FINANCE--AUTOMOTIVE--3.6%
------------------------------------------------------------------
20,000,000 New Center Asset Trust (Series A1+/P1), 3.75%-3.92%,
6/9/94-7/15/94 19,857,188
------------------------------------------------------------------
15,000,000 Premium Funding, Inc., Series B, 3.16%, 5/3/94 14,997,367
------------------------------------------------------------------ ------------
Total 34,854,555
------------------------------------------------------------------ ------------
</TABLE>
AUTOMATED CASH MANAGEMENT TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------------ ------------
<C> <S> <C>
* COMMERCIAL PAPER--CONTINUED
- ---------------------------------------------------------------------------------
FINANCE--COMMERCIAL--8.2%
------------------------------------------------------------------
$16,000,000 CIT Group Holdings Inc., 3.25%-3.33%, 7/13/94-7/18/94 $ 15,888,779
------------------------------------------------------------------
37,000,000 General Electric Capital Corp., 3.22%-4.02%, 5/2/94-9/23/94 36,749,052
------------------------------------------------------------------
28,000,000 Transamerica Finance Corp., 3.38%-3.95%, 6/2/94-9/8/94 27,746,984
------------------------------------------------------------------ ------------
Total 80,384,815
------------------------------------------------------------------ ------------
FINANCE--RETAIL--2.7%
------------------------------------------------------------------
18,000,000 Grand Metropolitan Finance PLC, 3.40%, 5/2/94 17,998,300
------------------------------------------------------------------
5,000,000 Household Finance Corp., 4.22%, 10/13/94 4,903,292
------------------------------------------------------------------
3,000,000 Sears Credit Corp. B, 3.42%, 5/9/94 2,997,720
------------------------------------------------------------------ ------------
Total 25,899,312
------------------------------------------------------------------ ------------
FOOD & BEVERAGE--0.7%
------------------------------------------------------------------
6,500,000 Anheuser-Busch Cos., Inc., 3.30%, 6/22/94 6,469,016
------------------------------------------------------------------ ------------
FUNDING CORPORATION--11.0%
------------------------------------------------------------------
4,500,000 Alpha Finance Corp. Ltd., 3.36%, 5/16/94 4,493,700
------------------------------------------------------------------
10,000,000 Asset Securitization Cooperative Corp., 3.35%-3.88%,
5/19/94-7/19/94 9,949,053
------------------------------------------------------------------
16,500,000 Beta Finance, Inc., 3.39%-4.22%, 5/24/94-10/27/94 16,291,900
------------------------------------------------------------------
14,300,000 CIESCO, LP, 3.12%-3.98%, 5/2/94-9/15/94 14,186,676
------------------------------------------------------------------
23,800,000 Corporate Asset Funding Co., Inc., 3.14%-3.36%, 5/6/94-7/21/94 23,730,855
------------------------------------------------------------------
28,000,000 McKenna Triangle National Corp., 3.22%-3.85%, 5/26/94-9/1/94 27,824,853
------------------------------------------------------------------
11,000,000 Sheffield Receivables Corp., 3.89%-3.90%, 7/8/94-7/14/94 10,915,190
------------------------------------------------------------------ ------------
Total 107,392,227
------------------------------------------------------------------ ------------
INSURANCE--8.1%
------------------------------------------------------------------
3,000,000 AI Credit Corp., 4.02%, 9/26/94 2,950,420
------------------------------------------------------------------
10,000,000 American General Corp., 3.60%, 5/2/94 10,000,000
------------------------------------------------------------------
41,775,000 Prospect St. Sr. Loan Port. L.P. (Guaranteed by FSA), 3.15%-3.94%,
5/2/94-8/1/94 41,582,044
------------------------------------------------------------------
25,000,000 Prudential Funding Corp., 3.23%-4.25%, 7/26/94-10/6/94 24,651,936
------------------------------------------------------------------ ------------
Total 79,184,400
------------------------------------------------------------------ ------------
</TABLE>
AUTOMATED CASH MANAGEMENT TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------------ ------------
<C> <S> <C>
* COMMERCIAL PAPER--CONTINUED
- ---------------------------------------------------------------------------------
MACHINERY, EQUIPMENT, AUTO--1.8%
------------------------------------------------------------------
$18,000,000 Eaton Corp., 3.85%-3.90%, 6/14/94-7/12/94 $ 17,879,778
------------------------------------------------------------------ ------------
OIL & OIL FINANCE--0.9%
------------------------------------------------------------------
9,000,000 Rockwell International Corp., 3.98%, 9/13/94 8,865,675
------------------------------------------------------------------ ------------
RETAIL--1.0%
------------------------------------------------------------------
10,000,000 Melville Corp., 4.20%, 10/12/94 9,808,667
------------------------------------------------------------------ ------------
TELECOMMUNICATIONS--1.0%
------------------------------------------------------------------
10,000,000 AT&T Corp., 3.60%, 5/2/94 9,999,000
------------------------------------------------------------------ ------------
TOTAL COMMERCIAL PAPER 496,439,602
------------------------------------------------------------------ ------------
** VARIABLE RATE INSTRUMENTS--37.8%
- ---------------------------------------------------------------------------------
BANKING--14.4%
------------------------------------------------------------------
11,000,000 American Seaway Foods, Inc. (Society National Bank LOC),
4.31%, 5/6/94 11,000,000
