MONEY MARKET MANAGEMENT, INC.
PROSPECTUS
Money Market Management, Inc. (the "Fund") is a no-load, open-end, diversified
management investment company (a mutual fund) investing in money market
instruments to achieve current income consistent with stability of principal.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THE FUND ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE; THERE CAN BE NO ASSURANCE THAT THE FUND 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 Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated February 28,
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 Fund, contact your financial institution.
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 February 28, 1994
TABLE OF CONTENTS
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SUMMARY OF FUND EXPENSES 1
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FINANCIAL HIGHLIGHTS 2
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GENERAL INFORMATION 3
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FAMILIES OF FUNDS 3
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Investment Family of Funds 3
Fortress Investment Program 3
INVESTMENT INFORMATION 4
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Investment Objective 4
Investment Policies 4
Acceptable Investments 4
Variable Rate Demand Notes 5
Bank Instruments 5
Short-Term Credit Facilities 5
Asset-Backed Securities 5
Average Maturity 6
Banks and Savings and Loans 6
Ratings 6
Repurchase Agreements 6
Credit Enhancement 6
Demand Features 7
When-Issued and Delayed
Delivery Transactions 7
Restricted and Illiquid Securities 7
Investment Risks 8
Investment Limitations 8
Regulatory Compliance 8
NET ASSET VALUE 9
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INVESTING IN THE FUND 9
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Share Purchases 9
Through a Financial Institution 9
By Mail 9
By Wire 9
By Invest-By-Phone 10
By Direct Deposit 10
By a Systematic Investment Program 10
Minimum Investment Required 10
What Shares Cost 10
Certificates and Confirmations 10
Dividends 11
Capital Gains 11
Retirement Plans 11
EXCHANGE PRIVILEGE 11
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Exchanges in the Fortress Investment Program 11
Exchanges in the Investment Family of Funds 11
Exchange-By-Telephone 11
REDEEMING SHARES 12
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Through a Financial Institution 12
By Telephone 12
By a Systematic Withdrawal Program 13
By Check 13
Using the Checking Account 13
By Mail 13
Signatures 14
Receiving Payment 14
Contingent Deferred Sales Charge 14
Accounts with Low Balances 15
FUND INFORMATION 15
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Management of the Fund 15
Board of Directors 15
Investment Adviser 15
Advisory Fees 15
Adviser's Background 15
Distribution of Fund Shares 16
Administrative Arrangements 16
Administration of the Fund 16
Administrative Services 16
Custodian 17
Transfer Agent and Dividend Disbursing
Agent 17
Legal Counsel 17
Independent Auditors 17
SHAREHOLDER INFORMATION 17
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Voting Rights 17
TAX INFORMATION 17
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Federal Income Tax 17
Pennsylvania Corporate and Personal
Property Taxes 17
PERFORMANCE INFORMATION 18
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FINANCIAL STATEMENTS 19
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INDEPENDENT AUDITORS' REPORT 29
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ADDRESSES Inside Back Cover
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SUMMARY OF FUND EXPENSES
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<TABLE>
<S> <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 Fees....................................................................................... None
Exchange Fee.......................................................................................... None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1)...................................................................... 0.43%
12b-1 Fee............................................................................................. None
Other Expenses........................................................................................ 0.74%
Total Fund Operating Expenses(2)............................................................ 1.17%
</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 Total Fund Operating Expenses would have been 1.24% 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 FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "REDEEMING SHARES" AND "FUND INFORMATION." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment assuming
(1) 5% annual return and (2) redemption at the end of each time
period. As noted in the table above, the Fund charges no contingent
deferred sales charge*................................................ $12 $37 $64 $142
</TABLE>
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* A contingent deferred sales charge of 1% will be imposed only under certain
limited circumstances in which Fund shares being redeemed were acquired in
exchange for shares of another fund in the Fortress Investment Program.
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
MONEY MARKET MANAGEMENT, INC.
FINANCIAL HIGHLIGHTS
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(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Independent Auditors' Report on page 29.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
- -------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------
INCOME FROM
INVESTMENT OPERATIONS
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Net investment
income 0.02 0.03 0.05 0.07 0.08 0.07 0.06 0.06 0.07 0.10
- -------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
LESS DISTRIBUTIONS
- --------------------
Dividends to
shareholders
from net investment
income (0.02) (0.03) (0.05) (0.07) (0.08) (0.07) (0.06) (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* 2.19% 2.86% 5.43% 7.65% 8.73% 7.03% 6.08% 6.28% 7.68% 10.08%
- --------------------
RATIOS TO AVERAGE
NET ASSETS
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Expenses 1.17% 1.11% 0.96% 0.89% 0.89% 0.91% 0.89% 0.84% 0.89% 0.92%
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Net investment
income 2.15% 2.85% 5.32% 7.38% 8.39% 6.81% 5.88% 6.12% 7.41% 9.63%
- --------------------
Expense waiver/
reimbursement (a) 0.07% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
- --------------------
SUPPLEMENTAL DATA
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Net assets, end of
period (000 omitted) $108,309 $127,711 $168,889 $194,836 $204,393 $188,239 $178,813 $205,723 $238,454 $274,965
- --------------------
</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 Fund was organized as a Maryland corporation on October 30, 1973, and was
one of the first money market funds. The Fund was reorganized as a Massachusetts
business trust on June 29, 1982. On February 11, 1993, shareholders voted to
reorganize the Fund as a Maryland corporation. The Fund is designed as a
convenient investment vehicle for investors with temporary cash balances and
investors with cash reserves seeking to obtain the yields available on money
market instruments while maintaining liquidity and diversification. A minimum
initial investment of $500 is required, except for retirement plans.
The Fund attempts to stabilize the value of a share at $1.00. Fund shares are
currently sold and redeemed at that price. However, a contingent deferred sales
charge may be imposed on shares acquired through an exchange of shares of other
funds in the Fortress Investment Program.
FAMILIES OF FUNDS
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The Fund is a member of two families of mutual funds, the Investment Family of
Funds and the Fortress Investment Program. Both the Investment Family of Funds
and the Fortress Investment Program provide flexibility and diversification for
an investor's long-term investment planning. Each family enables an investor to
meet the challenges of changing market conditions by offering convenient
exchange privileges which give access to a number of investment vehicles and by
providing the investment services of a proven, professional investment adviser.
INVESTMENT FAMILY OF FUNDS
The other funds in the Investment Family are Tax-Free Instruments Trust, a
tax-free money market fund, and Investment Series Trust, a mutual fund
consisting of the following three separate investment portfolios:
High Quality Stock Fund--a portfolio seeking growth of capital and income
by investing in securities of high quality companies;
U.S. Government Bond Fund--a portfolio seeking current income by investing
in U.S. government securities; and
Municipal Securities Income Fund--a portfolio seeking a high level of
current income exempt from federal regular income tax by investing in
municipal bonds.
FORTRESS INVESTMENT PROGRAM
The Fund is a member of a family of funds, collectively known as the Fortress
Investment Program. The other funds in the Program are:
California Municipal Income Fund (Fortress Shares only), providing current
income exempt from federal regular income tax, California personal property
tax and income taxes;
Fortress Adjustable Rate U.S. Government Fund, Inc., providing current
income consistent with lower volatility of principal through a diversified
portfolio of adjustable and floating rate mortgage securities which are
issued or guaranteed by the U.S. government, its agencies or
instrumentalities;
Fortress Bond Fund, providing current income primarily through high quality
corporate debt instruments;
Fortress Municipal Income Fund, Inc., providing a high level of current
income generally exempt from the federal regular income tax by investing
primarily in a diversified portfolio of municipal bonds;
Fortress Utility Fund, Inc., providing high current income and moderate
capital appreciation primarily through equity and debt securities of
utility companies;
Government Income Securities, Inc., providing current income through
long-term U.S. government securities;
Limited Term Fund (Fortress Shares only), providing a high level of current
income consistent with minimum fluctuation in principal value;
Limited Term Municipal Fund (Fortress Shares only), providing a high level
of current income which is exempt from federal regular income tax
consistent with the preservation of capital;
New York Municipal Income Fund (Fortress Shares only), providing current
income exempt from federal regular income tax, New York personal property
tax and income taxes; and
Ohio Municipal Income Fund (Fortress Shares only), providing current income
exempt from federal regular income tax, Ohio personal property and income
taxes.
Each of the funds may also invest in certain other types of securities as
described in each fund's prospectus. PROSPECTUSES FOR THESE FUNDS ARE AVAILABLE
BY WRITING TO FEDERATED SECURITIES CORP.
INVESTMENT INFORMATION
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INVESTMENT OBJECTIVE
The investment objective of the Fund is current income consistent with stability
of principal. The Fund pursues its investment objective by investing in a
portfolio of money market instruments maturing in 397 days or less. The
investment objective cannot be changed without shareholder approval. While there
is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the investment policies described in this
prospectus.
