Money Market Trust
PROSPECTUS
The shares of Money Market Trust (the "Trust") offered by this prospectus
represent interests in an open-end, management investment company (a mutual
fund). The Trust invests in short-term money market securities to achieve
current income consistent with stability of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE
TRUST ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE
CAN BE NO ASSURANCE THAT THE TRUST WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Trust. Keep this prospectus for future reference.
The Trust has also filed a Statement of Additional Information dated September
30, 1998, with the Securities and Exchange Commission ("SEC"). The information
contained in the Statement of Additional Information is incorporated by
reference into this prospectus. You may request a copy of the Statement of
Additional Information or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-341-7400. To
obtain other information, or make inquiries about the Trust, contact the Trust
at the address listed in the back of this prospectus. The Statement of
Additional Information, material incorporated by reference into this document,
and other information regarding the Trust is maintained electronically with the
SEC at Internet Web site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated September 30, 1998
TABLE OF CONTENTS
Summary of Trust Expenses 1
Financial Highlights 2
General Information 3
Year 2000 Statement 3
Investment Information 3
Investment Objective 3
Investment Policies 3
Investment Risks 5
Investment Limitations 5
Trust Information 5
Management of the Trust 5
Distribution of Shares 6
Administration of the Trust 6
Net Asset Value 7
How to Purchase Shares 7
Purchasing Shares by Wire 7
Purchasing Shares by Check 7
Automatic Investments 7
Subaccounting Services 7
How to Redeem Shares 8
Redeeming Shares by Telephone 8
Redeeming Shares by Mail 8
Account and Share Information 8
Dividends 8
Capital Gains 8
Account Activity 8
Accounts with Low Balances 8
Voting Rights 9
Tax Information 9
Federal Income Tax 9
State and Local Taxes 9
Performance Information 9
Last Meeting of Shareholders 10
Financial Statements 12
Independent Auditors' Report Inside Back Cover
SUMMARY OF TRUST EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> Maximum Sales Charge Imposed on Purchases (as a percentage of offering
price) None Maximum Sales Charge Imposed on Reinvested Dividends (as a
percentage of offering price) None Contingent Deferred Sales Charge (as a
percentage of original purchase price
or redemption proceeds, as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
<CAPTION>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee (after waiver)(1) 0.26%
12b-1 Fee None
Total Other Expenses 0.20%
Shareholder Services Fee (after waiver)(2) 0.05%
Total Operating Expenses(3) 0.46%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The maximum management fee is 0.40%.
(2) The shareholder services fee has been reduced to reflect the waiver of a
portion of the shareholder services fee. The shareholder service provider can
terminate this waiver at any time at its sole discretion. The maximum
shareholder services fee is 0.25%.
(3) The total operating expenses would have been 0.80% absent the voluntary
waivers of portions of the management fee and the shareholder services fee.
The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of the Trust will bear, either directly or
indirectly. For more complete descriptions of the various costs and expenses,
see "Trust Information." Wire-transferred redemptions of less than $5,000 may be
subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE
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.
<S> <C>
1 Year $ 5
3 Years $15
5 Years $26
10 Years $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.
FINANCIAL HIGHLIGHTS
MONEY MARKET TRUST
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Independent Auditors' Report on the inside back cover.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM
INVESTMENT OPERATIONS
Net
investment income 0.05 0.05 0.05 0.05 0.03 0.03 0.04 0.07 0.08 0.09
LESS DISTRIBUTIONS
Distributions from
net investment income (0.05) (0.05) (0.05) (0.05) (0.03) (0.03) (0.04) (0.07) (0.08) (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(a) 5.35% 5.19% 5.31% 5.42% 3.18% 3.00% 4.49% 7.05% 8.43% 8.93%
RATIOS TO AVERAGE
NET ASSETS
Expenses 0.46% 0.46% 0.46% 0.46% 0.46% 0.46% 0.46% 0.46% 0.46% 0.45%
Net
investment income 5.24% 5.09% 5.22% 5.32% 3.11% 2.98% 4.40% 6.88% 8.14% 8.58%
SUPPLEMENTAL DATA
Net assets,
end of period
(000 omitted) $412,104 $464,012 $513,687 $507,272 $539,983 $712,577 $943,893 $956,538 $1,189,023 $1,649,683
</TABLE>
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated 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 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.