------------------------------------------------------------------
11,500,000 Associated Materials, Inc. (Society National Bank LOC),
4.31%, 5/6/94 11,500,000
------------------------------------------------------------------
8,400,000 Beverly California Corp. (PNC Bank N.A. LOC), 4.14%, 5/2/94 8,400,000
------------------------------------------------------------------
7,400,000 Development Authority of Richmond County, GA (PNC Bank, Kentucky
LOC), 4.14%, 5/2/94 7,400,000
------------------------------------------------------------------
2,500,000 Eastern Milk Producers Cooperative Assn., Inc. (Barclays Bank PLC
LOC), 4.24%, 5/4/94 2,500,000
------------------------------------------------------------------
5,000,000 Kentucky Rural EDA (PCI)/(PNC Bank N.A. LOC), 4.24%, 5/2/94 5,000,000
------------------------------------------------------------------
10,000,000 Massachusetts Industrial Finance Agency (PNC Bank N.A. LOC),
4.18%, 5/5/94 10,000,000
------------------------------------------------------------------
14,300,000 Merit-Cal (PNC Bank N.A. LOC), 4.14%, 5/2/94 14,300,000
------------------------------------------------------------------
12,000,000 National Funding Corp. (Societe Generale LOC), 4.20%, 5/5/94 12,000,000
------------------------------------------------------------------
18,400,000 Oakwood Medical Enterprises, Inc. (Sumitomo Bank Ltd. LOC),
4.18%, 5/4/94 18,400,000
------------------------------------------------------------------
40,000,000 SMM Trust 1993-B (Guaranteed by Morgan Guaranty Trust Co.),
3.61%, 5/12/94 40,000,000
------------------------------------------------------------------ ------------
Total 140,500,000
------------------------------------------------------------------ ------------
</TABLE>
AUTOMATED CASH MANAGEMENT TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------------ ------------
<C> <S> <C>
* COMMERCIAL PAPER--CONTINUED
- ---------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--4.0%
------------------------------------------------------------------
$10,000,000 Compagnie Euralair S.A. (Guaranteed by General Electric Co.),
4.14%, 5/2/94 $ 10,000,000
------------------------------------------------------------------
973,400 GS Funding Corp. (Guaranteed by General Electric Co.), 4.14%,
5/2/94 973,400
------------------------------------------------------------------
27,743,154 Northwest Airlines, Inc. (Guaranteed by General Electric Co.),
4.16%, 5/2/94 27,743,154
------------------------------------------------------------------ ------------
Total 38,716,554
------------------------------------------------------------------ ------------
FINANCE-AUTOMOTIVE--7.7%
------------------------------------------------------------------
30,000,000 Carco Auto Loan Master Trust Certificates, Series 1993-2, Class
A-1, 3.79%, 5/16/94 30,000,000
------------------------------------------------------------------
45,000,000 Money Market Auto Loan Trust, 3.89%, 5/16/94 45,000,000
------------------------------------------------------------------ ------------
Total 75,000,000
------------------------------------------------------------------ ------------
INSURANCE--6.7%
------------------------------------------------------------------
25,000,000 People's Security Life Insurance Co., 3.88%, 5/2/94 25,000,000
------------------------------------------------------------------
25,000,000 Sun Life Insurance Co. of America, 3.90% - 4.55%, 5/4/94 25,000,000
------------------------------------------------------------------
15,000,000 Travelers Insurance Corp., 3.74%, 5/27/94 15,000,000
------------------------------------------------------------------ ------------
Total 65,000,000
------------------------------------------------------------------ ------------
LEASING--5.0%
------------------------------------------------------------------
5,309,565 Marta Leasing Ltd., 4.14%, 5/2/94 5,309,565
------------------------------------------------------------------
44,000,000 PHH/CFC Leasing (Societe Generale LOC), 4.18%, 5/4/94 44,000,000
------------------------------------------------------------------ ------------
Total 49,309,565
------------------------------------------------------------------ ------------
TOTAL VARIABLE RATE INSTRUMENTS 368,526,119
------------------------------------------------------------------ ------------
</TABLE>
AUTOMATED CASH MANAGEMENT TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------------ ------------
<C> <S> <C>
*** REPURCHASE AGREEMENTS--7.4%
- ---------------------------------------------------------------------------------
$35,000,000 Chase Manhattan Bank, N.A., 3.55%, dated 4/29/94, due 5/2/94 $ 35,000,000
------------------------------------------------------------------
5,000,000 Deutsche Bank Government Securities, Inc., 3.55%, dated 4/29/94,
due 5/2/94 5,000,000
------------------------------------------------------------------
2,000,000 Nikko Securities Co. International, Inc., 3.55%, dated 4/29/94,
due 5/2/94 2,000,000
------------------------------------------------------------------
10,000,000 PaineWebber, Inc., 3.60%, dated 4/29/94, due 5/2/94 10,000,000
------------------------------------------------------------------
20,000,000 S.G. Warburg & Co., Inc., 3.57%, dated 4/29/94, due 5/2/94 20,000,000
------------------------------------------------------------------ ------------
TOTAL REPURCHASE AGREEMENTS (NOTE 2B) 72,000,000
------------------------------------------------------------------ ------------
TOTAL INVESTMENTS, AT AMORTIZED COST $974,964,540+
------------------------------------------------------------------ ------------
+ Also represents cost for federal tax purposes.
* Each issue shows the rate of discount at the time of purchase.