INVESTMENT POLICIES
ACCEPTABLE INVESTMENTS. The Fund invests in high quality money market
instruments that are either rated in one of the two highest short-term rating
categories by one or more nationally recognized statistical rating organizations
("NRSRO's") or of comparable quality to securities having such ratings. Examples
of these instruments include, but are not limited to:
domestic issues of corporate debt obligations, including variable rate
demand notes;
commercial paper (including Canadian Commercial Paper and Europaper);
certificates of deposit, demand and time deposits, bankers' acceptances,
and other instruments of domestic and foreign banks and other deposit
institutions ("Bank Instruments");
short-term credit facilities, such as demand notes;
asset-backed securities;
obligations issued or guaranteed as to payment of principal and interest
by the U.S. government or one of its agencies or instrumentalities
("Government Securities"); and
other money market instruments.
The Fund invests only in instruments denominated and payable in U.S. dollars.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term
corporate debt instruments that have variable or floating interest rates
and provide the Fund with the right to tender the security for repurchase
at its stated principal amount, plus accrued interest. Such securities
typically bear interest at a rate that is intended to cause the securities
to trade at par. The interest rate may float or be adjusted at regular
intervals (ranging from daily to annually), and is normally based on a
published interest rate or interest rate index. Most variable rate demand
notes allow the Fund to demand the repurchase of the security on not more
than seven days' prior notice. Other notes only permit the Fund to tender
the security at the time of each interest rate adjustment or at other fixed
intervals. (See "Demand Features.") The Fund treats variable rate demand
notes as maturing on the later of the date of the next interest adjustment
or the date on which the Fund may next tender the security for repurchase.
BANK INSTRUMENTS. The Fund only invests in Bank Instruments either issued
by an institution having capital, surplus, and undivided profits over $100
million or insured by the Bank Insurance Fund ("BIF") or the Savings
Association Insurance Fund ("SAIF"). Bank Instruments may include
Eurodollar Certificates of Deposit ("ECD's"), Yankee Certificates of
Deposit ("Yankee CD's") and Eurodollar Time Deposits ("ETD's"). The Fund
will treat securities credit-enhanced with a bank's letter of credit as
Bank Instruments.
SHORT-TERM CREDIT FACILITIES. Demand notes are short-term borrowing
arrangements between a corporation and an institutional lender (such as the
Fund) payable upon demand by either party. The notice period for demand
typically ranges from one to seven days, and the party may demand full or
partial payment. The Fund may also enter into, or acquire participations
in, short-term revolving credit facilities with corporate borrowers. Demand
notes and other short-term credit arrangements usually provide for floating
or variable rates of interest.
ASSET-BACKED SECURITIES. Asset-backed securities are securities issued by
special purpose entities whose primary assets consist of a pool of loans or
accounts receivable. The securities may take the form of beneficial
interest in a special purpose trust, limited partnership interests, or
commercial paper or other debt securities issued by a special purpose
corporation. Although the securities often have some form of credit or
liquidity enhancement, payments on the securities depend predominately upon
collections of the loans and receivables held by the issuer.
AVERAGE MATURITY. The average maturity of money market instruments in the
Fund's portfolio, computed on a dollar-weighted basis, will be 90 days or less.
BANKS AND SAVINGS AND LOANS. The Fund invests only in instruments of banks and
savings and loans 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
Federal Deposit Insurance Corporation.
RATINGS. An NRSRO's two highest rating categories are determined without regard
for sub-categories and gradations. For example, securities rated A-1+, A-1, or
A-2 by Standard & Poor's Corporation ("S&P"), Prime-1 or Prime-2 by Moody's
Investors Service, Inc. ("Moody's"), or F-1 (+ or -) or F-2 (+ OR - ) BY FITCH
INVESTORS SERVICE, INC. ("FITCH") ARE ALL CONSIDERED RATED IN ONE OF THE TWO
HIGHEST SHORT-TERM RATING CATEGORIES. THE FUND WILL LIMIT ITS INVESTMENTS IN
SECURITIES RATED IN THE SECOND HIGHEST SHORT-TERM RATING CATEGORY (e.g., A-2 by
S&P, Prime-2 by Moody's, or F-2 (Kor -) by Fitch) to not more than 5% of its
total assets, with not more than 1% invested in the securities of any one
issuer. The Fund will follow applicable regulations in determining whether a
security rated by more than one NRSRO can be treated as being in one of the two
highest short-term rating categories; currently, such securities must be rated
by two NRSRO's in one of their two highest rating categories. (See "Regulatory
Compliance.")
REPURCHASE AGREEMENTS. The acceptable investments in which the Fund invests may
be purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell U.S. government securities or certificates of deposit to the
Fund 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 Fund 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 Fund, the
Fund 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 Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are found by the Fund's adviser to
be creditworthy pursuant to guidelines established by the Board of Directors
("Directors").
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may have been
credit-enhanced by a guaranty, letter of credit, or insurance. The Fund
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 Fund
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 Fund 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 Fund 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 Fund. 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 Fund uses these arrangements to provide the Fund with liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of the demand
feature, or a default on the underlying security or other event that terminates
the demand feature before its exercise, will adversely affect the liquidity of
the underlying security. Demand features that are exercisable even after a
payment default on the underlying security may be treated as a form of credit
enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase short-term
U.S. government securities on a when-issued or delayed delivery basis. These
transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The Fund engages in
when-issued and delayed delivery transactions only for the purpose of acquiring
portfolio securities consistent with the Fund's investment objective and
policies, not for investment leverage. In when-issued and delayed delivery
transactions, the Fund relies on the seller to complete the transaction. The
seller's failure to complete the transaction may cause the Fund to miss a price
or yield considered to be advantageous.
RESTRICTED AND ILLIQUID SECURITIES. The Fund intends to invest in restricted
securities. Restricted securities are any securities in which the Fund may
invest pursuant to its investment objective and policies but which are subject
to restrictions on resale under federal securities law. However, the Fund will
limit investments in illiquid securities, including restricted securities
determined by the Directors not to be liquid, non-negotiable time deposits and
repurchase agreements providing for settlement in more than seven days after
notice, to 10% of its net assets.
The Fund may invest in commercial paper issued in reliance on the exemption from
registration afforded by Section 4(2) of the Securities Act of 1933. Section
4(2) commercial paper is restricted as to disposition under federal securities
law, and is generally sold to institutional investors, such as the Fund, who
agree that they are purchasing the paper for investment purposes and not with a
view to public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) commercial paper is normally resold to other
institutional investors like the Fund through or with the assistance of the
issuer or investment dealers who make a market in Section 4(2) commercial paper,
thus providing liquidity. The Fund believes that Section 4(2) commercial paper
and possibly certain other restricted securities which meet the criteria for
liquidity established by the Directors are quite liquid. The Fund intends,
therefore, to treat the restricted securities which meet the criteria for
liquidity established by the Directors, including Section 4(2) commercial paper,
as determined by the Fund's investment adviser, as liquid and not subject to the
investment limitations applicable to illiquid securities. In addition, because
Section 4(2) commercial paper is liquid, the Fund intends not to subject such
paper to the limitation applicable to restricted securities.
INVESTMENT RISKS
The instruments of domestic and foreign banks and savings and loans in which the
Fund may invest include ECD's, Yankee CD's, and ETD's. The commercial paper in
which the Fund may invest includes Euro-commercial paper.
ECD's, ETD's, Yankee CD's, and Euro-commercial paper 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 ECD's, ETD's, and Yankee CD's 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 Fund's adviser in selecting
investments for the Fund.
INVESTMENT LIMITATIONS
The following investment limitations cannot be changed without shareholder
approval.
The Fund will not:
borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund 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 Fund
may borrow up to one-third of the value of its total assets and pledge up
to 10% of the value of those assets to secure such borrowings;
invest more than 5% of its total assets in securities of one issuer
(except cash and cash items and U. S. government obligations);
with respect to 75% of its assets, purchase securities (other than
repurchase agreements) issued by any one banking institution having a
value of more than 5% of the value of its total assets;
invest more than 10% of its net assets in securities subject to
restrictions on resale under federal securities law (except for
commerical paper issued under Section 4(2) of the Securities Act of
1933); or
act as underwriter of securities issued by others, 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 Fund may
purchase pursuant to its investment objective, policies, and limitations.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in this
prospectus and its Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940, as amended. In particular, the Fund
will comply with the various requirements of Rule 2a-7, which regulates money
market mutual funds. For example,
with limited exceptions, Rule 2a-7 prohibits the investment of more than 5% of
the Fund's total assets in the securities of any one issuer, although the Fund's
investment limitation only requires such 5% diversification with respect to 75%
of its assets. The Fund will invest more than 5% of its assets in any one issuer
only under the circumstances permitted by Rule 2a-7. The Fund 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
NRSRO's, according to Rule 2a-7. The Fund may change these operational policies
to reflect changes in the laws and regulations without the approval of its
shareholders.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund 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 Fund, of
course, cannot guarantee that its net asset value will always remain at $1.00
per share.
INVESTING IN THE FUND
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SHARE PURCHASES
Fund shares are sold on days on which the New York Stock Exchange is open.
Shares of the Fund may be purchased through an investment dealer who has a sales
agreement with the distributor or from the distributor, Federated Securities
Corp., by mail, wire, invest-by-phone, direct deposit, or by a systematic
investment program. In connection with the sale of Fund shares, Federated
Securities Corp. may from time to time offer certain items of nominal value to
any shareholder or investor. The Fund reserves the right to reject any purchase
request.