YEAR 2000 STATEMENT
Like other mutual funds and business organizations worldwide, the Trust's
service providers (among them, the adviser, distributor, administrator and
transfer agent) must ensure that their computer systems are adjusted to properly
process and calculate date-related information from and after January 1, 2000.
Many software programs and, to a lesser extent, the computer hardware in use
today cannot distinguish the year 2000 from the year 1900. Such a design flaw
could have a negative impact in the handling of securities trades, pricing and
accounting services. The Trust and its service providers are actively working on
necessary changes to computer systems to deal with the year 2000 issue and
believe that systems will be year 2000 compliant when required. Analysis
continues regarding the financial impact of instituting a year 2000 compliant
program on the Trust's operations.
INVESTMENT INFORMATION
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 complying
with the diversification and other requirements of Rule 2a-7 under the
Investment Company Act of 1940 which regulates money market mutual funds and by
following the investment policies described in this prospectus. The investment
policies and limitations set forth below unless otherwise indicated cannot be
changed by the Board of Trustees (the "Trustees") without shareholder approval.
Shareholders will be notified before any material change in these policies
becomes effective.
INVESTMENT POLICIES
The Trust pursues its investment objective by investing in a portfolio of money
market securities maturing in thirteen months or less. The Trust will limit the
dollar-weighted average maturity of its portfolio to 90 days or less, in order
to meet regulatory requirements. The operating policies stated above may be
changed without shareholder approval.
ACCEPTABLE INVESTMENTS
The Trust invests in high quality money market instruments that are either rated
in the highest short-term rating category by one or more nationally recognized
statistical rating organizations ("NRSROs") or are of comparable quality to
securities having such ratings. Examples of these instruments include, but are
not limited to:
* domestic issues of corporate debt obligations, including variable rate
demand notes;
* commercial paper (including Canadian Commercial Paper and Europaper);
* certificates of deposit, demand and time deposits, bankers' acceptances and
other instruments of domestic and foreign banks and other deposit institu tions
("Bank Instruments");
* short-term credit facilities;
* asset-backed securities;
* obligations issued or guaranteed as to payment of principal and interest by
the U.S. government or one of its agencies or instrumentalities; and
* other money market instruments.
The Trust invests only in instruments denominated and payable in U.S.
dollars.
VARIABLE RATE DEMAND NOTES
Variable rate demand notes are long-term debt instruments that have variable or
floating interest rates and provide the Trust with the right to tender the
security for repurchase at its stated principal amount plus accrued interest.
Such securities typically bear interest at a rate that is intended to cause the
securities to trade at par. The interest rate may float or be adjusted at
regular intervals (ranging from daily to annually), and is normally based on a
published interest rate or interest rate index. Most variable rate demand notes
allow the Trust to demand the repurchase of the security on not more than seven
days prior notice. Other notes only permit the Trust to tender the security at
the time of each interest rate adjustment or at other fixed intervals. See
"Demand Features." The Trust treats variable rate demand notes as maturing on
the later of the date of the next interest rate adjustment or the date on which
the Trust may next tender the security for repurchase.
BANK INSTRUMENTS
The Trust only invests in Bank Instruments either issued by an institution
having capital, surplus and undivided profits over $100 million, or insured by
the Bank Insurance Fund ("BIF") or the Savings Association Insurance Fund
("SAIF"). Bank Instruments may include Eurodollar Certificates of Deposit
("ECDs"), Yankee Certificates of Deposit ("Yankee CDs"), and Eurodollar Time
Deposits ("ETDs"). The Trust will treat securities credit enhanced with a bank's
letter of credit as Bank Instruments.
ASSET-BACKED SECURITIES
Asset-backed securities are securities issued by special purpose entities whose
primary assets consist of a pool of loans or accounts receivable. The securities
may take the form of beneficial interests in special purpose trusts, limited
partnership interests, or commercial paper or other debt securities issued by a
special purpose corporation. Although the securities often have some form of
credit or liquidity enhancement, payments on the securities depend predominantly
upon collections of the loans and receiv ables 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 facil ity.