** Current rate and next reset date shown.
*** Repurchase agreements are fully collateralized by U.S. government and/or agency
obligations based on market prices at the date of the portfolio. The investments in
repurchase agreements are through participation in joint accounts with other Federated
funds.
</TABLE>
Note: The categories of investments are shown as a percentage of net assets
($975,452,887) at April 30, 1994.
The following abbreviations are used in this portfolio:
EDA--Economic Development Authority
FSA --Financial Security Assurance
LOC--Letter of Credit
(See Notes which are an integral part of the Financial Statements)
AUTOMATED CASH MANAGEMENT TRUST
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments, at amortized cost and value (Notes 2A and 2B) $974,964,540
- --------------------------------------------------------------------------------
Interest receivable 1,948,439
- --------------------------------------------------------------------------------
Receivable for investments sold 508,513
- --------------------------------------------------------------------------------
Receivable for Trust shares sold 184,992
- -------------------------------------------------------------------------------- ------------
Total assets 977,606,484
- --------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------
Dividends payable $1,142,878
- -------------------------------------------------------------------
Payable to Bank 501,375
- -------------------------------------------------------------------
Payable for Trust shares repurchased 348,613
- -------------------------------------------------------------------
Accrued expenses 160,731
- ------------------------------------------------------------------- ----------
Total liabilities 2,153,597
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 975,452,887 shares of beneficial interest
outstanding $975,452,887
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Price Per Share:
($975,452,887 / 975,452,887 shares of beneficial interest outstanding) $1.00
- -------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
AUTOMATED CASH MANAGEMENT TRUST
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------
Interest income (Note 2C) $35,074,841
- ---------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------
Investment advisory fee (Note 4) $5,207,744
- --------------------------------------------------------------------
Trustees' fees 19,354
- --------------------------------------------------------------------
Administrative personnel and services fee (Note 4) 721,387
- --------------------------------------------------------------------
Custodian and recordkeeping fees and expenses 362,098
- --------------------------------------------------------------------
Trust share registration costs 37,012
- --------------------------------------------------------------------
Auditing fees 20,000
- --------------------------------------------------------------------
Legal fees 27,384
- --------------------------------------------------------------------
Printing and postage 9,797
- --------------------------------------------------------------------
Insurance premiums 50,555
- --------------------------------------------------------------------
Taxes 9,859
- --------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses (Note 4) 83,582
- --------------------------------------------------------------------
Shareholder services fee (Note 4) 86,041
- --------------------------------------------------------------------
Miscellaneous 10,330
- -------------------------------------------------------------------- ----------
Total expenses 6,645,143
- --------------------------------------------------------------------
Deduct--Waiver of investment advisory fee (Note 4) 724,909
- -------------------------------------------------------------------- ----------
Net expenses 5,920,234
- --------------------------------------------------------------------------------- -----------
Net investment income $29,154,607
- --------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
AUTOMATED CASH MANAGEMENT TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------------------
<S> <C> <C>
1994 1993
---------------- ---------------
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------
Net investment income $ 29,154,607 $ 37,887,029
- --------------------------------------------------------- ---------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)
- ---------------------------------------------------------
Dividends to shareholders from net investment income (29,154,607) (37,887,029)
- --------------------------------------------------------- ---------------- ---------------
TRUST SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)
- ---------------------------------------------------------
Proceeds from sale of shares 10,204,328,063 9,875,584,346
- ---------------------------------------------------------
Net asset value of shares issued to shareholders
in payment of dividends declared 14,864,321 16,100,512
- ---------------------------------------------------------
Cost of shares redeemed (10,415,909,478) (9,939,726,738)
- --------------------------------------------------------- ---------------- ---------------
Change in net assets from Trust share transactions (196,717,094) (48,041,880)
- --------------------------------------------------------- ---------------- ---------------
Change in net assets (196,717,094) (48,041,880)
- ---------------------------------------------------------
NET ASSETS--
- ---------------------------------------------------------
Beginning of period 1,172,169,981 1,220,211,861
- --------------------------------------------------------- ---------------- ---------------
End of period $ 975,452,887 $ 1,172,169,981
- --------------------------------------------------------- ---------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
AUTOMATED CASH MANAGEMENT TRUST
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
The Trust is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end, no load, management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles (GAAP).
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 Investment
Company Act of 1940.
B. REPURCHASE AGREEMENTS--It is the policy of the Trust to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve
Book Entry System or to have segregated within the custodian bank's vault,
all securities held as collateral in support of repurchase agreement
investments. Additionally, procedures have been established by the Trust to
monitor on a daily basis, the market value of each repurchase agreement's
underlying collateral to ensure the value at least equals the principal
amount of the repurchase transaction, including accrued interest.
The Trust will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed by
the Trust's adviser to be creditworthy pursuant to guidelines established by
the Board of Trustees ("Trustees"). Risks may arise from the potential
inability of counterparties to honor the terms of the repurchase agreement.
Accordingly, the Trust could receive less than the repurchase price on the
sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount are amortized as required by the
Internal Revenue Code ("Code"), as amended. 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 distribute to
shareholders each year substantially all of its taxable income. Accordingly,
no provisions for federal tax are necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Trust may engage in
when-issued or delayed delivery transactions. The Trust records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis
are marked to market daily and begin earning interest on the settlement date.