THROUGH A FINANCIAL INSTITUTION. An investor may call his financial institution
(such as a bank or an investment dealer) to place an order to purchase shares of
the Fund. Orders through a financial institution are considered received when
the Fund receives payment by wire or converts payment by check from the
financial institution into federal funds. It is the financial institution's
responsibility to transmit orders promptly.
BY MAIL. To purchase shares of the Fund by mail:
complete and sign an application available from the Fund;
enclose a check made payable to Money Market Management, Inc.; and
send both to the Fund's transfer agent, Federated Services Company, c/o
State Street Bank and Trust Company, P.O. Box 8606, Boston, MA
02266-8606.
Orders by mail are considered received after payment by check is converted by
State Street Bank and Trust Company ("State Street Bank") into federal funds.
This is generally the next business day after State Street Bank receives the
check.
BY WIRE. To purchase shares of the Fund by wire, call the Fund. All information
needed will be taken over the telephone, and the order is considered received
when State Street Bank receives payment by
wire. Shares cannot be purchased by wire on days on which the New York Stock
Exchange is closed and federal holidays restricting wire transfers.
BY INVEST-BY-PHONE. Once an account has been opened, a shareholder may use
invest-by-phone for investments if an authorization form has been filed with
Federated Services Company, the transfer agent for shares of the Fund.
Approximately two weeks after sending the form to the transfer agent, the
shareholder may call the transfer agent to purchase shares. The transfer agent
will send a request for monies to the shareholder's commercial bank, savings
bank, or credit union ("bank") via the Automated Clearing House ("ACH"). The
shareholder's bank, which must be an ACH member, will then forward the monies to
the transfer agent. The purchase is normally entered the next business day after
the initial phone request. For further information and an application, call the
Fund. Invest-by-phone may also be used to redeem shares. (See "Redeeming
Shares.")
BY DIRECT DEPOSIT. Shareholders of the Fund may have their Social Security,
Railroad Retirement, VA Compensation or Pension, Civil Service Retirement, and
certain other retirement payments invested directly into their Fund account.
Shareholders must complete an application and file it with the transfer agent
prior to use of this program. Investment of such payments into the Fund occurs
60 to 90 days after an application is submitted.
BY A SYSTEMATIC INVESTMENT PROGRAM. Once a Fund account has been established,
shareholders may apply for this service. Investments are regularly transferred
to the Fund from any commercial bank, savings bank, or credit union that is an
ACH member. For further information and an application, call the Fund.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $500, except for retirement plans,
in which case the initial minimum investment is $50. Subsequent investments must
be in amounts of at least $100, except for retirement plans, which must be in
amounts of at least $50.
WHAT SHARES COST
Fund shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund.
The net asset value is determined at 12:00 noon (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 Fund'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, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
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. Dividends are automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested by writing to the Fund. Shares purchased by wire before
12:00 noon (Eastern time) begin earning dividends that day. Shares purchased by
check generally begin earning dividends on the day after the check is converted,
upon instruction of the transfer agent, into federal funds.
CAPITAL GAINS
Capital gains, if any, could result in an increase in dividends. Capital losses,
if any, could result in a decrease in dividends. If, for some extraordinary
reason, the Fund realizes net long-term capital gains, it will distribute them
at least once every 12 months.
RETIREMENT PLANS
Shares of the Fund can be purchased as an investment for their retirement plans
or for their IRA accounts. For further details, including prototype retirement
plans, contact the Fund and consult a tax adviser.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
An exercise of the exchange privilege is treated as a sale for federal income
tax purposes. Depending on the circumstances, a short-term or long-term capital
gain or loss may be realized. A shareholder may obtain further information on
the exchange privilege by calling Federated Securities Corp. This privilege is
available to shareholders resident in any state in which the Fund shares being
acquired may be sold.
EXCHANGES IN THE FORTRESS INVESTMENT PROGRAM
Shares in other funds in the Fortress Investment Program may be exchanged for
Fund shares at net asset value. Fund shares may also be exchanged for shares in
other funds in the Fortress Investment Program at net asset value plus a 1%
sales charge, if applicable and not previously paid.
Shareholders using this privilege must exchange shares having a net asset value
of at least $1,500.
EXCHANGES IN THE INVESTMENT FAMILY OF FUNDS
Shares in other funds in the Investment Family of Funds may be exchanged for
Fund shares at net asset value plus a sales charge of up to 5.75%, if applicable
and not previously paid. Fund shares may also be exchanged at net asset value
for shares in other funds in the Investment Family of Funds, except that this
exchange privilege does not apply to Fund shares that would be subject to a
contingent deferred sales charge in the event the shares were redeemed. (See
"Contingent Deferred Sales Charge.")
Shareholders using this privilege must exchange shares having a net asset value
of at least $500.
EXCHANGE-BY-TELEPHONE
Exchange instructions by telephone may be given by the shareholder or investment
dealer if a telephone authorization form is on file with Federated Services
Company. Shares may be exchanged by
telephone only between fund accounts having identical shareholder registrations.
Exchange instructions given by telephone may be electronically recorded. If
reasonable procedures are not followed by the Fund, it may be liable for losses
due to unauthorized or fraudulent telephone instructions.
Any shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Services Company and deposited to the shareholder's
account before being exchanged. Telephone exchange instructions will be
processed as of 4:00 p.m. (Eastern time) and must be received by Federated
Services Company before that time for shares to be exchanged the same day.
Shareholders who exchange into the Fund will not receive a dividend from the
Fund on the date of the exchange. This privilege may be modified or terminated
at any time.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at their net asset value next determined after State
Street Bank receives the redemption request. Redemptions will be made on days on
which the Fund computes its net asset value. Redemption requests must be
received in proper form and can be made:
through a financial institution;
by telephone;
by a systematic withdrawal program;
by writing a check; or
by written request.
A contingent deferred sales charge may apply if the Fund shares being redeemed
were acquired in exchange for shares of another fund in the Fortress Investment
Program. (See "Contingent Deferred Sales Charge").
Shareholders investing through a retirement plan should be aware that a
redemption of shares may constitute a distribution under the retirement plan
subjecting the shareholder to federal income tax consequences. Such shareholders
should consult their tax adviser.
THROUGH A FINANCIAL INSTITUTION
A shareholder may redeem shares of the Fund by calling his financial institution
(such as a bank or an investment dealer) to request the redemption. Shares will
be redeemed at the net asset value next determined after the Fund receives the
redemption request from the financial institution. The financial institution is
responsible for promptly submitting redemption requests and providing proper
written instructions to the Fund. The financial institution may charge customary
fees and commissions for this service.
Shareholders investing through a financial institution may not be able to
utilize other methods of redemption.
BY TELEPHONE
Shareholders who have not purchased through a financial institution may redeem
their shares by telephoning the Fund. The proceeds will be mailed to the
shareholder's address of record or wire- transferred to the shareholder's
account at a domestic commercial bank that is a member of the Federal Reserve
System, normally within one business day, but in no event longer than seven
days, after the request. The minimum amount for a wire-transfer is $1,000. If at
any time the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders would be promptly notified.
An authorization form permitting State Street Bank to accept telephone requests
must first be completed. Authorization forms and information on this service are
available from Federated Securities Corp. Telephone redemption instructions may
be recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
In addition, a shareholder who has chosen the invest-by-phone service may redeem
shares with a net asset value of at least $1,000 and have the proceeds
transmitted electronically to a commercial bank that is an ACH member generally
by the second business day after the redemption request. (See "Investing in the
Fund.")
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as "By Mail," should be considered.
BY A SYSTEMATIC WITHDRAWAL PROGRAM
If a shareholder's account has a value of at least $10,000, a systematic
withdrawal program may be established whereby automatic redemptions are made
from the account and transferred electronically to any commercial bank, savings
bank, or credit union that is an ACH member. Depending upon the amount of the
withdrawal payments, the redemption fee if applicable, and the amount of
dividends paid and capital gains distributions with respect to Fund shares,
redemptions may reduce, and eventually use up, the shareholder's investment in
the Fund. For this reason, payments under this program should not be considered
as yield or income on the shareholder's investment in the Fund. Application
forms and further information on this program are available from the Fund.
BY CHECK
At the shareholder's request, State Street Bank will establish a checking
account for redeeming Fund shares. For further information, contact a
representative of Federated Securities Corp.
USING THE CHECKING ACCOUNT. With a Fund 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 State Street Bank presents the check to
the Fund. A sufficient number of shares will be redeemed to cover the contingent
deferred sales charge, if applicable. 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.
BY MAIL
Fund shares may also be redeemed by sending a written request to State Street
Bank. The written request should include the shareholder's name, the Fund name,
the 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.
Shareholders should call the Fund for assistance in redeeming by mail.
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 Fund, 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 Federal Deposit Insurance Corporation
("FDIC");
a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
a savings bank or savings and loan association whose deposits are insured
by the SAIF, which is administered by the FDIC; or
any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund 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.