The Trust treats any commitments to provide such advances as a standby
commitment to purchase the borrower's notes.
REPURCHASE AGREEMENTS
Certain securities in which the Trust invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell securities to
the Trust and agree at the time of sale to repurchase them at a mutually agreed
upon time and price. To the extent that the seller does not repurchase the
securities from the Trust, the Trust could receive less than the repurchase
price on any sale of such securities.
CREDIT ENHANCEMENT
Certain of the Trust's acceptable investments may be credit-enhanced by a
guaranty, letter of credit, or insurance. Any bankruptcy, receivership, default,
or change in the credit quality of the party providing the credit enhancement
will adversely affect the quality and marketability of the underlying security
and could cause losses to the Trust and affect its share price.
DEMAND FEATURES
The Trust may acquire securities that are subject to puts and standby
commitments ("demand features") to purchase the securities at their principal
amount (usually with accrued interest) within a fixed period (usually seven
days) following a demand by the Trust. The demand feature may be issued by the
issuer of the underlying securities, a dealer in the securities, or by another
third party, and may not be transferred separately from the underlying security.
The Trust uses these arrangements to provide the Trust with liquidity and not to
protect against changes in the market value of the underlying securities. The
bankruptcy, receivership, or default by the issuer of the demand feature, or a
default on the underlying security or other event that terminates the demand
feature before its exercise, will adversely affect the liquidity of the
underlying security. Demand features that are exercisable even after a payment
default on the underlying security may be treated as a form of credit
enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Trust may purchase securities on a when-issued or delayed delivery basis.
These transactions are arrangements in which the Trust purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause the Trust to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.
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
As a matter of operating policy, which may be changed without shareholder
approval, the Trust may invest in restricted securities. Restricted securities
are any securities in which the Trust may invest pursuant to its investment
objective and policies but which are subject to restrictions on resale under
federal securities law. Under criteria established by the Trustees, certain
restricted securities are determined to be liquid. To the extent that restricted
securities are not determined to be liquid, the Trust will limit their purchase,
together with other illiquid securities, including repurchase agreements
providing for settlement in more than seven days after notice, to 10% of its net
assets.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies. It should be noted that investment
companies incur certain expenses, such as management fees, and, therefore, any
investment by the Fund in shares of other investment companies may be subject to
such duplicate expenses.
INVESTMENT RISKS
ECDs, ETDs, Yankee CDs, Canadian Commercial Paper, and Europaper are subject to
different risks than domestic obligations of domestic banks or corporations.
Examples of these risks include international economic and political
developments, foreign governmental restrictions that may adversely affect the
payment of principal or interest, foreign withholding or other taxes on interest
income, difficulties in obtaining or enforcing a judgment against the issuing
entity, and the possible impact of interruptions in the flow of international
currency transactions. Risks may also exist for ECDs, ETDs, and Yankee CDs
because the banks issuing these instruments, or their domestic or foreign
branches, are not necessarily subject to the same regulatory requirements that
apply to domestic banks, such as reserve requirements, loan limitations,
examinations, accounting, auditing, recordkeeping, and the public availability
of information. These factors will be carefully considered by the Trust's
adviser in selecting investments for the Trust.
INVESTMENT LIMITATIONS
The Trust will not borrow money 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.
TRUST INFORMATION
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The Trust is managed by a Board of Trustees. The Trustees are responsible for
managing the Trust's business affairs and for exercising all the Trust's powers
except those reserved for the shareholders. An Executive Committee of the Board
of Trustees handles the Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER
Investment decisions for the Trust are made by Federated Research, the Trust's
investment adviser, subject to direction by the Trustees. The adviser
continually conducts investment research and supervision for the Trust and is
responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES
The adviser receives an annual investment advisory fee equal to 0.40% of the
Trust's average daily net assets. In addition, under the investment advisory
contract, the advisor will waive the amount, limited to the amount of the
advisory fee, by which the Trust's aggregate annual operating expenses,
including the investment advisory fee but excluding interest, taxes, broker age
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 its average daily net assets.