F. OTHER--Investment transactions are accounted for on the trade date.
AUTOMATED CASH MANAGEMENT TRUST
- --------------------------------------------------------------------------------
(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 April
30, 1994 capital paid in aggregated $975,452,887.
Transactions in Trust shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
----------------------------------
<S> <C> <C>
1994 1993
--------------- --------------
- ------------------------------------------------------------
Shares sold 10,204,328,063 9,875,584,346
- ------------------------------------------------------------
Shares issued to shareholders in payment of dividends
declared 14,864,321 16,100,512
- ------------------------------------------------------------
Shares redeemed (10,415,909,478) (9,939,726,738)
- ------------------------------------------------------------ --------------- --------------
Net change resulting from Trust share transaction (196,717,094) (48,041,880)
- ------------------------------------------------------------ --------------- --------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Trust's investment adviser
("Adviser"), receives for its services an annual investment advisory fee equal
to 0.50 of 1% of the Trust's average daily net assets. Adviser may voluntarily
choose to waive a portion of its fee. Adviser can modify or terminate this
voluntary waiver at any time at its sole discretion.
ADMINISTRATION FEE--Federated Administrative Services ("FAS") provides the Trust
with administrative personnel and services. Prior to March 1, 1994, these
services were provided at approximate cost. Effective March 1, 1994, the fee is
based on the level of average aggregate daily net assets of all funds advised by
subsidiaries of Federated Investors for the period. The administrative fee
received during any fiscal year shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a shareholder service agreement
with Federated Shareholder Services ("FSS"), the Trust will pay FSS up to .25 of
1% of average net assets of the Trust for the period. This fee is to obtain
certain personal services for shareholders and the maintenance of shareholders
accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEE--Federated Services Company ("FServ")
serves as transfer and dividend disbursing agent for the Trust. FServ's fee is
based on the size, type and number of accounts and transactions made by
shareholders.
Certain of the Officers and Trustees of the Trust are Officers and Trustees of
the above companies.
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Trustees and Shareholders of
AUTOMATED CASH MANAGEMENT TRUST:
We have audited the accompanying statement of assets and liabilities of
Automated Cash Management Trust, including the portfolio of investments, as of
April 30, 1994, and the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years in the period
then ended, and the financial highlights (see page 2 of this Prospectus) for
each of the ten years in the period then ended. 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 as of April
30, 1994, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Automated Cash Management Trust at April 30, 1994, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the ten years
in the period then ended, in conformity with generally accepted accounting
principles.
ERNST & YOUNG
Pittsburgh, Pennsylvania
June 9, 1994
[THIS PAGE INTENTIONALLY LEFT BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Automated Cash Management Trust Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8604
Trust Company Boston, Massachusetts 02266-8604
- -------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8604
Boston, Massachusetts 02266-8604
- -------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15219
- -------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin, L.L.P. 2101 L Street, N.W.
Washington, D.C. 20037
- -------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young One Oxford Centre
Pittsburgh, Pennsylvania 15219
- -------------------------------------------------------------------------------------------------
</TABLE>
AUTOMATED CASH
MANAGEMENT TRUST
PROSPECTUS
A No-Load, Open-End, Diversified
Management Investment Company
June 30, 1994
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 1522-3779
8060109A (6/94)
AUTOMATED CASH MANAGEMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus of
the Trust dated June 30, 1994. This Statement is not a prospectus itself. To
receive a copy of the prospectus, write or call Automated Cash Management Trust.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated June 30, 1994
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE TRUST 1
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ---------------------------------------------------------------
Types of Investments 1
When-Issued and Delayed
Delivery Transactions 1
Reverse Repurchase Agreements 1
Investment Limitations 2
TRUST MANAGEMENT 3
- ---------------------------------------------------------------
Officers and Trustees 3
The Funds 5
Trust Ownership 6
Trustee Liability 6
INVESTMENT ADVISORY SERVICES 6
- ---------------------------------------------------------------
Adviser to the Trust 6
Advisory Fees 6
Other Related Services 6
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS 7
- ---------------------------------------------------------------
ADMINISTRATIVE SERVICES 7
- ---------------------------------------------------------------
SHAREHOLDER SERVICES PLAN 7
- ---------------------------------------------------------------
BROKERAGE TRANSACTIONS 7
- ---------------------------------------------------------------
PURCHASING SHARES 8
- ---------------------------------------------------------------
Conversion to Federal Funds 8
DETERMINING NET ASSET VALUE 8
- ---------------------------------------------------------------
Use of the Amortized Cost Method 8
REDEEMING SHARES 9
- ---------------------------------------------------------------
Redemption in Kind 9
TAX STATUS 9
- ---------------------------------------------------------------
The Trust's Tax Status 9
Shareholders' Tax Status 9
YIELD 9
- ---------------------------------------------------------------
EFFECTIVE YIELD 10
- ---------------------------------------------------------------
PERFORMANCE COMPARISONS 10
- ---------------------------------------------------------------
APPENDIX 11
- ---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE TRUST
- --------------------------------------------------------------------------------
Automated Cash Management Trust was established as a Massachusetts business
trust under a Declaration of Trust dated November 17, 1981.
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
and which include, but are not limited to, bank instruments, commercial paper,
U.S. government obligations, and repurchase agreements.
The above investment objective and the policies described below cannot be
changed without approval of shareholders.