CONTINGENT DEFERRED SALES CHARGE
A contingent deferred sales charge will be imposed only in certain instances in
which the Fund shares being redeemed were acquired in exchange for shares of
another fund in the Fortress Investment Program. If Fund shares were acquired in
exchange for shares of another fund in the Fortress Investment Progam, a
redemption of those Fund shares within four years of the initial Fortress
Investment Program fund purchase will be subject to a contingent deferred sales
charge of 1% of the lesser of the purchase price of the shares acquired in the
initial Fortress Investment Program purchase or the net asset value of the Fund
shares acquired through the exchange. The contingent deferred sales charge will
not be imposed on Fund shares obtained in exchange for shares of another
Fortress Investment Program fund if such shares were acquired through: (i) the
reinvestment of dividends or distributions of long-term capital gains; or (ii)
the exchange of shares of Government Income Securities, Inc., that were
purchased during that fund's Charter Offering Period. In imposing the contingent
deferred sales charge, if any, redemptions of Fund shares are deemed to relate
first to shares of other Fortress Investment Program funds acquired through the
reinvestment of dividends and long-term capital gains, second to purchases of
shares occurring more than four years before the date of redemption, and finally
to purchases of such shares within the previous four years.
Also, the contingent deferred sales charge will not be imposed in connection
with redemptions by the Fund of accounts with low balances or when a redemption
results from a return under the following circumstances: (i) a total or partial
distribution from a qualified plan, other than an IRA, Keogh Plan, or a
custodial account, following retirement; (ii) a total or partial distribution
from an IRA, Keogh Plan, or a custodial account after the beneficial owner
attains age 59-1/2; or (iii) from the death or disability of
the beneficial owner. The exemption from the contingent deferred sales charge
for qualified plans, an IRA, Keogh Plan or a custodial account does not extend
to account transfers, rollovers, and other redemptions made for purposes of
reinvestment.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $500 due to shareholders
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.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS. The Fund is managed by a Board of Directors. The Directors
are responsible for managing the Fund's business affairs and for exercising all
the Fund's powers except those reserved for the shareholders. An Executive
Committee of the Board of Directors handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Advisers, the Fund's investment adviser (the "Adviser"), subject to direction by
the Directors. The Adviser continually conducts investment research and
supervision for the Fund and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the Fund.
ADVISORY FEES. The annual investment advisory fee is based on the Fund's
average daily net assets as shown on the chart below:
<TABLE>
<CAPTION>
ADVISORY FEE AS
AVERAGE DAILY % OF AVERAGE
NET ASSETS DAILY NET ASSETS
<S> <C>
First $500 million .50 of 1%
Second $500 million .475 of 1%
Third $500 million .45 of 1%
Fourth $500 million .425 of 1%
Over $2 billion .40 of 1%
</TABLE>
The Adviser has also undertaken to reimburse the Fund for operating
expenses in excess of limitations established by certain states.
ADVISER'S BACKGROUND. Federated Advisers, 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-averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the principal distributor for shares of the Fund.
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.
ADMINISTRATIVE ARRANGEMENTS. The distributor may select brokers and dealers to
provide distribution and administrative services. The distributor may also
select administrators (including depository institutions such as commercial
banks and savings and loan associations) to provide administrative services.
These administrative services include, but are not limited to, distributing
prospectuses and other information, providing accounting assistance, and
communicating or facilitating purchases and redemptions of Fund shares.
Brokers, dealers, and administrators will receive fees of up to .25 of 1% from
the distributor based upon shares owned by their clients or customers. The fees
are calculated as a percentage of the average aggregate net asset value of
shareholder accounts during the period for which the brokers, dealers, and
administrators provide services. Any fees paid for these services by the
distributor will be reimbursed by the Adviser.
The Glass-Steagall Act limits the ability of a depository institution (such as a
commercial bank or a savings and loan association) to become an underwriter or
distributor of securities. In the event the Glass-Steagall Act is deemed to
prohibit depository institutions from acting in the capacities described above
or should Congress relax current restrictions on depository institutions, the
Directors will consider appropriate changes in the administrative services.
State securities laws governing the ability of depository institutions acting as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, Inc., which is a
subsidiary of Federated Investors, provides the Fund with the administrative
personnel and services necessary to operate the Fund. Such services include
shareholder servicing and certain legal and accounting services. Federated
Administrative Services, Inc., provides these at approximate cost.
CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund. State Street London Limited
is custodian for all foreign instruments purchased by the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, is transfer agent for the shares of the Fund and
dividend disbursing agent for the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, Washington, D.C.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Deloitte &
Touche, Boston, Massachusetts.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Director elections and
other matters submitted to shareholders for vote. As a Maryland corporation,
Money Market Management, Inc. is not required to hold annual shareholder
meetings. Shareholder approval will be sought only for certain changes in Money
Market Management, Inc.'s operation and for the election of Directors under
certain circumstances.
Directors may be removed by the Directors or by shareholders at a special
meeting. A special meeting of the shareholders shall be called by the Directors
upon the written request of shareholders owning at least 10% of the outstanding
shares of Money Market Management, Inc.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund 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 Fund:
the Fund is subject to Pennsylvania corporate franchise tax; and
Fund shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.
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 Fund advertises its yield and effective yield.
The yield of the Fund represents the annualized rate of income earned on an
investment in the Fund 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 Fund 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 Fund 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 Fund may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
MONEY MARKET MANAGEMENT, INC.
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- --------------------------------------------------------------------------------- ---------------
CERTIFICATE OF DEPOSIT--4.6%
- ------------------------------------------------------------------------------------------------
BANKING--4.6%
---------------------------------------------------------------------------------
$ 5,000,000 American Express Centurion Bank, 3.37%, 1/27/94 $ 5,000,000
--------------------------------------------------------------------------------- ---------------
COMMERCIAL PAPER*--33.6%
- ------------------------------------------------------------------------------------------------
BANKING--8.7%
---------------------------------------------------------------------------------
3,000,000 Commerzbank U.S. Finance, Inc., 3.48%, 8/19/94 2,933,300
---------------------------------------------------------------------------------
4,500,000 PEMEX Capital, Inc. (Swiss Bank Corp. LOC), 3.35%-3.38%,
1/4/94-1/12/94 4,498,021
---------------------------------------------------------------------------------
1,000,000 Queensland Alumina Ltd. (Credit Suisse LOC), 3.32%, 1/28/94 997,525
---------------------------------------------------------------------------------
1,000,000 TNT Limited (Barclays Bank PLC LOC), 3.42%, 1/28/94 997,473
--------------------------------------------------------------------------------- ---------------
Total 9,426,319
--------------------------------------------------------------------------------- ---------------
ELECTRICAL EQUIPMENT--1.9%
---------------------------------------------------------------------------------
2,000,000 Whirlpool Financial Corp., 3.27%, 1/10/94 1,998,375
--------------------------------------------------------------------------------- ---------------
FINANCE--AUTOMOTIVE--4.6%
---------------------------------------------------------------------------------
5,000,000 New Center Asset Trust (Series A1+/P1), 3.27%-3.38%,
1/10/94-2/28/94 4,986,672
--------------------------------------------------------------------------------- ---------------
FINANCE--COMMERCIAL--2.8%
---------------------------------------------------------------------------------
2,000,000 General Electric Capital Corp., 3.23%, 3/15/94 1,987,103
---------------------------------------------------------------------------------
1,000,000 General Electric Capital Corp., 4.33%, 8/2/94 1,029,339
--------------------------------------------------------------------------------- ---------------
Total 3,016,442
--------------------------------------------------------------------------------- ---------------
FINANCE--RETAIL--1.8%
---------------------------------------------------------------------------------
2,000,000 Sears Credit Corp. B, 3.42%, 2/22/94 1,990,178
--------------------------------------------------------------------------------- ---------------
FUNDING CORPORATION--9.2%
---------------------------------------------------------------------------------
5,000,000 Beta Finance, Inc., 3.27%-3.40%, 1/5/94-2/7/94 4,985,785
---------------------------------------------------------------------------------
2,000,000 McKenna Triangle National Corp., 3.41%, 1/24/94 1,995,707
---------------------------------------------------------------------------------
$ 3,000,000 PREFCO, 3.37%, 2/1/94 $ 2,991,346
--------------------------------------------------------------------------------- ---------------
Total 9,972,838
--------------------------------------------------------------------------------- ---------------
INSURANCE--4.6%
---------------------------------------------------------------------------------
4,967,000 Prospect St. Sr. Loan Port. L.P. (Guaranteed by FSA), 3.28%-3.43%,
1/25/94-2/22/94 4,949,329
--------------------------------------------------------------------------------- ---------------
TOTAL COMMERCIAL PAPER 36,340,153
--------------------------------------------------------------------------------- ---------------
CORPORATE BONDS--NON-CONVERTIBLE--0.9%
- ------------------------------------------------------------------------------------------------
FINANCE--COMMERCIAL--0.9%
---------------------------------------------------------------------------------
1,000,000 IBM Credit Corp., 3.45%, 2/19/94 1,004,873
--------------------------------------------------------------------------------- ---------------
VARIABLE NOTES**--28.6%
- ------------------------------------------------------------------------------------------------
BANKING--25.8%
---------------------------------------------------------------------------------
1,875,000 Canton Township Equity Partners L.P. (Huntington National Bank LOC), 3.37%,
1/6/94 1,875,000
---------------------------------------------------------------------------------
5,000,000 Mercy Health Systems, Series 1990A (Morgan Guaranty Trust Co. LOC), 3.35%, 1/5/94 5,000,000
