MONEY MARKET TRUST
PROSPECTUS
The shares of Money Market Trust (the "Trust") offered by this prospectus
represent interests in an open-end, diversified management investment company (a
mutual fund), investing in short-term money market securities to achieve
stability of principal and current income consistent with stability of
principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE TRUST
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE TRUST WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Trust. Keep this prospectus for future reference.
The Trust has also filed a Statement of Additional Information dated September
30, 1994 with the Securities and Exchange Commission. The information contained
in the Statement of Additional Information is incorporated by reference into
this prospectus. You may request a copy of the Statement of Additional
Information free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Trust, contact the Trust at the address
listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated September 30, 1994
TABLE OF CONTENTS
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SUMMARY OF TRUST EXPENSES 1
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FINANCIAL HIGHLIGHTS 2
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GENERAL INFORMATION 3
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INVESTMENT INFORMATION 3
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Investment Objective 3
Investment Policies 3
Investment Limitations 6
Regulatory Compliance 6
TRUST INFORMATION 6
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Management of the Trust 6
Distribution of Shares 7
Administration of the Trust 7
NET ASSET VALUE 8
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INVESTING IN THE TRUST 8
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Share Purchases 8
Minimum Investment Required 9
Subaccounting Services 9
Certificates and Confirmations 9
Dividends 10
Capital Gains 10
REDEEMING SHARES 10
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By Mail 10
Telephone Redemption 11
Accounts with Low Balances 11
SHAREHOLDER INFORMATION 11
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Voting Rights 11
Massachusetts Partnership Law 11
TAX INFORMATION 12
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Federal Income Tax 12
Pennsylvania Corporate and Personal
Property Taxes 12
PERFORMANCE INFORMATION 12
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FINANCIAL STATEMENTS 14
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INDEPENDENT AUDITORS' REPORT 23
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ADDRESSES 24
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SUMMARY OF TRUST EXPENSES
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<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)......................................................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)......................................................... None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds, as applicable).................................................................... None
Redemption Fees (as a percentage of amount redeemed, if applicable)........................... None
Exchange Fee.................................................................................. None
ANNUAL TRUST OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (1)............................................................. 0.25%
12b-1 Fee..................................................................................... None
Total Other Expenses.......................................................................... 0.21%
Shareholder Services Fee (2)................................................................ 0.05%
Total Trust Operating Expenses (3).................................................. 0.46%
</TABLE>
(1) The Management Fee has been reduced to reflect the waiver of a portion of
the Management Fee. The maximum Management Fee is 0.40%.
(2) The maximum Shareholder Services Fee is 0.25%.
(3) The Total Trust Operating Expenses in the table above are based on expenses
expected during the fiscal year ending July 31, 1995. The Total Trust
Operating Expenses were 0.46% for the fiscal year ended July 31, 1994, and
would have been 0.58% absent the waiver of a portion of the Management Fee.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE TRUST WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "TRUST INFORMATION." Wire-transferred redemptions of less than
$5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time
period............................................................... $5 $15 $26 $58
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
MONEY MARKET TRUST
FINANCIAL HIGHLIGHTS
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(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Independent Auditors' Report on page 23.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
- ----------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
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 0.03 0.03 0.04 0.07 0.08 0.09 0.07 0.06 0.07 0.09
- ----------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
LESS
DISTRIBUTIONS
- -----------------
Dividends to
shareholders
from net
investment
income (0.03) (0.03) (0.04) (0.07) (0.08) (0.09) (0.07) (0.06) (0.07) (0.09)
- ----------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE,
END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN* 3.18% 3.00% 4.49% 7.05% 8.43% 8.93% 6.94% 5.98% 7.42% 9.32%
- -----------------
RATIOS TO AVERAGE
NET ASSETS
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Expenses 0.46% 0.46% 0.46% 0.46% 0.46% 0.45% 0.45% 0.45% 0.45% 0.45%
- -----------------
Net investment
income 3.11% 2.98% 4.40% 6.88% 8.14% 8.58% 6.72% 5.80% 7.17% 8.92%
- -----------------
SUPPLEMENTAL DATA
- -----------------
Net assets, end
of period (000
omitted) $539,983 $712,577 $943,893 $956,538 $1,189,023 $1,649,683 $1,685,914 $1,747,618 $1,904,972 $1,948,005
- -----------------
</TABLE>
* Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
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The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated July 24, 1978. The Trust is designed for institutional investors
such as banks, fiduciaries, custodians of public funds, and similar
institutional investors as a convenient means of accumulating an interest in a
professionally managed, diversified portfolio investing in short-term money
market securities. A minimum initial investment of $25,000 over a 90-day period
is required.
The Trust attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
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INVESTMENT OBJECTIVE
The investment objective of the Trust is stability of principal and current
income consistent with stability of principal. This investment objective cannot
be changed without shareholder approval. While there is no assurance that the
Trust will achieve its investment objective, it endeavors to do so by following
the investment policies described in this prospectus. The investment policies
and limitations set forth below cannot be changed by the Board of Trustees
without shareholder approval.
INVESTMENT POLICIES
The Trust pursues its investment objective by investing in a portfolio of money
market securities maturing in one year or less. As a matter of operating policy,
which may be changed without shareholder approval, the Trust will limit the
average maturity of its portfolio to 90 days or less, in order to meet
regulatory requirements.
ACCEPTABLE INVESTMENTS. The Trust invests in high quality money market
instruments that are either rated in the highest short-term rating category by
one or more nationally recognized statistical rating organizations ("NRSROs") or
of comparable quality to securities having such ratings. Examples of these
instruments include, but are not limited to: The Trust may attempt to increase
yield by trading portfolio securities to take advantage of short-term market
variations.
domestic issues of corporate debt obligations, including variable rate
demand notes;
commercial paper;
certificates of deposit, demand and time deposits, bankers' acceptances
and other instruments of domestic banks and other deposit institutions
("Bank Instruments");
short-term credit facilities;
asset-backed securities;
obligations issued or guaranteed as to payment of principal and interest
by the U.S. Government or one of its agencies or instrumentalities
("Government Securities"); and
other money market instruments.
The Trust invests only in instruments denominated and payable in U.S. dollars.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Trust with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at
par. The interest rate may float or be adjusted at regular intervals
(ranging from daily to annually), and is normally based on a published
interest rate or interest rate index. Most variable rate demand notes allow
the Trust to demand the repurchase of the security on not more than seven
days prior notice. Other notes only permit the Trust to tender the security
at the time of each interest rate adjustment or at other fixed intervals.
See "Demand Features." The Trust treats variable rate demand notes as
maturing on the later of the date of the next interest rate adjustment or
the date on which the Trust may next tender the security for repurchase.
BANK INSTRUMENTS. The Trust only invests in Bank Instruments either issued
by an institution having capital, surplus and undivided profits over $100
million, or insured by the Bank Insurance Fund ("BIF") or the Savings
Association Insurance Fund ("SAIF"). The Trust will treat securities credit
enhanced with a bank's letter of credit as Bank Instruments.
ASSET-BACKED SECURITIES. Asset-backed securities are securities issued by
special purpose entities whose primary assets consist of a pool of loans or
accounts receivable. The securities may take the form of beneficial
interests in special purpose trusts, limited partnership interests, or
commercial paper or other debt securities issued by a special purpose
corporation. Although the securities often have some form of credit or
liquidity enhancement, payments on the securities depend predominantly upon
collections of the loans and receivables held by the issuer.
SHORT-TERM CREDIT FACILITIES. The Trust may enter into, or acquire
participations in, short-term borrowing arrangements with corporations,
consisting of either a short-term revolving credit facility or a master
note agreement payable upon demand. Under these arrangements, the borrower
may reborrow funds during the term of the facility. The Trust treats any
commitments to provide such advances as a standby commitment to purchase
the borrower's notes.