BANK INSTRUMENTS
In addition to domestic bank obligations such as certificates of deposit,
demand and time deposits, savings shares, and bankers' acceptances, the
Trust may invest in:
TYPES OF ACCEPTABLE INVESTMENTS
- Eurodollar Certificates of Deposit issued by foreign branches of U.S.
or foreign banks;
- Eurodollar Time Deposits, which are U.S. dollar-denominated deposits in
foreign branches or U.S. or foreign banks;
- Canadian Time Deposits, which are U.S. dollar-denominated deposits
issued by branches of major Canadian banks located in the United
States; and
- Yankee Certificates of Deposit, which are U.S. dollar-denominated
certificates of deposit issued by U.S. branches of foreign banks and
held in the United States.
U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Trust may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued or guaranteed by
U.S. government agencies or instrumentalities. These securities are
backed by:
- the full faith and credit of the U.S. Treasury;
- the issuer's right to borrow from the U.S. Treasury;
- the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
- the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
- Federal Farm Credit Bank;
- Federal Home Loan Banks;
- Federal Home Loan Mortgage Corporation;
- Federal National Mortgage Association; and
- Student Loan Marketing Association.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price and yield for the Trust. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.
No fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of the Trust sufficient to make payment for the
securities to be purchased are segregated at the trade date. These securities
are marked to market daily and maintained until the transaction is settled.
REVERSE REPURCHASE AGREEMENTS
The Trust may also enter into reverse repurchase agreements. This transaction is
similar to borrowing cash. In a reverse repurchase agreement the Trust transfers
possession of a portfolio instrument to another person, such as a financial
institution, broker, or dealer, 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 the ability to enter into reverse repurchase agreements
does not ensure that the Trust will be able to avoid selling portfolio
instruments at a disadvantageous time.
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 at the trade date. These securities are 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 real estate, except that it may purchase
money market instruments issued by companies that invest in or sponsor
such interests.
UNDERWRITING
The Trust will not underwrite any issue of securities, except as it may
be deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of restricted securities which the Trust may
purchase pursuant to its investment objective, policies, and limitations.
LENDING CASH OR SECURITIES
The Trust will not lend any of its assets, except that it may purchase or
hold money market instruments, including repurchase agreements, 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.
DIVERSIFICATION OF INVESTMENTS
The Trust will not purchase securities issued by any one issuer having a
value of more than 5% of the value of its total assets except cash or
cash items, repurchase agreements, and U.S. government obligations.
- --------------------------------------------------------------------------------
With respect to 75% of the Trust's assets, the Trust may not purchase
securities issued by any one banking institution having a value of more
than 15% of the value of the Trust's total assets. The Trust considers
the type of bank obligations it purchases as cash items.
INVESTING IN RESTRICTED SECURITIES
The Trust will not invest in securities which are subject to restrictions
on resale under federal securities laws except that the Trust may invest
up to 10% of its net assets in high quality securities subject to such
restrictions. This limitation is not applicable to commercial paper
issued under Section 4(2) of the Securities Act of 1933.
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 of them.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS OF THE TRUST
The Trust will not purchase or retain 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
beneficially 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.
CONCENTRATION OF INVESTMENTS
The Trust will not purchase money market instruments if, as a result of
such purchase, more than 25% of the value of its total assets would be
invested in any one industry.
However, investing in bank instruments (such as time and demand deposits
and certificates of deposit), U.S. government obligations or instruments
secured by these money market instruments, such as repurchase agreements,
shall not be considered investments in any one industry. The Trust will
invest at least 25% of the value of its total assets in bank instruments
secured by these instruments unless the Trust assumes a defensive
posture.
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.
TRUST MANAGEMENT
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with Federated Management,
Federated Investors, Federated Securities Corp., Federated Services Company,
Federated Administrative Services, and the Funds (as defined below).
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
John F. Donahue*+ Chairman and Trustee Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Federated Investors Management, and Federated Research; Director, AEtna Life and Casualty Company;
Tower Chief Executive Officer and Director, Trustee, or Managing General Partner of
Pittsburgh, PA the Funds; formerly, Director, The Standard Fire Insurance Company. Mr.
Donahue is the father of J. Christopher Donahue, Vice President of the Trust.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
John T. Conroy, Jr. Trustee President, Investment Properties Corporation; Senior Vice President, John R.
Wood/IPC Commercial Wood and Associates, Inc., Realtors; President, Northgate Village Development
Department Corporation; General Partner or Trustee in private real estate ventures in
John R. Wood and Southwest Florida; Director, Trustee or Managing General Partner of the Funds;
Associates, Inc., Realtors formerly, President, Naples Property Management, Inc.
3255 Tamiami Trail North
Naples, FL
- -------------------------------------------------------------------------------------------------------------------------------
William J. Copeland Trustee Director and Member of the Executive Committee, Michael Baker, Inc.; Director,
One PNC Plaza Trustee, or Managing General Partner of the Funds; formerly, Vice Chairman and
23rd Floor Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.
Pittsburgh, PA
- -------------------------------------------------------------------------------------------------------------------------------
James E. Dowd Trustee Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
571 Hayward Mill Road or Managing General Partner of the Funds; formerly, Director, Blue Cross of
Concord, MA Massachusetts, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
3471 Fifth Avenue Hospitals; Clinical Professor of Medicine and Trustee, University of
Suite 1111 Pittsburgh; Director, Trustee, or Managing General Partner of the Funds.