---------------------------------------------------------------------------------
1,420,000 North Center Properties (Huntington National Bank LOC), 3.37%,
1/6/94 1,420,000
---------------------------------------------------------------------------------
5,000,000 PHH/CFC Leasing (Societe Generale LOC), 3.35%, 1/5/94 5,000,000
---------------------------------------------------------------------------------
5,100,000 Poly Foam International Inc. (National City Bank LOC), 3.45%,
1/6/94 5,100,000
---------------------------------------------------------------------------------
4,550,000 Ramsey Real Estate Enterprises Ltd. (National City Bank, Kentucky LOC), 3.45%,
1/6/94 4,550,000
---------------------------------------------------------------------------------
5,000,000 SMM Trust 1993-A (Guaranteed by Morgan Guaranty Trust Co.), 3.23%, 3/18/94 (A) 5,000,000
--------------------------------------------------------------------------------- ---------------
Total 27,945,000
--------------------------------------------------------------------------------- ---------------
$ 3,000,000 Carco Auto Loan Master Trust Certificates, Series 1993-2, Class A-1, 3.43%,
1/15/94 $ 3,000,000
--------------------------------------------------------------------------------- ---------------
TOTAL VARIABLE NOTES 30,945,000
--------------------------------------------------------------------------------- ---------------
SHORT-TERM NOTES--29.6%
- ------------------------------------------------------------------------------------------------
AUTOMOTIVE--4.6%
---------------------------------------------------------------------------------
5,000,000 Ford Motor Credit Co., 4.13%-4.89%, 1/14/94-1/20/94 5,011,368
--------------------------------------------------------------------------------- ---------------
BANKING--4.2%
---------------------------------------------------------------------------------
2,500,000 ABC II (Bankers Trust Co. Put), 4.34%, 8/8/94 (A) 2,500,000
---------------------------------------------------------------------------------
2,000,000 AP Investment Co. (Bankers Trust Co. Put), 3.85%, 9/7/94 (A) 2,000,000
--------------------------------------------------------------------------------- ---------------
Total 4,500,000
--------------------------------------------------------------------------------- ---------------
FINANCE--AUTOMOTIVE--5.4%
---------------------------------------------------------------------------------
882,270 Capital Auto Receivables Asset Trust, 1993-2 Class A-1, 3.37%,
6/15/94 882,178
---------------------------------------------------------------------------------
5,000,000 GMAC Mortgage of PA (Guaranteed by GMAC), 3.37%, 1/3/94 5,000,000
--------------------------------------------------------------------------------- ---------------
Total 5,882,178
--------------------------------------------------------------------------------- ---------------
FINANCE--RETAIL--10.4%
---------------------------------------------------------------------------------
1,000,000 American Express Credit Corp., 1.62%, 8/1/94 1,028,338
---------------------------------------------------------------------------------
1,500,000 Associates Corporation of North America, 3.55%, 4/15/94 1,527,068
---------------------------------------------------------------------------------
1,000,000 Beneficial Corp., 5.49%, 3/15/94 1,013,007
---------------------------------------------------------------------------------
2,530,000 Household Finance Corp., 3.60%-3.62%, 2/1/94-3/15/94 2,547,096
---------------------------------------------------------------------------------
5,000,000 Security Pacific Corp., 8.90%-9.07%, 4/25/94-5/9/94 5,091,750
--------------------------------------------------------------------------------- ---------------
Total 11,207,259
--------------------------------------------------------------------------------- ---------------
GOVERNMENT AGENCY--MORTGAGE-BACKED SECURITIES--1.0%
---------------------------------------------------------------------------------
1,000,000 Tennesse Valley Authority, 8.75% Deb., (Series E), 3.82%,
10/1/94 1,079,111
--------------------------------------------------------------------------------- ---------------
TOBACCO--4.0%
---------------------------------------------------------------------------------
3,300,000 Philip Morris Cos., Inc., 3.59%-4.79%, 2/15/94 3,318,679
---------------------------------------------------------------------------------
$ 1,000,000 Philip Morris Cos., Inc., Sr. Note, 9.10%, 2/16/94 $ 1,006,867
--------------------------------------------------------------------------------- ---------------
Total 4,325,546
--------------------------------------------------------------------------------- ---------------
TOTAL SHORT-TERM NOTES 32,005,462
--------------------------------------------------------------------------------- ---------------
REPURCHASE AGREEMENT***--2.8%
- ------------------------------------------------------------------------------------------------
3,050,000 S.G. Warburg & Co., Inc., 3.20%, 1/3/94 (Note 1B) 3,050,000
--------------------------------------------------------------------------------- ---------------
TOTAL INVESTMENTS, AT AMORTIZED COST $ 108,345,488\
--------------------------------------------------------------------------------- ---------------
</TABLE>
\Also represents cost for federal tax purposes.
(a) Restricted securities--Investment in securities not registered under the
Securities Act of 1933. At the end of the period, the value of these
securities amounted to $9,500,000 or 8.8% of net assets (Note 1F).
* Each issue shows the rate of discount at the time of purchase for discount
issues, or the coupon for interest bearing issues.
** Current rate and next demand date shown.
*** The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in joint
accounts with other Federated funds.
The following abbreviations are used in this portfolio:
FSA--Financial Security Assurance
LOC--Letter of Credit
Note: The categories of investments are shown as a percentage of net assets
($108,309,400) at December 31, 1993.
(See Notes which are an integral part of the Financial Statements)
MONEY MARKET MANAGEMENT, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
- -------------------------------------------------------------------------------------------------
Investments in securities, at amortized cost and value (Note 1A) $ 108,345,488
- -------------------------------------------------------------------------------------------------
Cash 143,738
- -------------------------------------------------------------------------------------------------
Interest receivable 617,003
- -------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 181,767
- ------------------------------------------------------------------------------------------------- ---------------
Total assets 109,287,996
- -------------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------------------
Payable for Fund shares redeemed 876,367
- -------------------------------------------------------------------------------------------------
Dividends payable 13,196
- -------------------------------------------------------------------------------------------------
Accrued expenses 89,033
- ------------------------------------------------------------------------------------------------- ---------------
Total liabilities 978,596
- ------------------------------------------------------------------------------------------------- ---------------
NET ASSETS for 108,309,400 shares of capital stock outstanding $ 108,309,400
- ------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, Offering Price, and Redemption Price Per Share
($108,309,400 / 108,309,400 shares of capital stock outstanding) $1.00
- ------------------------------------------------------------------------------------------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MONEY MARKET MANAGEMENT, INC.
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Interest income (Note 1C) $ 3,761,914
- ---------------------------------------------------------------------------------------------------
EXPENSES:
- ------------------------------------------------------------------------------------
Investment advisory fee (Note 4) $ 566,814
- ------------------------------------------------------------------------------------
Directors' fees 12,456
- ------------------------------------------------------------------------------------
Administrative personnel and services (Note 4) 324,918
- ------------------------------------------------------------------------------------
Custodian, transfer and dividend disbursing agent fees and expenses 351,047
- ------------------------------------------------------------------------------------
Fund share registration costs 39,992
- ------------------------------------------------------------------------------------
Auditing fees 16,147
- ------------------------------------------------------------------------------------
Legal fees 12,007
- ------------------------------------------------------------------------------------
Printing and postage 25,572
- ------------------------------------------------------------------------------------
Taxes 38,669
- ------------------------------------------------------------------------------------
Insurance premiums 7,052
- ------------------------------------------------------------------------------------
Miscellaneous 8,639
- ------------------------------------------------------------------------------------ -------------
Total expenses 1,403,313
- ------------------------------------------------------------------------------------
Deduct--Waiver of investment advisory fee (Note 4) 79,605
- ------------------------------------------------------------------------------------ -------------
Net expenses 1,323,708
- --------------------------------------------------------------------------------------------------- -------------
Net investment income $ 2,438,206
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MONEY MARKET MANAGEMENT, INC.
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
<S> <C> <C>
----------------------------------
<CAPTION>
1993 1992
<S> <C> <C>
- ----------------------------------------------------------------------------- ---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------------------
Net investment income $ 2,438,206 $ 4,307,725
- ----------------------------------------------------------------------------- ---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2)--
- -----------------------------------------------------------------------------
Dividends to shareholders from net investment income (2,438,206) (4,307,725)
- ----------------------------------------------------------------------------- ---------------- ----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- -----------------------------------------------------------------------------
Proceeds from sales of shares 175,602,925 210,533,230
- -----------------------------------------------------------------------------
Net asset value of shares issued to shareholders
in payment of dividends declared 2,287,236 4,003,559
- -----------------------------------------------------------------------------
Cost of shares redeemed (197,291,489) (255,715,087)
- ----------------------------------------------------------------------------- ---------------- ----------------
Change in net assets from Fund share transactions (19,401,328) (41,178,298)
- ----------------------------------------------------------------------------- ---------------- ----------------
Change in net assets (19,401,328) (41,178,298)
- -----------------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------------
Beginning of period 127,710,728 168,889,026
- ----------------------------------------------------------------------------- ---------------- ----------------
End of period $ 108,309,400 $ 127,710,728
- ----------------------------------------------------------------------------- ---------------- ----------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MONEY MARKET MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. The following is a
summary of significant accounting policies consistently followed by the Fund in
the preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles.