RATINGS. An NRSRO's highest rating category is determined without regard for
sub-categories and gradations. For example, securities rated A-1 or A-1+ by
Standard & Poor's Ratings Group ("S&P"),
Prime-1 by Moody's Investors Service, Inc. ("Moody's"), or F-1 (+ or -) by Fitch
Investors Service, Inc. ("Fitch") are all considered rated in the highest
short-term rating category. The Trust will follow applicable regulations in
determining whether a security rated by more than one NRSRO can be treated as
being in the highest short-term rating category; currently, such securities must
be rated by two NRSROs in their highest rating category. See "Regulatory
Compliance."
REPURCHASE AGREEMENTS. Certain securities in which the Trust invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, brokers/dealers, and other recognized financial
institutions sell U.S. government securities or certificates of deposit to the
Trust and agree at the time of sale to repurchase them at a mutually agreed upon
time and price within one year from the date of acquisition. To the extent that
the seller does not repurchase the securities from the Trust, the Trust could
receive less than the repurchase price on any sale of such securities.
CREDIT ENHANCEMENT. Certain of the Trust's acceptable investments may be credit
enhanced by a guaranty, letter of credit, or insurance. The Trust typically
evaluates the credit quality and ratings of credit enhanced securities based
upon the financial condition and ratings of the party providing the credit
enhancement (the "credit enhancer'), rather than the issuer. Generally, the
Trust will not treat credit enhanced securities as having been issued by the
credit enhancer for diversification purposes. However, under certain
circumstances applicable regulations may require the Trust to treat the
securities as having been issued by both the issuer and the credit enhancer. The
bankruptcy, receivership, or default of the credit enhancer will adversely
affect the quality and marketability of the underlying security.
DEMAND FEATURES. The Trust may acquire securities that are subject to puts and
standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period (usually
seven days) following a demand by the Trust. The demand feature may be issued by
the issuer of the underlying securities, a dealer in the securities, or by
another third party, and may not be transferred separately from the underlying
security. The Trust uses these arrangements to provide the Trust with liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of the demand
feature, or a default on the underlying security or other event that terminates
the demand feature before its exercise, will adversely affect the liquidity of
the underlying security. Demand features that are exercisable even after a
payment default on the underlying security may be treated as a form of credit
enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Trust may purchase U.S.
government securities on a when-issued or delayed delivery basis. These
transactions are arrangements in which the Trust purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause the Trust to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. Accordingly, the Trust may pay
more/less than the market value of the securities on the settlement date.
The Trust may dispose of a commitment prior to settlement if the adviser deems
it appropriate to do so. In addition, the Trust may enter into transactions to
sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Trust may realize short-term profits or losses upon the sale of such
commitments.
RESTRICTED AND ILLIQUID SECURITIES. The Trust may invest in restricted
securities. Restricted securities are any securities in which the Trust may
otherwise invest pursuant to its investment objective and policies but which are
subject to restrictions on resale under federal securities law. However, the
Trust will limit investments in illiquid securities, including restricted
securities (except for Section 4(2) commercial paper), non-negotiable time
deposits, and repurchase agreements providing for settlement in more than seven
days after notice, to 10% of its net assets.
The Trust may invest in commercial paper issued in reliance on the exemption
from registration afforded by Section 4(2) of the Securities Act of 1933.
Section 4(2) commercial paper is restricted as to disposition under federal
securities law, and is generally sold to institutional investors, such as the
Trust, who agree that they are purchasing the paper for investment purposes and
not with a view to
public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) commercial paper is normally resold to other
institutional investors like the Trust through or with the assistance of the
issuer or investment dealers who make a market in Section 4(2) commercial paper,
thus providing liquidity. The Trust believes that Section 4(2) commercial paper
is quite liquid. The Trust intends, therefore, to treat Section 4(2) commercial
paper as liquid and not subject to the investment limitation applicable to
illiquid securities. In addition, because Section 4(2) commercial paper is
liquid, the Trust intends to not subject such paper to the limitation applicable
to restricted securities.
INVESTMENT LIMITATIONS
The Trust will not borrow money or pledge securities except, under certain
circumstances, the Trust may borrow up to one-third of the value of its total
assets and pledge assets to secure such borrowings. This investment limitation
cannot be changed without shareholder approval.
REGULATORY COMPLIANCE
The Trust may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in this
prospectus and its Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940, as amended. In particular, the Trust
will comply with the various requirements of Rule 2a-7 which regulates money
market mutual funds. 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 Trust will invest more
than 5% of its assets in any one issuer only under the circumstances permitted
by Rule 2a-7. The Trust will also determine the effective maturity of its
investments, as well as its ability to consider a security as having received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The Trust
may change these operational policies to reflect changes in the laws and
regulations without the approval of its shareholders.
TRUST INFORMATION
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MANAGEMENT OF THE TRUST
Board of Trustees. The Trust is managed by a Board of Trustees. The Trustees are
responsible for managing the Trust's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Trust are made by Federated
Research, the Trust's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Trust and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee
equal to 0.40 of 1% of the Trust's average daily net assets. Under the
investment advisory contract, the adviser will waive the amount, limited to
the amount of the advisory fee, by which the Trust's aggregate
annual operating expenses, including its investment advisory fee but
excluding interest, taxes, brokerage commissions, expenses of registering
and qualifying the Trust and its shares under federal and state laws and
regulations, expenses of withholding taxes, and extraordinary expenses,
exceed 0.45 of 1% of its average daily net assets. This does not include
reimbursement to the Trust of any expenses incurred by shareholders who use
the transfer agent's subaccounting facilities. The adviser has also
undertaken to reimburse the Trust for operating expenses in excess of
limitations established by certain states.
ADVISER'S BACKGROUND. Federated Research, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Research and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for shares of the Trust.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
SHAREHOLDER SERVICES PLAN. The Trust has adopted a Shareholder Services Plan
under which it will pay Federated Shareholder Services, an affiliate of
Federated Investors, an amount not exceeding 0.25 of 1% of the average daily net
asset value of the Trust to provide personal services and/or maintenance of
shareholder accounts to the Trust and its shareholders. Federated Shareholder
Services may, from time to time and for such periods as it deems appropriate,
voluntarily reduce the amount stated above.
Federated Shareholder Services may elect to pay financial institutions fees
based upon shares owned by their clients or customers for services provided to
those clients and customers. The schedules of such fees and the basis upon which
such fees will be paid will be determined from time to time by Federated
Shareholder Services.
ADMINISTRATION OF THE TRUST
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and accounting services) necessary to operate the Trust. Federated
Administrative Services provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
Average aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may choose
voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, MA is custodian for the
securities and cash of the Trust.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, PA is transfer agent for the shares of, and dividend disbursing
agent for, the Trust.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, PA and Dickstein, Shapiro & Morin, L.L.P., Washington, D.C.
INDEPENDENT AUDITORS. The independent Auditors for the Trust are Deloitte &
Touche LLP,
Pittsburgh, PA.
NET ASSET VALUE
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The Trust attempts to stabilize the net asset value of its shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per share is determined by subtracting total liabilities from total assets
and dividing the remainder by the number of shares outstanding. The Trust cannot
guarantee that its net asset value will always remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 3:00 p.m., and 4:00 p.m.