Pittsburgh, PA
- -------------------------------------------------------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+ Trustee Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat'N Park
5916 Penn Mall Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director, Trustee,
Pittsburgh, PA or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
- -------------------------------------------------------------------------------------------------------------------------------
Peter E. Madden Trustee Consultant; State Representative, Commonwealth of Massachusetts; Director,
225 Franklin Street Trustee, or Managing General Partner of the Funds; formerly, President, State
Boston, MA Street Bank and Trust Company and State Street Boston Corporation and Trustee,
Lahey Clinic Foundation, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare, Inc.;
5916 Penn Mall Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or Managing General
Pittsburgh, PA Partner of the Funds; formerly, Vice Chairman, Horizon Financial, F.A.
- -------------------------------------------------------------------------------------------------------------------------------
Wesley W. Posvar Trustee Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
1202 Cathedral of Endowment for International Peace, RAND Corporation, Online Computer Library
Learning Center, Inc., and U.S. Space Foundation; Chairman Czecho Slovak Management
University of Pittsburgh Center; Director, Trustee, or Managing General Partner of the Funds; President
Pittsburgh, PA Emeritus, University of Pittsburgh; formerly, Chairman, National Advisory
Council for Environmental Policy and Technology.
- -------------------------------------------------------------------------------------------------------------------------------
Marjorie P. Smuts Trustee Public relations/marketing consultant; Director, Trustee, or Managing General
4905 Bayard Street Partner of the Funds.
Pittsburgh, PA
- -------------------------------------------------------------------------------------------------------------------------------
Glen R. Johnson President Trustee, Federated Investors; President and/or Trustee of some of the Funds;
Federated Investors staff member, Federated Securities Corp. and Federated Administrative
Tower Services.
Pittsburgh, PA
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
J. Christopher Donahue Vice President President and Trustee, Federated Investors; Trustee, Federated Advisers,
Federated Investors Federated Management, Federated Research, and Federated Services Company;
Tower President and Trustee, Federated Administrative Services; President or Vice
Pittsburgh, PA President of the Funds; Director, Trustee or Managing General Partner of some
of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and Trustee
of the Trust.
- -------------------------------------------------------------------------------------------------------------------------------
Richard B. Fisher Vice President Executive Vice President and Trustee, Federated Investors; Chairman and
Federated Investors Director, Federated Securities Corp.; President or Vice President of the
Tower Funds; Director or Trustee of some of the Funds.
Pittsburgh, PA
- -------------------------------------------------------------------------------------------------------------------------------
Edward C. Gonzales Vice President Vice President, Treasurer, and Trustee, Federated Investors; Vice President
Federated Investors and Treasurer and Treasurer, Federated Advisers, Federated Management, and Federated
Tower Research; Executive Vice President, Treasurer, and Director, Federated
Pittsburgh, PA Securities Corp.; Trustee, Federated Services Company; 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 Vice President Vice President, Secretary, General Counsel, and Trustee, Federated Investors;
Federated Investors and Secretary Vice President, Secretary, and Trustee, Federated Advisers, Federated
Tower Management, and Federated Research; Trustee, Federated Services Company;
Pittsburgh, PA Executive Vice President, Secretary, and Trustee, Federated Administrative
Services; Director and Executive Vice President, Federated Securities Corp.;
Vice President and Secretary of the Funds.
- -------------------------------------------------------------------------------------------------------------------------------
John A. Staley, IV Vice President Vice President and Trustee, Federated Investors; Executive Vice President,
Federated Investors Federated Securities Corp.; President and Trustee, Federated Advisers,
Tower Federated Management, and Federated Research; Vice President of the Funds;
Pittsburgh, PA Director, Trustee, or Managing General Partner of some of the Funds; formerly,
Vice President, The Standard Fire Insurance Company and President of its
Federated Research Division.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* This Trustee is deemed to be an "interested person" of the Trust as defined in
the Investment Company Act
of 1940.
+ Member of the Trust's Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of Trustees
between meetings of the Board.
THE FUNDS
"The Funds" and "Funds" mean the following investment companies: American
Leaders Fund, Inc.; Annuity Management Series; Automated Cash Management Trust;
Automated Government Money Trust; California Municipal Cash Trust; Cash Trust
Series, Inc.; Cash Trust Series II; 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 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 Term Trust, Inc.--1999; Liberty U.S. Government Money Market Trust;
Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Mark Twain
Funds; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Trust; Municipal Securities
- --------------------------------------------------------------------------------
Income Trust; New York Municipal Cash Trust; 111 Corcoran Funds; Peachtree
Funds; The Planters Funds; Portage Funds; RIMCO Monument Funds; The Shawmut
Funds; Short-Term Municipal Trust; Signet Select Funds; Star Funds; The
Starburst Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; Trademark Funds;
Trust for Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations; and
World Investment Series, Inc.
TRUST OWNERSHIP
Officers and Trustees own less than 1% of the Trust's outstanding shares.
As of June 4, 1994, the following shareholders of record owned 5% or more of the
outstanding shares of the Trust: State Street Bank and Trust Company, North
Quincy, MA owned approximately 85,877,733 shares (8.79%); and Stephens, Inc.,
Little Rock, AR owned approximately 56,065,512 shares (5.74%).