A. VALUATION OF INVESTMENTS--The Board of Directors ("Directors") has
determined that the best method currently available for valuing portfolio
securities is amortized cost. The Fund's use of the amortized cost method
to value its portfolio securities is conditioned on its compliance with
Rule 2a-7 under the Investment Company Act of 1940.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund 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 Fund to monitor, on a daily basis, the market value of
the repurchase agreement's underlying securities to ensure the existence of
a proper level of collateral.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed
by the Fund's adviser to be creditworthy pursuant to guidelines established
by the Directors. Risks may arise from the potential inability of
counterparties to honor the terms of the repurchase agreement. Accordingly,
the Fund could receive less than the repurchase price on the sale of
collateral securities.
C. INCOME--Interest income is recorded on the accrual basis. Interest income
includes interest and discount earned (net of premium), including original
issue discount as required by the Internal Revenue Code, plus realized net
gains if any, on portfolio securities.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Internal Revenue Code, as amended, applicable to investment companies and
to distribute to shareholders each year all of its taxable income.
Accordingly, no provision for federal taxes is necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. To the extent the Fund
engages in such transactions, it will do so for the purpose of acquiring
portfolio securities consistent with its investment objective and policies
and not for the purpose of investment leverage. The Fund will record a
when-issued security and the related liability on the trade date. Until the
securities are received and paid for, the Fund will maintain 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. The Fund is permitted to invest in privately placed restricted securities.
These securities may be resold in transactions exempt from registration or
to the public if the securities are registered. Disposal of these
securities may involve time-consuming negotiations and expense, and prompt
sale at an acceptable price may be difficult. The Fund's policy, however,
is to only purchase restricted securities, if such securities mature within
a period such that they are acceptable investments under Rule 2A-7 of the
Investment Company Act of 1940. Additional information on each restricted
security held at December 31, 1993 is as follows:
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
SECURITY DATE COST
<S> <C> <C>
SMM Trust 1993-A 3/19/93 $ 5,000,000
- ---------------------------------------------------------------------------------
ABC II 8/10/93 2,500,000
- ---------------------------------------------------------------------------------
AP Investment Co. 9/14/93 2,000,000
- ---------------------------------------------------------------------------------
</TABLE>
G. OTHER--Investment transactions are accounted for on the date of the
transaction.
(2) DIVIDENDS
The Fund computes its net income daily and, immediately prior to the calculation
of its net asset value at the close of business, declares and records dividends
to shareholders of record at the time of the previous computation of the Fund's
net asset value. Payment of dividends is made monthly in cash or in additional
shares at the net asset value on the payable date.
(3) CAPITAL STOCK
At December 31, 1993, there were 50,000,000,000 shares of ($0.001) par value
capital stock authorized. Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
<S> <C> <C>
--------------------------------
<CAPTION>
1993 1992
<S> <C> <C>
- -------------------------------------------------------------------------------- --------------- ---------------
Shares outstanding, beginning of period 127,710,728 168,889,026
- --------------------------------------------------------------------------------
Shares sold 175,602,925 210,533,230
- --------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 2,287,236 4,003,559
- --------------------------------------------------------------------------------
Shares redeemed (197,291,489) (255,715,087)
- -------------------------------------------------------------------------------- --------------- ---------------
Shares outstanding, end of period 108,309,400 127,710,728
- -------------------------------------------------------------------------------- --------------- ---------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Federated Advisers ("Adviser") receives for its services an annual investment
advisory fee based on the average daily net assets of the Fund as follows: 0.5%
on the first $500 million, 0.475% on the next $500
million, 0.45% on the next $500 million, 0.425% on the next $500 million, and
0.4% thereafter. For the year ended December 31, 1993, the Fund's Adviser earned
a fee of $566,814 of which $79,605 was voluntarily waived.
During the year ended December 31, 1993, pursuant to Rule 17A-7 of the
Investment Company Act of 1940, the Fund engaged in purchase and sale
transactions with the other funds advised by the Adviser amounting to
$28,692,047 and $4,000,000, respectively. These purchases and sales were
transacted for cash consideration only, at independent current market prices and
without brokerage commission, fee or other remuneration.
Administrative personnel and services were provided at approximate cost by
Federated Administrative Services, Inc. Certain of the Officers and Directors of
the Fund are Officers and Directors of the above corporations.
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
Money Market Management, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Money Market Management, Inc. as of December
31, 1993, the related statement of operations for the year then ended, the
statement of changes in net assets for the years ended December 31, 1993 and
1992, and the financial highlights (see page 2 of the prospectus) for each of
the years in the ten-year period ended December 31, 1993. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
December 31, 1993 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Money Market
Management, Inc. as of December 31, 1993, the results of its operations, the
changes in its net assets, and its financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE
Boston, Massachusetts
February 4, 1994
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Money Market Management, Inc. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Distributor
Federated Securties Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Investment Adviser
Federated Advisers Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8606
Trust Company Boston, Massachusetts 02266-8606
- ---------------------------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- ---------------------------------------------------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche 125 Summer Street
Boston, Massachusetts 02110-1617
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
MONEY MARKET
MANAGEMENT, INC.
PROSPECTUS
A No-Load, Open-End, Diversified,
Management Investment Company
February 28, 1994
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
8012811A (2/94)
MONEY MARKET MANAGEMENT, INC.
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of Money Market Management, Inc. (the "Fund") dated
February 28, 1994. This Statement is not a prospectus itself. To
receive a copy of the prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated February 28, 1994
[LOGO] FEDERATED SECURITIES CORP.
----------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ---------------------------------------------------------------
Types of Investments 1
When-Issued and Delayed
Delivery Transactions 1
Reverse Repurchase Agreements 1
Investment Limitations 2
FUND MANAGEMENT 3
- ---------------------------------------------------------------
Officers and Directors 3
The Funds 5
Fund Ownership 5
INVESTMENT ADVISORY SERVICES 5
- ---------------------------------------------------------------
Adviser to the Fund 5
Advisory Fees 6
ADMINISTRATIVE SERVICES 6
- ---------------------------------------------------------------
BROKERAGE TRANSACTIONS 7
- ---------------------------------------------------------------
PURCHASING SHARES 7
- ---------------------------------------------------------------
Conversion to Federal Funds 7
DETERMINING NET ASSET VALUE 7
- ---------------------------------------------------------------
Use of the Amortized Cost Method 7
EXCHANGE PRIVILEGE 8
- ---------------------------------------------------------------
Requirements for Exchange 8
Making an Exchange 8
Telephone Instructions 8
REDEEMING SHARES 9
- ---------------------------------------------------------------
Redemption in Kind 9
TAX STATUS 9
- ---------------------------------------------------------------
The Fund's Tax Status 9
Shareholders' Tax Status 9
YIELD 9
- ---------------------------------------------------------------
EFFECTIVE YIELD 10
- ---------------------------------------------------------------
PERFORMANCE COMPARISONS 10
- ---------------------------------------------------------------
APPENDIX 11
- ---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund was organized as a Maryland corporation on October 30, 1973, and was
one of the first money market funds. The Fund was reorganized as a Massachusetts
business trust on June 29, 1982. On February 11, 1993, shareholders voted to
reorganize the Fund as a Maryland corportion.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is current income consistent with stability of
principal.
TYPES OF INVESTMENTS
The Fund invests in money market instruments which mature in 397 days or less
and which include, but are not limited to, instruments of foreign and domestic
banks and savings and loans, U.S. government obligations, repurchase agreements,
prime commercial paper (including Euro-commercial paper), and instruments
secured by such obligations.
The above investment objective and policies 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
Fund may invest in:
Eurodollar Certificates of Deposit issued by foreign branches of U.S. or
foreign banks;
Eurodollar Time Deposits, which are U.S. dollar-denominated deposits in
foreign branches of U.S. or foreign banks;
Canadian Time Deposits, which are U.S. dollar-denominated deposits
issued by branches of major Canadian banks located in the United States;
and
Yankee Certificates of Deposit, which are U.S. dollar-denominated
certificates of deposit issued by U.S. branches of foreign banks and
held in the United States.
U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Fund may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued or guaranteed by
U.S. government agencies or instrumentalities. These securities are
backed by:
the full faith and credit of the U.S. Treasury;
the issuer's right to borrow from the U.S. Treasury;
the discretionary authority of the U.S. government to purchase certain
obligations of agencies or
instrumentalities; or
the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
Federal Farm Credit Banks;
Federal Home Loan Banks;
Federal National Mortgage Association;
Student Loan Marketing Association; and
Federal Home Loan Mortgage Corporation.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. 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 Fund sufficient to make payment for the securities
to be purchased are segregated at the trade date. These assets are marked to
market daily and are maintained until the transaction is settled. The Fund may
engage in these transactions to an extent that would cause the segregation of an
amount up to 20% of the total value of its assets.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. This transaction is
similar to borrowing cash. In a reverse repurchase agreement the Fund 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
Fund 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 Fund 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 Fund will be
able to avoid selling portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These assets are marked to market daily and
are maintained until the transaction is settled.
INVESTMENT LIMITATIONS
The Fund will not change any of the investment limitations described below
without approval of shareholders.
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin.
BORROWING MONEY
The Fund 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 Fund 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 Fund 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
Fund may not purchase any portfolio instruments while any borrowings
(exclusive of reverse repurchase agreements) are outstanding.
PLEDGING SECURITIES
The Fund 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, COMMODITY CONTRACTS, OR REAL ESTATE
The Fund will not invest in commodities, commodity contracts, or real
estate, except that it may purchase money market instruments issued by
companies that invest in real estate or interests in real estate.