(Eastern time) Monday through Friday except on: (i) days on which there are not
sufficient changes in the value of the Trust's portfolio securities that its net
asset value might be materially affected; (ii) days during which no shares are
tendered for redemption and no orders to purchase shares are received; or (iii)
the following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
INVESTING IN THE TRUST
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange and the Federal Reserve Wire System are open for business. Shares may
be purchased either by wire or mail. The Trust reserves the right to reject any
purchase request.
To make a purchase, open an account by calling Federated Securities Corp.
Information needed to establish the account will be taken by telephone.
BY WIRE. To purchase by Federal Reserve wire, call the Trust before 3:00 p.m.
(Eastern time) to place an order. The order is considered received immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern time) that
day. Federal funds should be wired as follows: Federated Services Company, c/o
State Street Bank and Trust Company, Boston, Massachusetts; Attention: EDGEWIRE;
For Credit to: Money Market Trust , Fund Number (this number can be found on the
account statement or by contacting the Trust); Group Number or Order Number;
Nominee or Institution Name; and ABA Number 011000028.
BY MAIL. To purchase by mail, send a check made payable to Money Market Trust
to: Federated Services Company, P.O. Box 8602, Boston, MA 02266-8602. Orders by
mail are considered received when payment by check is converted into federal
funds. This is normally the next business day after the check is received.
AUTOMATIC INVESTMENTS. Investors may establish accounts with their
financial institutions to have cash accumulations automatically invested in
the Trust. The investments may be made on predetermined dates or when the
investor's account reaches a certain level. Participating financial
institutions are responsible for prompt transmission of orders relating to
the program, and they may charge for their services. Investors should read
this prospectus along with the financial institution's agreement or
literature describing these services and fees.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment is $25,000. However, an account may be opened
with a smaller amount as long as the minimum is reached within 90 days. Minimum
investments will be calculated by combining all accounts maintained with the
Trust. Financial institutions may impose different minimum investment
requirements on their customers.
SUBACCOUNTING SERVICES
Financial institutions are encouraged to open single master accounts. However,
certain financial institutions may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent charges a fee based on the level of subaccounting services
rendered. Financial institutions may charge or pass through subaccounting fees
as part of or in addition to normal trust or agency account fees. They may also
charge fees for other services provided which may be related to the ownership of
Trust shares. This prospectus should, therefore, be read together with any
agreement between the customer and the financial institution with regard to the
services provided, the fees charged for those services and any restrictions and
limitations imposed.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Trust, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Trust or Federated Services Company in writing.
Monthly confirmations are sent to report transactions such as all purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are automatically
reinvested on payment dates in additional shares of the Trust unless cash
payments are requested by writing to the Trust. Shares purchased by wire before
3:00 p.m. (Eastern time) begin earning dividends that day. Shares purchased by
check begin earning dividends the day after the check is converted into federal
funds.
CAPITAL GAINS
The Trust does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Trust will distribute in cash or additional shares any realized
net long-term capital gains at least once every 12 months.
REDEEMING SHARES
- --------------------------------------------------------------------------------
Shares are redeemed at their net asset value next determined after the transfer
agent receives the redemption request. Redemptions will be made on days on which
the Trust computes its net asset value. Redemption requests must be received in
proper form and can be made as described below.
BY MAIL
Shares may be redeemed by sending a written request to: Money Market Trust, P.O.
Box 8602, Boston, MA 02266-8602. The written request should state: name of the
Trust; shareholder's name; the account number; and the share or dollar amount
requested. Sign the request exactly as the shares are registered. Shareholders
should call the Trust for assistance in redeeming by mail.
If share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request.
Shareholders requesting a redemption of $50,000 or more, a redemption of any
amount to be sent to an address other than that on record with the Trust, or a
redemption payable other than to the shareholder of record must have their
signatures guaranteed by:
a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund, which is administered by the Federal Deposit Insurance
Corporation ("FDIC");
a member firm of the New York, American, Boston, Midwest, or Pacific
Stock Exchanges;
a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund, which is administered by the
FDIC; or
any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Trust does not accept signatures guaranteed by a notary public.
The Fund and the 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 the
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request. Dividends are paid up to and including the day that a redemption
request is processed.
TELEPHONE REDEMPTION
Shares may be redeemed by telephoning the Trust. Telephone redemption
instructions may be recorded and if reasonable procedures are not followed by
the Trust, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. An authorization form permitting the Trust to accept
telephone requests must first be completed. Authorization forms and information
on this service are available from Federated Securities Corp.
If the redemption request is received before 3:00 p.m. (Eastern time), the
proceeds will be wired the same day to the shareholder's account at a domestic
commercial bank which is a member of the Federal Reserve System, and those
shares redeemed will not be entitled to that day's dividend. A daily dividend
will be paid on shares redeemed if the redemption request is received after 3:00
p.m. (Eastern time).
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as "By Mail", should be considered. If at any time
the Trust shall determine it necessary to terminate or modify this method of
redemption, shareholders would be promptly notified.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Trust may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $25,000 due to
shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Trust gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust's
operation and for election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the Trust shall be called by the Trustees upon the written
request of shareholders owning at least 10% of the Trust's outstanding shares.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents
with Massachusetts that expressly disclaim the liability of its shareholders for
acts or obligations of the Trust. These documents require notice of this
disclaimer to be given in each agreement, obligation, or instrument the Trust or
its Trustees enter into or sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for any act or
obligation of the Trust. Therefore, financial loss resulting from liability as a
shareholder will occur only if the Trust itself cannot meet its obligations to
indemnify shareholders and pay judgments against them.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Trust will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional shares.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Trust:
the Trust is not subject to Pennsylvania corporate or personal property
taxes; and
Trust shares may be subject to personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania to the
extent that the portfolio securities in the Trust would be subject to
such taxes if owned directly by residents of those jurisdictions.
OTHER STATE AND LOCAL TAXES. Shareholders are urged to consult their own tax
advisers regarding the status of their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Trust advertises its yield and effective yield.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment.
Advertisements and sales literature may also refer to total return. Total return
represents the change, over a specified period of time, in the value of an
investment in the Trust after reinvesting all income
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
From time to time, the Trust may advertise its performance using certain
reporting services and/or compare its performance to certain indices.