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE TRUST
The Trust's investment adviser is Federated Management (the "Adviser"). It is a
subsidiary of Federated Investors. All of 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. John F. Donahue, Chairman and Trustee
of Federated Management, is Chairman and Trustee of Federated Investors and
Chairman and Trustee of the Trust. John A. Staley, IV, President and Trustee of
Federated Management, is Vice President and Trustee of Federated Investors,
Executive Vice President of Federated Securities Corp., and Vice President of
the Trust. J. Christopher Donahue, Trustee of Federated Management, is President
and Trustee of Federated Investors, President and Trustee of Federated
Administrative Services, Trustee, Federated Services Company, and Vice President
of the Trust. John W. McGonigle, Vice President, Secretary and Trustee of
Federated Management, is Vice President, Secretary, Trustee and General Counsel
of Federated Investors, Director, Executive Vice President, and Secretary of
Federated Administrative Services, Trustee, Federated Services Company, Director
and Executive Vice President of Federated Securities Corp., and Vice President
and Secretary of the Trust.
ADVISORY FEES
For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectus. During the fiscal years ended April
30, 1994, 1993, and 1992, the Adviser, earned $5,207,744, $6,173,392, and
$6,649,637, respectively, of which $724,909, $488,070, and $425,928,
respectively, were waived, because of undertakings to limit the Trust's
expenses.
STATE EXPENSE LIMITATIONS
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Trust's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2-1/2% 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 expense
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, on any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
OTHER RELATED SERVICES
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of shares of funds offered by Federated Securities Corp.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS
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The administrative services for which the distributor will pay financial
institutions include, but are not limited to: providing office space, equipment,
telephone facilities, and various clerical, supervisory, and computer personnel,
as is necessary or beneficial to establish and maintain shareholders' accounts
and records; processing purchase and redemption transactions; processing
automatic investments of client account cash balances; answering routine client
inquiries regarding the Trust; assisting clients in changing dividend options,
account designations, and addresses; and providing such other services as the
Trust may reasonably request.
ADMINISTRATIVE SERVICES
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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 year ended April 30, 1994, the Administrators collectively earned
$721,387, none of which was waived. For the fiscal years ended April 30, 1993
and 1992, Federated Administrative Services, Inc. earned $649,911, and $595,119,
respectively, none of which was waived.
SHAREHOLDER SERVICES PLAN
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This arrangement permits the payment of fees to Federated Shareholder Services
and, indirectly, to financial institutions to cause services to be provided to
shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. These activities and services may include,
but are not limited to: providing office space, equipment, telephone facilities,
and various clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and addresses.
For the fiscal period ending April 30, 1994, payments in the amount of $86,041
were made pursuant to the Shareholder Services Plan, all of which was paid to
financial institutions.
BROKERAGE TRANSACTIONS
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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 utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees.
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Trust or to the
Adviser and may include:
- - advice as to the advisability of investing in securities;
- - security analysis and reports;
- - economic studies;
- - industry studies;
- - receipt of quotations for portfolio evaluations; and
- - similar services.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage and
research services provided.
Research services provided by brokers may be used by the Adviser or by
affiliates of Federated Investors' in advising the Funds and other accounts. To
the extent that receipt of these services may supplant services for which the
Adviser or its affiliates might otherwise have paid, it would tend to reduce
their expenses.
PURCHASING SHARES
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Shares are sold at their net asset value without a sales charge on days the New
York Stock Exchange is open for business. The procedure for purchasing shares of
the Trust is explained in the prospectus under "Investing in the Trust."
CONVERSION TO FEDERAL FUNDS
It is the Trust's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds. Federated Services Company
acts as the shareholder's agent in depositing checks and converting them to
federal funds.
DETERMINING NET ASSET VALUE
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The Trust attempts to stabilize the value of a share at $1.00. The days in which
net asset value is calculated by the Trust are described in the prospectus.
USE OF THE AMORTIZED COST METHOD
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
The Trust's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions of 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.
Under the Rule, the Trust is permitted to purchase instruments which are subject
to demand features or standby commitments. As defined by the Rule, as amended, a
demand feature entitles the Trust to receive the principal amount of the
instrument from the issuer or a third party on (1) no more than 30 days' notice
or (2) at specified intervals not exceeding one year on no more than 30 days'
notice. A standby commitment entitles the Trust to achieve same day settlement
and to receive an exercise price equal to the amortized cost of the underlying
instrument plus accrued interest at the time of exercise.
Although demand features and standby commitments are defined as "puts" under the
Rule, the Trust does not consider them to be "puts" as that term is used in the
Trust's investment limitations. Demand features and standby commitments are
features which enhance an instrument's liquidity, and the investment limitation
which prescribes puts is designed to prohibit the purchase and sale of put and
call options and is not designed to prohibit the Trust from using techniques
which enhance the liquidity of portfolio instruments.
MONITORING PROCEDURES
The Trustees' procedures include monitoring the relationship between the
amortized cost value per share and the net asset value per share based
upon available indications of market value. The Trustees will decide
what, if any, steps should be taken if there is a difference of more than
.5 of 1% between the two values. The Trustees will take any steps they
consider appropriate (such as redemption in kind or shortening the
average portfolio maturity) to minimize any material dilution or other
unfair results arising from differences between the two methods of
determining net asset value.
INVESTMENT RESTRICTIONS
The Rule requires that the Trust limit its investment to instruments
that, in the opinion of the Trustees, present minimal credit risk and
have received the requisite rating from one or more nationally recognized
statistical rating organizations. If the instruments are not rated, the
Trustees must determine that they are of comparable quality. The Rule
also requires the Trust to maintain a dollar weighted average portfolio
maturity (not more than 90 days) appropriate to the objective of
maintaining a stable net asset value of $1.00 per share. In addition, no
instrument with a remaining maturity of more than one year can be
purchased by the Trust.