RESTRICTED SECURITIES
The Fund will not invest more than 10% of its net assets in securities
subject to restrictions on resale under federal securities law (except
for commercial paper issued under Section 4(2) of the Securities Act of
1933).
UNDERWRITING
The Fund will not act as underwriter of securities issued by others,
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
Fund may purchase pursuant to its investment objective, policies and
limitations.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except that it may purchase or
hold money market instruments permitted by its investment objective and
policies.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not invest in securities issued by any other investment
company.
ACQUIRING SECURITIES
The Fund will not invest in securities of a company for the purpose of
exercising control or management.
DIVERSIFICATION OF INVESTMENTS
The Fund will not invest more than 5% of the value of its assets in
securities of any one issuer, except cash or cash items and U.S.
government obligations.
With respect to 75% of the Fund's assets, the Fund will not purchase
securities, other than repurchase agreements, issued by any one banking
institution having a value of more than 5% of the value of the Fund's
total assets.
CONCENTRATION OF INVESTMENTS
The Fund 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.
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 Fund did not borrow money 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.
FUND MANAGEMENT
- --------------------------------------------------------------------------------
OFFICERS AND DIRECTORS
Officers and Directors are listed with their addresses, principal occupations,
and present positions, including any affiliation with Federated Advisers,
Federated Investors, Federated Services Company, Federated Securities Corp.,
Federated Administrative Services, Inc., and the Funds (as defined below).
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE FUND DURING PAST FIVE YEARS
<S> <C> <C>
John F. Donahue*\ Chairman and Chairman and Trustee, Federated Investors; Chairman and Trustee,
Federated Investors Tower Director Federated Advisers, Federated Management, and Federated Research;
Pittsburgh, PA Director, AEtna Life and Casualty Company; Chief Executive Officer and
Director, Trustee, or Managing General Partner of the Funds; formerly,
Director, The Standard Fire Insurance Company. Mr. Donahue is the father
of J. Christopher Donahue, President and Director of the Fund.
John T. Conroy, Jr. Director President, Investment Properties Corporation; Senior Vice President,
Wood/IPC Commercial John R. Wood and Associates, Inc., Realtors; President, Northgate
Department Village Development Corporation; General Partner or Trustee in private
John R. Wood and real estate ventures in Southwest Florida; Director, Trustee, or
Associates, Inc., Realtors Managing General Partner of the Funds; formerly, President, Naples
3255 Tamiami Trail North Property Management, Inc.
Naples, FL
William J. Copeland Director Director and Member of the Executive Committee, Michael Baker, Inc.;
One PNC Plaza-- Director, Trustee, or Managing General Partner of the Funds; formerly,
23rd Floor Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and
Pittsburgh, PA Director, Ryan Homes, Inc.
J. Christopher Donahue* President and President and Trustee, Federated Investors; Trustee, Federated Advisers,
Federated Investors Tower Director Federated Management, and Federated Research; President and Director,
Pittsburgh, PA Federated Administrative Services, Inc.; Trustee, Federated Services
Company; President or Vice President of the Funds; Director, Trustee, or
Managing General Partner of some of the Funds. Mr. Donahue is the son of
John F. Donahue, Chairman and Director of the Fund.
James E. Dowd Director Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
571 Hayward Mill Road Trustee, or Managing General Partner of the Funds; formerly, Director,
Concord, MA Blue Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D. 3471 Director Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
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.\ Director Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat'N Park
5916 Penn Mall Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Pittsburgh, PA Trustee, or Managing General Partner of the Funds; formerly, Counsel,
Horizon Financial, F.A., Western Region.
Peter E. Madden Director Consultant; State Representative, Commonwealth of Massachusetts;
225 Franklin Street Director, Trustee, or Managing General Partner of the Funds; formerly,
Boston, MA President, State Street Bank and Trust Company and State Street Boston
Corporation and Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer Director Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare, Inc.;
5916 Penn Mall Director, Eat'N Park Restaurants, Inc. Director, Trustee, or Managing
Pittsburgh, PA General Partner of the Funds; formerly, Vice Chairman, Horizon
Financial, F.A.
Wesley W. Posvar Director Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
1202 Cathedral of Endowment for International Peace, RAND Corporation, Online Computer
Learning Library Center, Inc.; and U.S. Space Foundation; Chairman, Czecho Slovak
University of Pittsburgh Management Center; Director, Trustee, or Managing General Partner of the
Pittsburgh, PA Funds; President Emeritus, University of Pittsburgh; formerly, Chairman,
National Advisory Council for Environmental Policy and Technology.
Marjorie P. Smuts Director Public relations/marketing consultant; Director, Trustee, or Managing
4905 Bayard Street General Partner of the Funds.
Pittsburgh, PA
Richard B. Fisher Vice President Executive Vice President and Trustee, Federated Investors; Chairman and
Federated Investors Tower Director, Federated Securities Corp.; President or Vice President of the
Pittsburgh, PA Funds; Director or Trustee of some of the Funds.
Edward C. Gonzales Vice President Vice President, Treasurer, and Trustee, Federated Investors; Vice
Federated Investors Tower and Treasurer President and Treasurer, Federated Advisers, Federated Management, and
Pittsburgh, PA Federated Research; Executive Vice President, Treasurer, and Director,
Federated Securities Corp.; Trustee, Federated Services Company;
Chairman, Treasurer, and Director, Federated Administrative Services,
Inc.; Trustee of some of the Funds; Vice President and Treasurer of the
Funds.
John W. McGonigle Vice President and Vice President, Secretary, General Counsel, and Trustee, Federated
Federated Investors Tower Secretary Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Pittsburgh, PA Federated Management, and Federated Research; Trustee, Federated
Services Company; Executive Vice President, Secretary, and Director,
Federated Administrative Services, Inc.; Director and Executive Vice
President, Federated Securities Corp.; Vice President and Secretary of
the Funds.
John A. Staley, IV Vice President Vice President and Trustee, Federated Investors; Executive Vice
Federated Investors Tower President, Federated Securities Corp.; President and Trustee, Federated
Pittsburgh, PA Advisers, Federated Management, and Federated Research; Vice President
of the Funds; Director, Trustee, or Managing General Partner of some of
the Funds; formerly, Vice President, The Standard Fire Insurance Com-
pany and President of its Federated Research Division.
</TABLE>
*This Director is deemed to be an "interested person" of the Fund as defined in
the Investment Company Act of 1940, as amended.
\Members of the Fund's Executive Committee. The Executive Committee of the Board
of Directors handles the responsibilities of the Board of Directors between
meetings of the Board.
THE FUNDS
"The Funds" and "Funds" mean the following investment companies: A.T. Ohio
Tax-Free Money Fund; American Leaders Fund, Inc.; Annuity Management Series;
Automated Cash Management Trust; Automated Government Money Trust; BankSouth
Select Funds; The Boulevard Funds; California Municipal Cash Trust; Cash Trust
Series Inc.; Cash Trust Series II; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; FT Series, Inc.; Federated ARMS Fund; Federated
Exchange Fund, Ltd.; Federated GNMA Trust; Federated Government Trust; Federated
Growth Trust; Federated High Yield Trust; Federated Income Securities Trust;
Federated Income Trust; Federated Index Trust; Federated Intermediate Government
Trust; Federated Master Trust; Federated Municipal Trust; Federated
Short-Intermediate Government Trust; Federated Short-Term U.S. Government Trust;
Federated Stock Trust; Federated Tax-Free Trust; Federated U.S. Government Bond
Fund; First Priority Funds; Fixed Income Securities, Inc.; Fortress Adjustable
Rate U.S. Government Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress
Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.; Government Income
Securities, Inc.; High Yield Cash Trust; Insight Institutional Series, Inc.;
Insurance Management Series; Intermediate Municipal Trust; Investment Series
Trust; Investment Series Funds, Inc.; Liberty Equity Income Fund, Inc.; Liberty
High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty
U.S. Government Money Market Trust; Liberty Term Trust Inc.-- 1999; Liberty
Utility Fund, Inc.; Liquid Cash Trust; 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; The
Planters Fund; Portage Funds; RIMCO Monument Funds; Signet Select Funds; The
Shawmut Funds; Star Funds; The Starburst Funds; The Starburst Funds II; Stock
and Bond Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; Trademark Funds; Trust for Financial Institutions; Trust for
Government Cash Reserves; Trust for Short-Term U.S. Government Securities; and
Trust for U.S. Treasury Obligations.
FUND OWNERSHIP
Officers and Directors own less than 1% of the Fund's outstanding shares.
As of February 4, 1994, no shareholders of record owned 5% or more of the
outstanding shares of the Fund.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is Federated Advisers. 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, his wife,
and his son, J. Christopher Donahue. John F. Donahue, Chairman and Director of
Federated Advisers, is Chairman and Trustee of Federated Investors and Chairman
and Director of the Fund. John A. Staley, IV, President and Trustee of Federated
Advisers, is Vice President and Trustee of Federated Investors, Executive Vice
President of Federated Securities Corp., and Vice President of the Fund. J.