MONEY MARKET TRUST
PORTFOLIO OF INVESTMENTS
JULY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------- ---------------
*COMMERCIAL PAPER--44.8%
- ------------------------------------------------------------------------------------------------
DIVERSIFIED--1.5%
--------------------------------------------------------------------------------
$ 8,000,000 Rockwell International Corp., 4.061%, 9/13/94 $ 7,961,969
-------------------------------------------------------------------------------- ---------------
FINANCE-AUTOMOTIVE--5.2%
--------------------------------------------------------------------------------
13,600,000 Ford Credit Receivables Funding, Inc., 4.485%-4.563%,
8/25/94-9/14/94 13,538,234
--------------------------------------------------------------------------------
15,000,000 New Center Asset Trust, A1+/P1 Series, 4.739%-5.180%,
8/15/94-1/23/95 14,745,414
-------------------------------------------------------------------------------- ---------------
Total 28,283,648
-------------------------------------------------------------------------------- ---------------
FINANCE-COMMERCIAL--22.6%
--------------------------------------------------------------------------------
27,000,000 Asset Securitization Cooperative Corp., 4.457%-5.185%,
8/17/94-1/23/95 26,595,397
--------------------------------------------------------------------------------
11,700,000 CIESCO, Inc., 3.739%-4.062%, 8/24/94-9/15/94 11,659,607
--------------------------------------------------------------------------------
5,000,000 CIT Group Holdings, Inc., 4.915%, 12/14/94 4,910,000
--------------------------------------------------------------------------------
27,600,000 Corporate Asset Funding Co., Inc. (CAFCO), 3.687%-5.183%,
8/8/94-1/23/95 27,363,544
--------------------------------------------------------------------------------
25,000,000 Falcon Asset Securitization Corp., 4.573%-4.864%,
9/22/94-10/28/94 24,749,800
--------------------------------------------------------------------------------
27,000,000 General Electric Capital Corp., 3.276%-5.262%, 8/4/94-1/18/95 26,693,997
-------------------------------------------------------------------------------- ---------------
Total 121,972,345
-------------------------------------------------------------------------------- ---------------
FINANCE-RETAIL--2.7%
--------------------------------------------------------------------------------
15,000,000 Norwest Financial Corp., 4.509%-4.816%, 9/27/94-12/15/94 14,787,215
-------------------------------------------------------------------------------- ---------------
INSURANCE--11.9%
--------------------------------------------------------------------------------
4,000,000 AI Credit Corp., 4.105%, 9/26/94 3,974,987
--------------------------------------------------------------------------------
15,800,000 American General Corp., 4.221%, 8/1/94 15,800,000
--------------------------------------------------------------------------------
27,842,000 Prospect Street Senior Loan Portfolio, L.P. (Guaranteed by Financial Security
Assurance, Inc.), 3.914%-5.027%, 8/1/94-12/8/94 27,624,824
--------------------------------------------------------------------------------
</TABLE>
MONEY MARKET TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------- ---------------
*COMMERCIAL PAPER--CONTINUED
- ------------------------------------------------------------------------------------------------
INSURANCE--CONTINUED
--------------------------------------------------------------------------------
$ 17,000,000 Prudential Funding Corp., 4.135%-4.923%, 9/28/94-12/7/94 $ 16,861,658
-------------------------------------------------------------------------------- ---------------
Total 64,261,469
-------------------------------------------------------------------------------- ---------------
UTILITIES--0.9%
--------------------------------------------------------------------------------
5,000,000 Ameritech Corp., 4.816%, 12/8/94 4,915,792
-------------------------------------------------------------------------------- ---------------
TOTAL COMMERCIAL PAPER 242,182,438
-------------------------------------------------------------------------------- ---------------
SHORT-TERM NOTES--1.9%
- ------------------------------------------------------------------------------------------------
BANKING--1.9%
--------------------------------------------------------------------------------
10,000,000 AP Investment Co. (Bankers Trust Co. Put), 3.850%, 9/7/94 10,000,000
-------------------------------------------------------------------------------- ---------------
**VARIABLE RATE OBLIGATIONS--35.1%
- ------------------------------------------------------------------------------------------------
BANKING--16.3%
--------------------------------------------------------------------------------
7,300,000 Hunt Club Apartments., Inc., (Huntington National Bank, Columbus, OH LOC),
4.800%, 8/4/94 7,300,000
--------------------------------------------------------------------------------
22,205,000 Kenny, Donald R. and Cheryl A., (Huntington National Bank, Columbus, OH LOC),
4.800%, 8/4/94 22,205,000
--------------------------------------------------------------------------------
5,400,000 Melberger, Clifford K. and Ruth B., (PNC Bank, Northeast, PA LOC), 4.723%,
8/1/94 5,400,000
--------------------------------------------------------------------------------
8,300,000 Shamrock Communications, Inc., (PNC Bank, Northeast, PA LOC), 4.723%, 8/1/94 8,300,000
--------------------------------------------------------------------------------
30,000,000 SMM Trust, Series 1993-B, 4.862%, 8/12/94 30,000,000
--------------------------------------------------------------------------------
9,000,000 The Scranton Times, (PNC Bank, Northeast, PA LOC), 4.723%,
8/1/94 9,000,000
--------------------------------------------------------------------------------
5,990,000 Westminster Village Terre Haute, Inc., (Huntington National Bank, Columbus, OH
LOC), 4.800%, 8/4/94 5,990,000
-------------------------------------------------------------------------------- ---------------
Total 88,195,000
-------------------------------------------------------------------------------- ---------------
ELECTRICAL EQUIPMENT--5.4%
--------------------------------------------------------------------------------
23,951,719 Northwest Airlines, Inc., (Guaranteed by General Electric Co.), 4.742%, 8/1/94 23,951,719
--------------------------------------------------------------------------------
</TABLE>
MONEY MARKET TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------- ---------------
**VARIABLE RATE OBLIGATIONS--CONTINUED
- ------------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--CONTINUED
--------------------------------------------------------------------------------
$ 5,317,617 Marta Leasing, Ltd., (Guaranteed by General Electric Co.), 4.723%,
8/1/94 $ 5,317,617
-------------------------------------------------------------------------------- ---------------
Total 29,269,336
-------------------------------------------------------------------------------- ---------------
FINANCE-AUTOMOTIVE--8.7%
--------------------------------------------------------------------------------
25,000,000 Carco Auto Loan Master Trust, Series 1993-2, 4.655%, 8/15/94 25,000,000
--------------------------------------------------------------------------------
22,000,000 Money Market Auto Loan Trust, 4.735%, 8/15/94 22,000,000
-------------------------------------------------------------------------------- ---------------
Total 47,000,000
-------------------------------------------------------------------------------- ---------------
INSURANCE--4.7%
--------------------------------------------------------------------------------
25,000,000 Peoples Security Life Insurance, 4.580%, 8/1/94 25,000,000
-------------------------------------------------------------------------------- ---------------
TOTAL VARIABLE RATE OBLIGATIONS 189,464,336
-------------------------------------------------------------------------------- ---------------
***REPURCHASE AGREEMENTS--17.8%
- ------------------------------------------------------------------------------------------------
13,000,000 Bear, Stearns & Co., Inc., 4.220%, dated 7/29/94, due 8/1/94 13,000,000
--------------------------------------------------------------------------------
20,000,000 Chase Securities, Inc., 4.210%, dated 7/29/94, due 8/1/94 20,000,000
--------------------------------------------------------------------------------
11,080,000 Kidder, Peabody & Co., Inc., 4.220%, dated 7/29/94, due 8/1/94 11,080,000
--------------------------------------------------------------------------------
16,000,000 Lehman Government Securities, Inc., 4.200%, dated 7/29/94,
due 8/1/94 16,000,000
--------------------------------------------------------------------------------
10,000,000 PaineWebber Inc., 4.250%, dated 7/29/94, due 8/1/94 10,000,000
--------------------------------------------------------------------------------
</TABLE>
MONEY MARKET TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------- ---------------
***REPURCHASE AGREEMENTS--CONTINUED
- ------------------------------------------------------------------------------------------------
$ 26,000,000 Warburg Securities, 4.220%, dated 7/29/94, due 8/1/94 $ 26,000,000
-------------------------------------------------------------------------------- ---------------
TOTAL REPURCHASE AGREEMENTS (NOTE 2B) 96,080,000
-------------------------------------------------------------------------------- ---------------
TOTAL INVESTMENTS, AT AMORTIZED COST $ 537,726,774+
-------------------------------------------------------------------------------- ---------------
</TABLE>
+ Also represents cost for federal tax purposes.
* Each issue shows the rate of discount at the time of purchase for discount
issues, or the coupon for interest bearing issues.
** Current rate and next reset date shown.
*** The repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investments in the repurchase agreements are through participation in joint
accounts with other Federated Funds.
Note: The categories of investments are shown as a percentage of net assets
($539,983,305) at July 31, 1994.