Should the disposition of a portfolio security result in a dollar
weighted average portfolio maturity of more than 90 days, the Trust will
invest its available cash to reduce the average maturity to 90 days or
less as soon as possible.
It is the Trust's usual practice to hold portfolio securities to maturity and
realize par, unless the investment adviser determines that sale or other
disposition is appropriate in light of the Trust's investment objective. Under
the amortized cost method of valuation, neither the amount of daily income nor
the net asset value is affected by any unrealized appreciation or depreciation
of the portfolio.
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In periods of declining interest rates, the indicated daily yield on shares of
the Trust computed by dividing the annualized daily income on the Trust's
portfolio by the net asset value computed as above may tend to be higher than a
similar computation made by using a method of valuation based upon market prices
and estimates.
In periods of rising interest rates, the indicated daily yield on shares of the
Trust computed the same way may tend to be lower than a similar computation made
by using a method of calculation based upon market prices and estimates.
REDEEMING SHARES
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The Trust redeems shares at the next computed net asset value after the Trust
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Shares." Although the transfer agent does not charge
for telephone redemptions, it reserves the right to charge a fee for the cost of
wire-transferred redemptions of less than $5,000.
REDEMPTION IN KIND
Although the Trust intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the Trust's portfolio.
Redemption in kind will be made in conformity with applicable Securities and
Exchange Commission rules, taking such securities at the same value employed in
determining net asset value and selecting the securities in a manner the
Trustees determine to be fair and equitable.
The Trust has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940, under which the Trust is obligated to redeem shares for any one
shareholder in cash only up to the lesser of $250,000 or 1% of the Trust's net
asset value during any 90-day period.
TAX STATUS
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THE TRUST'S TAX STATUS
The Trust will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Trust must, among other
requirements:
- - derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
- - derive less than 30% of its gross income from the sale of securities held less
than three months;
- - invest in securities within certain statutory limits; and
- - distribute to its shareholders at least 90% of its net income earned during
the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends received as cash or
additional shares. No portion of any income dividend paid by the Trust is
eligible for the dividends received deduction available to corporations. These
dividends, and any short-term capital gains, are taxable as ordinary income.
CAPITAL GAINS
Because the Trust invests primarily for income and because it normally
holds portfolio instruments to maturity, it is not expected to realize
long-term capital gains.
YIELD
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The Trust's yield for the seven-day period ended April 30, 1994 was 3.20%.
The Trust calculates its yield daily, based upon the seven days ending on the
day of the calculation, called the "base period." This yield is computed by:
- - determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net change
excluding capital changes but including the value of any additional shares
purchased with dividends earned from the original one share and all dividends
declared on the original and any purchased shares;
- - dividing the net change in the account's value by the value of the account at
the beginning of the base period to determine the base period return; and
- - multiplying the base period return by (365/7).
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To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the
Trust, the performance will be reduced for those shareholders paying those fees.
EFFECTIVE YIELD
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The Trust's effective yield for the seven-day period ended April 30, 1994 was
3.25%.
The Trust's effective yield is computed by compounding the unannualized base
period return by:
- - adding 1 to the base period return;
- - raising the sum to the 365/7th power; and
- - subtracting 1 from the result.
PERFORMANCE COMPARISONS
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The Trust's performance depends upon such variables as:
- - portfolio quality;
- - average portfolio maturity;
- - type of instruments in which the portfolio is invested;
- - changes in interest rates on money market instruments;
- - changes in Trust expenses; and
- - the relative amount of Trust cash flow.
Investors may use financial publications and/or indices to obtain a more
complete view of the Trust's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute 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 by
making comparative calculations using total return. Total return assumes the
reinvestment of all income dividends and capital gains distributions, if any.
From time to time, the Trust will quote its Lipper ranking in the "money
market instruments funds" category in advertising and sales literature; and
- - SALOMON 30-DAY CD INDEX compares rate levels of 30-day certificates of deposit
from top ten prime representative banks.
Advertisements and other sales literature for the Trust may refer to total
return. Total return is the historic change in the value of an investment in the
Trust based on the monthly reinvestment of dividends over a specified period of
time.
When using total return to compare the Trust with other mutual funds, investors
should realize that total returns may not be comparable because of differences
in permitted portfolio composition and computing offering price.
APPENDIX
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STANDARD AND POOR'S CORPORATION COMMERCIAL PAPER RATING DEFINITIONS
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATING DEFINITIONS
PRIME-1--Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. PRIME-1
repayment capacity will normally be evidenced by the following characteristics:
- - Leading market positions in well established industries;
- - High rates of return on funds employed;
- - Conservative capitalization structure with moderate reliance on debt and ample
asset protection;
- - Broad margins in earnings coverage of fixed financial charges and high
internal cash generation; or
- - Well-established access to a range of financial markets and assured sources of
alternate liquidity.
FITCH INVESTORS SERVICE, INC. COMMERCIAL PAPER RATING DEFINITIONS
Plus or minus signs are used with a rating symbol to indicate the relative
portion of the credit within the rating category:
F-1+--EXCEPTIONALLY STRONG CREDIT QUALITY. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment; or
F-1--VERY STRONG CREDIT QUALITY. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.
8060109B (6/94)