Christopher Donahue, Trustee of Federated Advisers, is President and Trustee of
Federated Investors, President and Director of Federated Administrative
Services, Inc., and President and Director of the Fund. John W. McGonigle, Vice
President, Secretary, and Trustee of Federated Advisers, is Trustee, Vice
President, Secretary, and General Counsel of Federated Investors Trustee,
Federated Services Company, Director, Executive Vice President, and Secretary of
Federated Administrative Services, Inc., Director and Executive Vice President
of Federated Securities Corp., and Vice President and Secretary of the Fund.
The adviser shall not be liable to the Fund or any shareholder for any losses
that may be sustained in the purchase, holding, or sale of any security, or for
anything done or omitted by it, except acts or omissions involving willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
imposed upon it by its contract with the Fund.
ADVISORY FEES
For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus. During the fiscal years ended
December 31, 1993, 1992, and 1991, the Fund's adviser earned $566,814, $755,133,
and $923,412, respectively, of which $79,605, $0, and $0, respectively, were
voluntarily waived. All advisory fees were computed on the same basis as in the
new investment advisory contract described in the prospectus.
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 Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2.5% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1.5% per year
of the remaining average net assets, the adviser will reimburse the Fund
for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed these expense
limitations, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
ADMINISTRATIVE SERVICES
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Federated Administrative Services, Inc., a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund at approximate cost.
For the fiscal years ended December 31, 1993, 1992, and 1991, the Fund incurred
administrative service fees of $324,918, $307,106, and $293,539, respectively.
John A. Staley, IV, an officer of the Fund, and Dr. Henry J. Gailliot, an
officer of Federated Advisers, the adviser to the Fund, each hold approximately
15% and 20%, respectively, of the outstanding common stock and serve as
Directors of Commercial Data Services, Inc., a company which provides computer
processing services to Federated Administrative Services, Inc. For the fiscal
years ended December 31, 1993, 1992, and 1991, Federated Administrative
Services, Inc., paid $162,309, $184,862, and $196,783, respectively, for
services provided by Commercial Data Services, Inc.
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 Board of Directors.
The adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund 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 relation 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 Federated funds and other
accounts. To the extent that receipt of these services may supplant services for
which the adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses.
PURCHASING SHARES
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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 Fund is explained in the prospectus under "Investing in the Fund."
CONVERSION TO FEDERAL FUNDS
It is the Fund'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. This conversion must be made
before shares are purchased. State Street Bank and Trust 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 Fund attempts to stabilize the value of a share at $1.00. The days on which
net asset value is calculated by the Fund are described in the prospectus. Net
asset value will not be calculated on the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
USE OF THE AMORTIZED COST METHOD
The Board of Directors ("Directors") 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 Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with conditions in Rule 2a-7 (the "Rule") promulgated
by the Securities and Exchange Commission under the Investment Company Act of
1940. Under the Rule, the Directors 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 Fund's investment objective.
Under the Rule, the Fund is permitted to purchase instruments which are subject
to demand features or standby commitments. As defined by the Rule, a demand
feature entitles the Fund 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 Fund 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.
MONITORING PROCEDURES
The Directors' 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 Directors will decide
what, if any, steps should be taken if there is a difference of more than
0.5 of 1% between the two values. The Directors 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 Fund limit its investments to instruments
that, in the opinion of the Directors, present minimal credit risks and
have received the requisite rating from one or more nationally recognized
statistical rating organizations. If the instruments are not rated, the
Directors must determine that they are of comparable quality. The Rule
also requires the Fund 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 397 days can be
purchased by the Fund; however, the Fund's investment policy is more
restrictive in that no instrument will be held for longer than one year.
Should the disposition of a portfolio security result in a
dollar-weighted average portfolio maturity of more than 90 days, the Fund
will invest its available cash to reduce the average maturity to 90 days
or less as soon as possible.
The Fund may attempt to increase yield by trading portfolio securities to take
advantage of short-term market variations. This policy may, from time to time,
result in high portfolio turnover. Under the amortized cost method of valuation,
neither the amount of daily income nor the net asset value is affected by any
unrealized appreciation or depreciation of the portfolio.
In periods of declining interest rates, the indicated daily yield on shares of
the Fund computed by dividing the annualized daily income on the Fund'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
Fund 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.
EXCHANGE PRIVILEGE
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REQUIREMENTS FOR EXCHANGE
Shareholders using the exchange privilege must exchange shares having a net
asset value of at least $500 ($1,500 if the exchange involves a fund in the
Fortress Investment Program). Before the exchange, the shareholder must receive
a prospectus of the portfolio or fund for which the exchange is being made.
This privilege is available to shareholders resident in any state in which the
portfolio or fund shares being acquired may be sold. Upon receipt of proper
instructions and required supporting documents, shares submitted for exchange
are redeemed and the proceeds invested in shares of the other portfolio or fund.
Further information on the exchange privilege and prospectuses may be obtained
by calling the Fund.
MAKING AN EXCHANGE
Instructions for exchanges may be given in writing. Written instructions may
require a signature guarantee. Any exchanges may be subject to the fee described
in the prospectus.
TELEPHONE INSTRUCTIONS
Telephone instructions made by the investor may be carried out only if a
telephone authorization form completed by the investor is on file with Federated
Services Company. If the instructions are given by a broker, a telephone
authorization form completed by the broker must be on file with Federated
Services Company. Shares may be exchanged between two funds by telephone only if
the two funds have identical shareholder registrations.
Telephone exchange instructions may be recorded and will be binding upon the
shareholder. They will be processed
as of 4:00 p.m. (Eastern time) and must be received by Federated Services
Company before that time for shares to be exchanged that day.
REDEEMING SHARES
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The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Shares." Although State Street Bank 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
The Fund has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940 under which the Fund is obligated to redeem shares solely in cash up to
$250,000 or 1% of the Fund'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 Directors
determine that further cash payments will have a material adverse effect on
remaining shareholders or unless the Directors grant a shareholder request for
redemption in kind. In such case, the Fund will pay all or a portion of the
remainder of the redemption in portfolio instruments, valued in the same way as
the Fund determines net asset value. The portfolio instruments will be selected
in a manner that the Directors deem fair and equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.
Although the Fund 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 Fund'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
Directors determine to be fair and equitable.
TAX STATUS
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THE FUND'S TAX STATUS
The Fund 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 Fund 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 Fund is
eligible for the dividends received deduction or exclusion available to
corporations and individuals. These dividends and any short-term capital gains
are taxable as ordinary income.
YIELD
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The Fund's yield for the seven-day period ended December 31, 1993, was 2.25%.
The Fund calculates its yield daily, based upon the seven days ending on the day
of the calculation, called the "base period." This yield is computed by:
determining the net change in the value of a hypothetical account with a balance
of one share at the beginning of the base period, with the net change excluding
capital changes but including the value of any additional shares purchased with
dividends earned from the original one share and all dividends declared on the
original and any purchased shares;
dividing the net change in the account's value by the value of the account at
the beginning of the base period to determine the base period return; and
multiplying the base period return by (365/7).
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the Fund,
the performance will be reduced for those shareholders paying those fees.
EFFECTIVE YIELD
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The Fund's effective yield for the seven-day period ended December 31, 1993, was
2.28%.
The Fund'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
subtacting 1 from the result.
PERFORMANCE COMPARISONS
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The Fund'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 Fund expenses; and
the relative amount of Fund cash flow.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund'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 Fund 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 Fund will quote its Lipper ranking in the "money market
instruments funds" category in advertising and sales literature.
BANK RATE MONITOR National Index, Miami Beach, Florida, is a financial reporting
service which publishes weekly average rates of 50 leading bank and thrift
institution money market deposit accounts. The rates published in the index are
averages of the personal account rates offered on the Wednesday prior to the
date of publication by ten of the largest banks and thrifts in each of the five
largest Standard Metropolitan Statistical Areas. Account minimums range upward
from $2,500 in each institution, and compounding methods vary. If more than one
rate is offered, the lowest rate is used. Rates are subject to change at any
time specified by the institution.
Advertisements and other sales literature for the Fund may refer to total
return. Total return is the historic change in the value of an investment in the
Fund based on the monthly reinvestment of dividends over a specified period of
time.
APPENDIX
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STANDARD AND POOR'S CORPORATION CORPORATE BOND RATING DEFINITIONS
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's
Corporation. Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effect of changes in
circumstances and economic conditions than debt in higher rated categories.
MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATING DEFINITIONS
Aaa--Bonds which are rated AAA are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in AAA securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
STANDARD AND POOR'S CORPORATION COMMERICAL 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.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
MOODY'S INVESTORS SERVICE, INC., COMMERICAL PAPER RATING DEFINITIONS
P-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 earning coverage of fixed financial charges and high
internal cash generation.
--Well-established access to a range of financial markets and assured
sources of alternate liquidity.
P-2--Issuers rated PRIME-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
FITCH INVESTORS SERVICE, INC., SHORT-TERM DEBT RATING DEFINITIONS
F-1+--Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1--Very Strong Credit Quality. Issues assigned this rating reflect an
assurance for timely payment only slightly less in degree than issues rated
F-1+.
F-2--Good Credit Quality. Issues carrying this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as the
F-1+ and F-1 ratings.
FITCH INVESTORS SERVICE, INC., INVESTMENT GRADE BOND RATING DEFINITIONS
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA." Because bonds rated in the
"AAA" and "AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+."
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered strong, but
may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
8012811B (2/94)