The following abbreviation is used in this portfolio:
LOC--Letter of Credit
(See Notes which are an integral part of the Financial Statements)
MONEY MARKET TRUST
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------------------------------------------------------
Investments in repurchase agreements (Note 2B) $ 96,080,000
- -------------------------------------------------------------------------------
Investments in other securities (Note 2A) 441,646,774
- ------------------------------------------------------------------------------- ---------------
Total investments, at amortized cost and value $ 537,726,774
- ------------------------------------------------------------------------------------------------
Cash 3,176,113
- ------------------------------------------------------------------------------------------------
Interest receivable 1,156,759
- ------------------------------------------------------------------------------------------------
Receivable for Trust shares sold 2,281
- ------------------------------------------------------------------------------------------------ ---------------
Total assets 542,061,927
- ------------------------------------------------------------------------------------------------ ---------------
LIABILITIES:
- ------------------------------------------------------------------------------------------------
Dividends payable 1,570,558
- -------------------------------------------------------------------------------
Payable for Trust shares redeemed 378,817
- -------------------------------------------------------------------------------
Accrued expenses 129,247
- ------------------------------------------------------------------------------- ---------------
Total liabilities 2,078,622
- ------------------------------------------------------------------------------------------------ ---------------
NET ASSETS for 539,983,305 shares of beneficial interest outstanding $ 539,983,305
- ------------------------------------------------------------------------------------------------ ---------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds per Share
($539,983,305 / 539,983,305 shares of beneficial interest outstanding) $1.00
- ------------------------------------------------------------------------------------------------ ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MONEY MARKET TRUST
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------------------------------------
Interest income (Note 2C) $ 22,497,868
- --------------------------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------------------------------------
Investment advisory fee* $ 2,520,096
- -----------------------------------------------------------------------------------
Trustees' fees 15,658
- -----------------------------------------------------------------------------------
Administrative personnel and services* 488,553
- -----------------------------------------------------------------------------------
Custodian and portfolio accounting fees 291,833
- -----------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses* 39,505
- -----------------------------------------------------------------------------------
Shareholder services fee* 122,774
- -----------------------------------------------------------------------------------
Trust share registration costs 30,076
- -----------------------------------------------------------------------------------
Auditing fees 15,115
- -----------------------------------------------------------------------------------
Legal fees 15,087
- -----------------------------------------------------------------------------------
Printing and postage 8,437
- -----------------------------------------------------------------------------------
Insurance premiums 35,538
- -----------------------------------------------------------------------------------
Taxes 23,283
- -----------------------------------------------------------------------------------
Miscellaneous 9,153
- ----------------------------------------------------------------------------------- -------------
Total expenses 3,615,108
- -----------------------------------------------------------------------------------
Deduct--Waiver of investment advisory fee* (727,018)
- ----------------------------------------------------------------------------------- -------------
Net expenses 2,888,090
- -------------------------------------------------------------------------------------------------- --------------
Net investment income $ 19,609,778
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
* See Note 4.
(See Notes which are an integral part of the Financial Statements)
MONEY MARKET TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
1994 1993
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------------------
Net investment income $ 19,609,778 $ 24,834,637
- ------------------------------------------------------------------------- ------------------ ------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- -------------------------------------------------------------------------
Dividends to shareholders from net investment income (19,609,778) (24,834,637)
- ------------------------------------------------------------------------- ------------------ ------------------
TRUST SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- -------------------------------------------------------------------------
Proceeds from sale of shares 3,027,736,629 4,074,533,092
- -------------------------------------------------------------------------
Net asset value of shares issued to shareholders
in payment of dividends declared 3,874,627 4,717,881
- -------------------------------------------------------------------------
Cost of shares redeemed (3,204,204,720) (4,310,567,648)
- ------------------------------------------------------------------------- ------------------ ------------------
Change in net assets from Trust share transactions (172,593,464) (231,316,675)
- ------------------------------------------------------------------------- ------------------ ------------------
Change in net assets (172,593,464) (231,316,675)
- -------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------
Beginning of period 712,576,769 943,893,444
- ------------------------------------------------------------------------- ------------------ ------------------
End of period $ 539,983,305 $ 712,576,769
- ------------------------------------------------------------------------- ------------------ ------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MONEY MARKET TRUST
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
The Trust is registered under the Investment Company Act of 1940, as amended
(the "Act"), as a no-load, open-end, diversified, management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--The Trust's use of the amortized cost method to
value its portfolio securities is in accordance with Rule 2a-7 under the
Act.
B. REPURCHASE AGREEMENTS--It is the policy of the Trust to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Trust to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure that the value
at least equals the principal amount of the repurchase agreement, including
accrued interest.
The Trust will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Trust's adviser to be creditworthy pursuant to guidelines
established by the Board of Trustees (the "Trustees"). Risks may arise from
the potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Trust could receive less than the
repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
D. FEDERAL TAXES--It is the Trust's policy to comply with the provisions of
the Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Trust may engage in
when-issued or delayed delivery transactions. The Trust records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
MONEY MARKET TRUST
- --------------------------------------------------------------------------------
F. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At July
31, 1994, capital paid-in aggregated $539,983,305. Transactions in Trust shares
were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
1994 1993
<S> <C> <C>
- ------------------------------------------------------------------------- ----------------- -----------------
Shares sold 3,027,736,629 4,074,533,092
- -------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends
declared 3,874,627 4,717,881
- -------------------------------------------------------------------------
Shares redeemed (3,204,204,720) (4,310,567,648)
- ------------------------------------------------------------------------- ----------------- -----------------
Net change resulting from Trust Share transactions (172,593,464) (231,316,675)
- ------------------------------------------------------------------------- ----------------- -----------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Research, the Trust's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
0.40 of 1% of the Trust's average daily net assets. The Adviser will waive, to
the extent of its advisory fee, the amount, if any, by which the Trust's
aggregate annual operating expenses (excluding interest, taxes, brokerage
commissions, expenses of registering and qualifying the Trust and its shares
under federal and state law, expenses of withholding taxes, and extraordinary
expenses) exceed, 0.45 of 1% of average daily net assets of the Trust.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Trust
with administrative personnel and services. Prior to March 1, 1994, these
services were provided at approximate cost. Effective March 1, 1994, the FAS fee
is based on the level of average aggregate daily net assets of all funds advised
by subsidiaries of Federated Investors for the period. The administrative fee
received during the period of the Administrative Services Agreement shall be at
least $125,000 per portfolio and $30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Trust will pay FSS up to 0.25
of 1% of average net assets of the Trust for the period. This fee is to obtain
certain personal services for shareholders and to maintain the shareholder
accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Trust. The
FServ fee is based on the size, type, and number of accounts and transactions
made by shareholders.
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of
MONEY MARKET TRUST:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Money Market Trust as of July 31, 1994, the
related statement of operations for the year then ended, the statement of
changes in net assets for the years ended July 31, 1994 and 1993, and the
financial highlights (see page 2 of the prospectus) for each of the years in the
ten-year period ended July 31, 1994. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at July
31, 1994 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Money Market Trust
as of July 31, 1994, the results of its operations, the changes in its net
assets, and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
September 9, 1994
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Money Market Trust Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -----------------------------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222
- -----------------------------------------------------------------------------------------------------------------------
Investment Adviser
Federated Research Federated Investors Tower
Pittsburgh, PA 15222-3779
- -----------------------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company P.O. Box 8602
Boston, MA 02266-8602
- -----------------------------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, PA 15222
- -----------------------------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, PA 15222
- -----------------------------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin, LLP 2101 L Street, N.W.
Washington, D.C. 20037
- -----------------------------------------------------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche LLP One PPG Place
Pittsburgh, PA 15222
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
MONEY MARKET TRUST
PROSPECTUS
An Open-End Management
Investment Company
September 30, 1994
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
609900105
8083102A (9/94)
MONEY MARKET TRUST
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of Money Market Trust (the "Trust") dated September 30,
1994. This Statement is not a prospectus. To receive a copy of a
prospectus, write or call the Trust.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated September 30, 1994
[LOGO] FEDERATED SECURITIES CORP.
---------------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
INVESTMENT POLICIES 1
- ---------------------------------------------------------------
Bank Instruments 1
When-Issued and Delayed
Delivery Transactions 1
Repurchase Agreements 1
INVESTMENT LIMITATIONS 1
- ---------------------------------------------------------------
Selling Short and Buying on Margin 1
Borrowing Money 1
Pledging Assets 1
Investing in Commodities, Minerals,
or Real Estate 1
Underwriting 1
Lending Cash or Securities 1
Acquiring Securities 2
Diversification of Investments 2
Investing in Restricted Securities 2
Investing in New Issuers 2
Investing in Put and Call Options 2
Investing in Foreign Securities 2
Investing in Issuers Whose Securities Are
Owned by Officers of the Trust 2
Concentration of Investments 2
Issuing Senior Securities 2
BROKERAGE TRANSACTIONS 2
- ---------------------------------------------------------------
MONEY MARKET TRUST MANAGEMENT 3
- ---------------------------------------------------------------
The Funds 5
Trust Ownership 6
Trustee Liability 6
INVESTMENT ADVISORY SERVICES 6
- ---------------------------------------------------------------
Investment Adviser 6
Advisory Fees 6
State Expense Limitations 6
TRUST ADMINISTRATION 7
- ---------------------------------------------------------------
SHAREHOLDER SERVICES PLAN 7
- ---------------------------------------------------------------
DETERMINING NET ASSET VALUE 7
- ---------------------------------------------------------------
Redemption in Kind 8
The Trust's Tax Status 8
PERFORMANCE INFORMATION 8
- ---------------------------------------------------------------
Yield 8
Effective Yield 8
Total Return 8
Performance Comparisons 9
APPENDIX 10
- ---------------------------------------------------------------
INVESTMENT POLICIES
- --------------------------------------------------------------------------------
Unless indicated otherwise, the policies described below may not be changed by
the Board of Trustees without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
BANK INSTRUMENTS
The instruments of banks and savings and loans whose deposits are insured by the
Bank Insurance Fund ("BIF") or the Savings Association Insurance Fund ("SAIF")
such as certificates of deposit, demand and time deposits, savings shares, and
bankers' acceptances, are not necessarily guaranteed by those organizations.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Trust. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Trust sufficient
to make payment for the U.S. government securities to be purchased are
segregated on the Trust's records at the trade date. These assets are marked to
market daily and are maintained until the transaction has been settled. As a
matter of operating policy, which may be changed without shareholder approval,
the Trust does not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more than 20% of
the total value of its assets.
REPURCHASE AGREEMENTS
The Trust or its custodian will take possession of the U.S. government
securities or certificates of deposit subject to repurchase agreements, and
these securities will be marked to market daily. In the event that a defaulting
seller filed for bankruptcy or became insolvent, disposition of such securities
by the Trust might be delayed pending court action. The Trust believes that
under the regular procedures normally in effect for custody of the Trust's
portfolio securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of the Trust and allow retention or disposition
of such securities. The Trust will only enter into repurchase agreements with
banks and other recognized financial institutions, such as broker/dealers, which
are deemed by the Trust's adviser to be creditworthy pursuant to guidelines
established by the Trustees.
INVESTMENT LIMITATIONS
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SELLING SHORT AND BUYING ON MARGIN
The Trust will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as may be necessary for clearance
of purchases and sales of securities.
BORROWING MONEY
The Trust will not borrow money except as a temporary measure for extraordinary
or emergency purposes and then only in amounts not in excess of 5% of the value
of its total assets or in an amount up to one-third of the value of its total
assets, including the amount borrowed, in order to meet redemption requests
without immediately selling any portfolio securities.
PLEDGING ASSETS
The Trust will not pledge securities.
INVESTING IN COMMODITIES, MINERALS, OR REAL ESTATE
The Trust will not invest in commodities, commodity contracts, oil, gas, or
other mineral programs or real estate, except that it may purchase money market
instruments issued by companies which invest in or sponsor interests therein.
UNDERWRITING
The Trust will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection with
the sale of restricted securities which the Trust may purchase pursuant to its
investment objective, policies, and limitations.
LENDING CASH OR SECURITIES
The Trust will not lend any assets of the Trust, except that it may purchase or
hold money market instruments, including repurchase agreements and variable
amount and variable rate notes, permitted by its investment objective and
policies.
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ACQUIRING SECURITIES
The Trust will not acquire the voting securities of any issuers. It will not
invest in securities issued by any other investment company, except as part of a
merger, consolidation, or other acquisition. It will not invest in securities of
a company for the purpose of exercising control or management.
DIVERSIFICATION OF INVESTMENTS
The Trust will not invest more than 5% of its total assets in the securities of
any one issuer (except in cash or cash items, repurchase agreements, and
securities issued by the U.S. government, its agencies, or instrumentalities).
INVESTING IN RESTRICTED SECURITIES
The Trust will not invest in securities which are subject to restrictions on
resale under federal securities laws, except that the Trust may invest up to 10%
of its net assets in high quality securities subject to such restrictions. This
limitation is not applicable to commercial paper issued under Section 4(2) of
the Securities Act of 1933.
INVESTING IN NEW ISSUERS
The Trust will not invest more than 5% of its total assets in securities of
unseasoned issuers, including their predecessors, that have been in operation
for less than three years.
INVESTING IN PUT AND CALL OPTIONS
The Trust will not invest in puts, calls, straddles, spreads, or any combination
thereof.
INVESTING IN FOREIGN SECURITIES
The Trust will not invest in foreign securities which are not publicly traded in
the United States.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS OF THE TRUST
The Trust will not purchase or retain the securities issued by an issuer, any of
whose officers, directors, or security holders is an officer, Director, or
Trustee of the Trust or its investment adviser if, after the purchase of the
securities of such issuer by the Trust, one or more of those officers,
Directors, and Trustees owning individually more than 1/2 of 1% of the issuer's
securities, together own more than 5% of the issuer's securities.
CONCENTRATION OF INVESTMENTS
The Trust will not invest more than 25% of the value of its total assets 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 for U.S. government securities, shall not be considered investments
in any one industry.
ISSUING SENIOR SECURITIES
The Trust will not issue senior securities.
The above limitations cannot be changed without shareholder approval.
For purposes of the above limitations, the Trust considers instruments issued by
a U.S. branch of a domestic bank or savings and loan having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of investment to be
"cash items". Except with respect to borrowing money, if a percentage limitation
is adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not result in a
violation of such limitation.
The Trust did not borrow money or pledge securities in excess of 5% of the value
of its net assets during the last fiscal year and has no present intent to do so
during the coming fiscal year.
BROKERAGE TRANSACTIONS
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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 use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
guidelines established by the Board of Trustees. The adviser may select brokers
and dealers who offer brokerage and research services. These services may be
furnished directly to the Trust or to the adviser and may include: advice as to
the advisability of investing in securities; security analysis and reports;
economic studies; industry studies; receipt of quotations for portfolio
evaluations; and similar services. Research
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services provided by brokers and dealers may be used by the adviser or its
affiliates in advising the Trust and other accounts. To the extent that receipt
of these services may supplant services for which the adviser or its affiliates
might otherwise have paid, it would tend to reduce their expenses. The adviser
and its affiliates exercise reasonable business judgment in selecting brokers
who offer brokerage and research services to execute securities transactions.
They determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research services
provided. During the fiscal years ended
July 31, 1994, 1993, and 1992, the Trust paid no brokerage commissions.
Although investment decisions for the Trust are made independently from those of
the other accounts managed by the adviser, investments of the type the Trust may
make may also be made by those other accounts. When the Trust and one or more
other accounts managed by the adviser are prepared to invest in, or desire to
dispose of, the same security, available investments or opportunities for sales
will be allocated in a manner believed by the adviser to be equitable to each.
In some cases, this procedure may adversely affect the price paid or received by
the Trust or the size of the position obtained or disposed of by the Trust. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Trust.
MONEY MARKET TRUST MANAGEMENT
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Officers and Trustees are listed with their addresses, present positions with
Money Market Trust, and principal occupations.
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John F. Donahue+*
Federated Investors Tower
Pittsburgh, PA
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or Managing General
Partner of the Funds. Mr. Donahue is the father of J. Christopher Donahue,
Vice-President of the Trust.
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John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Trustee
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate ventures in Southwest
Florida; Director, Trustee, or Managing General Partner of the Funds; formerly,
President, Naples Property Management, Inc.
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William J. Copeland
One PNC Plaza--23rd Floor
Pittsburgh, PA
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice-Chairman and
Director, PNC Bank, N.A., and PNC Bank Corp.; and
Director, Ryan Homes, Inc.
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James E. Dowd
571 Hayward Mill Road
Concord, MA
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds; formerly, Director, Blue Cross of
Massachusetts, Inc.
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Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Trustee
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore Hospitals;
Professor of Medicine and Trustee, University of Pittsburgh; Director of
Corporate Health, University of Pittsburgh Medical Center; Director, Trustee, or
Managing General Partner of the Funds.
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Edward L. Flaherty, Jr.+
5916 Penn Mall
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat'N Park Restaurants,
Inc., and Statewide Settlement Agency, Inc.; Director, Trustee, or Managing
General Partner of the Funds; formerly, Counsel, Horizon Financial, F.A.,
Western Region.
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Peter E. Madden
225 Franklin Street
Boston, MA
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President, State
Street Bank and Trust Company and State Street Boston Corporation; and Trustee,
Lahey Clinic Foundation, Inc.
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Gregor F. Meyer
5916 Penn Mall
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare, Inc.;
Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or Managing General
Partner of the Funds; formerly, Vice Chairman, Horizon Financial, F.A.
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Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie Endowment
for International Peace, RAND Corporation, Online Computer Library Center, Inc.,
and U.S. Space Foundation; Chairman, Czecho Slovak Management Center; Director,
Trustee, or Managing General Partner of the Funds; President Emeritus,
University of Pittsburgh; formerly, Chairman, National Advisory Council for
Environmental Policy and Technology.
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Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing General
Partner of the Funds.
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Glen R. Johnson
Federated Investors Tower
Pittsburgh, PA
President
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Administrative Services.
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J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp.; President, Passport Research, Ltd.; Trustee, Federated Administrative
Services, Federated Services Company, and Federated Shareholder Services;
President or Vice President of the Funds; Director, Trustee, or Managing General
Partner of some of the Funds. Mr. Donahue is the son of John F. Donahue,
Chairman and Trustee of the Trust.
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Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Vice President
Executive Vice President and Trustee, Federated Investors; Director, Federated
Research Corp.; Chairman and Director, Federated Securities Corp.; President or
Vice President of some of the Funds; Director or Trustee of some of the Funds.
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Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice President and
Treasurer, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Executive Vice President,
Treasurer, and Director, Federated Securities Corp.; Trustee, Federated Services
Company and Federated Shareholder Services; Chairman, Treasurer, and Trustee,
Federated Administrative Services; Trustee or Director of some of the Funds;
Vice President and Treasurer of the Funds.
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John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated Investors;
Vice President, Secretary, and Trustee, Federated Advisers, Federated
Management, and Federated Research; Vice President and Secretary, Federated
Research Corp. and Passport Research, Ltd.; Trustee, Federated Services Company;
Executive Vice President, Secretary, and Trustee, Federated Administrative
Services; Secretary and Trustee, Federated Shareholder Services; Executive Vice
President and Director, Federated Securities Corp.; Vice President and Secretary
of the Funds.
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* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
+ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board of Trustees between
meetings of the Board.
THE FUNDS
As referred to in the list of Trustees and Officers, "Funds" includes the
following investment companies:
American Leaders Fund, Inc.; Annuity Management Series; Automated Cash
Management Trust; Automated Government Money Trust; California Municipal Cash
Trust; Cash Trust Series II; Cash Trust Series, Inc. ; DG Investor Series;
Edward D. Jones & Co. Daily Passport Cash Trust; Federated ARMs Fund; Federated
Exchange
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Fund, Ltd.; Federated GNMA Trust; Federated Government Trust; Federated Growth
Trust; Federated High Yield Trust; Federated Income Securities Trust; Federated
Income Trust; Federated Index Trust; Federated Intermediate Government Trust;
Federated Master Trust; Federated Municipal Trust; Federated Short-Intermediate
Government Trust; Federated Short-Term U.S. Government Trust; Federated Stock
Trust; Federated Tax-Free Trust; Federated U.S. Government Bond Fund; First
Priority Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate U.S.
Government Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility
Fund, Inc.; Fund for U.S. Government Securities, Inc.; Government Income
Securities, Inc.; High Yield Cash Trust; Insight Institutional Series, Inc.;
Insurance Management Series; Intermediate Municipal Trust; International Series,
Inc.; Investment Series Funds, Inc.; Investment Series Trust; Liberty Equity
Income Fund, Inc.; Liberty High Income Bond Fund, Inc.; Liberty Municipal
Securities Fund, Inc.; Liberty Term Trust, Inc. 1999; Liberty U.S. Government
Money Market Trust; Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed
Series Trust; Mark Twain Funds; The Medalist Funds; Money Market Management,
Inc.; Money Market Obligations Trust; Money Market Trust; Municipal Securities
Income Trust; New York Municipal Cash Trust; 111 Corcoran Funds; Peachtree
Funds; The Planters Funds; Portage Funds; RIMCO Monument Funds; The Shawmut
Funds; Short-Term Municipal Trust; Star Funds; The Starburst Funds; The
Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted Duration
Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for Financial
Institutions; Trust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations; and World Investment
Series, Inc.
TRUST OWNERSHIP
Officers and Trustees own less than 1% of the Trust's outstanding shares.
As of September 6, 1994, the following shareholders of record owned 5% or more
of the outstanding shares of the Trust: The Fiduciary Trust Co. International,
New York City, New York, owned approximately 56,489,100 shares (10.33%) and The
Brotherhood Bank and Trust Co., Kansas City, Kansas, owned approximately 31,
291,783 shares (5.72%).
TRUSTEE LIABILITY
The Declaration of Trust provides that the Trustees will not be liable for
errors of judgment or mistakes or fact or law. However, they are not protected
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
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INVESTMENT ADVISER
The Trust's investment adviser is Federated Research. It is a subsidiary of
Federated Investors. All the voting securities of Federated Investors are owned
by a trust, the trustees of which are John F. Donahue, his wife and his son, J.
Christopher Donahue.
The adviser shall not be liable to the Trust or any shareholder for any losses
that may be sustained in the purchase, holding, or sale of any security or for
anything done or omitted by it, except acts or omissions involving willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
imposed upon it by its contract with Trust.
ADVISORY FEES
For its advisory services, Federated Research receives an annual investment
advisory fee as described in the prospectus.
For the fiscal years ended July 31, 1994, 1993 and 1992, the adviser earned
$2,520,096, $3,331,606, and $3,957,398, respectively, of which $727,018,
$501,415, and $414,598, respectively, was voluntarily waived.
STATE EXPENSE LIMITATIONS
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Trust's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2-1/2% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1-1/2% per
year of the remaining average net assets, the adviser will reimburse the
Trust for its expenses over the limitation.
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If the Trust's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fees.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
TRUST ADMINISTRATION
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Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Trust for a fee as described in the
prospectus. Prior to March 1, 1994, Federated Administrative Services, Inc.,
also a subsidiary of Federated Investors, served as the Trust's administrator.
(For purposes of this Statement of Additional Information, Federated
Administrative Service and Federated Administrative Services, Inc. may
hereinafter collectively be referred to as, the "Administrators".) For the
fiscal years ended July 31, 1994, 1993, and 1992, the Administrators
collectively earned $488,553, $516,405, and $523,188, respectively. Dr. Henry J.
Gailliot, an officer of Federated Research, the adviser to the Trust, holds
approximately 20% of the outstanding common stock and serves as a director of
Commercial Data Services, Inc., a company which provides computer processing
services to Federated Administrative Services.
SHAREHOLDER SERVICES PLAN
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This arrangement permits the payment of fees to Federated Shareholder Services
and financial institutions to cause services to be provided which are necessary
for the maintenance of shareholder accounts and to encourage personal services
to shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. These activities and services may include,
but are not limited to: providing office space, equipment, telephone facilities,
and various clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and addresses.
By adopting the Shareholder Services Plan, the Board of Trustees expects that
the Trust will benefit by:
(1) providing personal services to shareholders; (2) investing shareholder
assets with a minimum of delay and administrative detail; (3) enhancing
shareholder recordkeeping systems; and (4) responding promptly to shareholders'
requests and inquiries concerning their accounts.
For the fiscal period ending July 31, 1994, payments in the amount of $122,774
were made pursuant to the Shareholder Services Plan.
CUSTODIAN AND PORTFOLIO RECORDKEEPER. State Street Bank and Trust Company,
Boston, MA is custodian for the securities and cash of the Trust. Federated
Services Company, Pittsburgh, PA provides certain accounting and recordkeeping
services with respect to the Trust's portfolio investments.
TRANSFER AGENT. As transfer agent, Federated Services Company maintains all
necessary shareholder records. For its services, the transfer agent receives a
fee based on the number of shareholder accounts.
DETERMINING NET ASSET VALUE
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The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
Accordingly, neither the amount of daily income nor the net asset value is
affected by any unrealized appreciation or depreciation of the portfolio. In
periods of declining interest rates, the indicated daily yield on shares of the
Trust computed by dividing the annualized daily income on the Trust's portfolio
by the net asset value computed as above may tend to be higher than a similar
computation made by using a method of valuation based upon market prices and
estimates. In periods of rising interest rates, the opposite may be true.
The Trust's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in Rule 2a-7 (the "Rule")
promulgated by the Securities and Exchange Commission under the Investment
Company Act of 1940. Under the Rule, the Trustees must establish procedures
reasonably designed to stabilize the net asset value per share, as computed for
purposes of distribution and redemption, at $1.00 per
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share, taking into account current market conditions and the Trust's investment
objective. The procedures include monitoring the relationship between the
amortized cost value per share and the net asset value per share based upon
available indications of market value. The Trustees will decide what, if any,
steps should be taken if there is a difference of more than 0.5 of 1% between
the two values. The Trustees will take any steps they consider appropriate (such
as redemption in kind or shortening the average portfolio maturity) to minimize
any material dilution or other unfair results arising from differences between
the two methods of determining net asset value.
REDEMPTION IN KIND
The Trust is obligated to redeem shares solely in cash up to $250,000 or 1% of
the Trust's net asset value, whichever is less, for any one shareholder within a
90-day period. Any redemption beyond this amount will also be in cash unless the
Trustees determine that further payments should be in kind. In such cases, the
Trust will pay all or a portion of the remainder of the redemption in portfolio
instruments valued in the same way as the Trust determines net asset value. The
portfolio instruments will be selected in a manner that the Trustees deem fair
and equitable. Redemption in kind is not as liquid as a cash redemption. If
redemption is made in kind, shareholders who sell these securities could receive
less than the redemption value and could incur certain transaction costs.
THE TRUST'S TAX STATUS
To qualify for the special tax treatment afforded to regulated investment
companies, the Trust must, among other requirements: derive at least 90% of its
gross income from dividends, interest, and gains from the sale of securities;
derive less than 30% of its gross income from the sale of securities held less
than three months; invest in securities within certain statutory limits; and
distribute to its shareholders at least 90% of its net income earned during the
year.
PERFORMANCE INFORMATION
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Performance depends upon such variables as: portfolio quality; average portfolio
maturity; type of instruments in which the portfolio is invested; changes in
interest rates; changes in expenses; and the relative amount of cash flow. To
the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in shares of
the Trust, the performance will be reduced for those shareholders paying those
fees.
YIELD
The Trust calculates its yield based upon the seven days ending on the day of
the calculation, called the "base period." This yield is computed by:
determining the net change in the value of a hypothetical account with a balance
of one share at the beginning of the base period, with the net change excluding
capital changes but including the value of any additional shares purchased with
dividends earned from the original one share and all dividends declared on the
original and any purchased shares; dividing the net change in the account's
value by the value of the account at the beginning of the base period to
determine the base period return; and multiplying the base period return by
365/7.
The Trust's yield for the seven-day period ended July 31, 1994, was 4.11%.
EFFECTIVE YIELD
The Trust calculates its effective yield by compounding the unannualized base
period return by: adding 1 to the base period return; raising the sum to the
365/7th power; and subtracting 1 from the result.
The Trust's effective yield for the seven-day period ended July 31, 1994, was
4.20%.
TOTAL RETURN
Average annual total return is the average compounded rate of return for a given
period that would equate a $1,000 initial investment to the ending redeemable
value of that investment. The ending redeemable value is compounded by
multiplying the number of shares owned at the end of the period by the net asset
value per share at the end of the period. The number of shares owned at the end
of the period is based on the number of shares purchased at the beginnning of
the period with $1,000, adjusted over the period by any additional shares,
assuming the monthly reinvestmentof all dividends and distributions.
The Trust's average annual total returns for the one-, five- and ten-year
periods ended July 31, 1994 were 3.18%, 5.21% and 6.45%, respectively.
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PERFORMANCE COMPARISONS
Investors may use financial publications and/or indices to obtain a more
complete view of the Trust's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute net asset value. The financial
publications and/or indices which the Trust uses in advertising may include:
LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories based
on total return, which assumes the reinvestment of all income dividends and
capital gains distributions, if any.
DONOGHUE'S MONEY FUND REPORT publishes annualized yields of money market funds
weekly. Donoghue's Money Market Insight publication reports monthly and
12-month-to-date investment results for the same money funds.
MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
SALOMON 30-DAY CD INDEX compares rate levels of 30-day certificates of deposit
from the top ten prime representative banks.
APPENDIX
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STANDARD AND POOR'S RATINGS GROUP CORPORATE BOND RATING DEFINITIONS
AAA--Debt rated "AAA" has the highest rating assigned by Standard & Poor's
Ratings Group. 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.
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.
STANDARD & POOR'S RATINGS GROUP COMMERCIAL PAPER RATING DEFINITIONS
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
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. COMMERCIAL PAPER RATING DEFINITIONS
PRIME-1--Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
Leading market positions in well established industries.
High rates of return on funds employed.
Conservative capitalization structure with moderate reliance on debt and ample
asset protection.
Broad margins in 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
PRIME-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.
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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 for
issues assigned "F-1+" and "F-1" ratings.
609900105
8083102B (9/94)