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, Inc. All of the Class A (voting) shares of
Federated Investors, Inc. are owned by a trust, the trustees of which are John
F. Donahue, Chairman and Director of Federated Investors, Inc., Mr. Donahue's
wife, and Mr. Donahue's son, J. Christopher Donahue, who is President and
Director of Federated Investors, Inc.
Federated Research and other subsidiaries of Federated Investors, Inc. serve as
investment advisers to a number of investment companies and private accounts.
Certain other subsidiaries also provide administrative services to a number of
investment companies. With over $120 billion invested across more than 300 funds
under management and/or administration by its subsidiaries, as of December 31,
1997, Federated Investors, Inc. is one of the largest mutual fund investment
managers in the United States. With more than 2,000 employees, Federated
continues to be led by the management who founded the company in 1955. Federated
funds are presently at work in and through approximately 4,000 financial
institutions nationwide.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Trust and its portfolio securities.
These codes recognize that such persons owe a fiduciary duty to the Trust's
shareholders and must place the interests of shareholders ahead of the
employees' own interests. Among other things, the codes: require preclearance
and periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Trust; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for shares of the
Trust. It is a Pennsylvania corporation organized on November 14, 1969, and
is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors, Inc.
SHAREHOLDER SERVICES
The Trust has entered into a Shareholder Services Agreement with Federated
Shareholder Services, a subsidiary of Federated Investors, Inc., under which the
Trust may make payments up to 0.25% of the average daily net asset value of its
shares, computed at an annual rate, to obtain certain personal services for
shareholders and to maintain shareholder accounts. From time to time and for
such periods as deemed appropriate, the amount stated above may be reduced
voluntarily. Under the Shareholder Services Agreement, Federated Shareholder
Services will either perform shareholder services directly or will select
financial institutions to perform shareholder services. Financial institutions
will receive fees based upon shares owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Trust and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS
In addition to payments made pursuant to the Shareholder Services Agreement,
Federated Securities Corp. and Federated Shareholder Services, from their own
assets, may pay financial institutions supplemental fees for the performance of
substantial sales services, distribution-related support services, or
shareholder services. The support may include sponsoring sales, educational and
training seminars for their employees, providing sales literature, and
engineering computer software programs that emphasize the attributes of the
Trust. Such assistance will be predicated upon the amount of shares the
financial institution sells or may sell, and/or upon the type and nature of
sales or marketing support furnished by the financial institution. Any payments
made by the distributor may be reimbursed by the Trust's investment adviser or
its affiliates.
ADMINISTRATION OF THE TRUST
ADMINISTRATIVE SERVICES
Federated Services Company, a subsidiary of Federated Investors, Inc., provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Trust at an annual rate which
relates to the average aggregate daily net assets of all funds advised by
affiliates of Federated Investors, Inc. specified below:
MAXIMUM AVERAGE AGGREGATE
FEE DAILY NET ASSETS
0.150% on the first $250million
0.125% on the next $250million
0.100% on the next $250million
0.075% on assets in excess of $750million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Services Company may choose voluntarily to waive a portion of its fee.
NET ASSET VALUE
The Trust attempts to stabilize the net asset value of its shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per share is determined by subtracting total liabilities from total assets
and dividing the remainder by the number of shares outstanding. The Trust cannot
guarantee that its net asset value will always remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 3:00 p.m. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day.
HOW TO PURCHASE SHARES
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange is open for business. Shares may be purchased either by wire or by
check. The Trust reserves the right to reject any purchase request.
To make a purchase, open an account by calling Federated Securities Corp.
Information needed to establish the account will be taken by telephone. The
minimum initial investment is $25,000. However, an account may be opened with a
smaller amount as long as the minimum is reached within 90 days. Minimum
investments will be calculated by combining all accounts maintained with the
Trust. Financial institutions may impose different minimum investment
requirements on their customers.
PURCHASING SHARES BY WIRE
Shares may be purchased by Federal Reserve wire by calling the Trust before 3:00
p.m. (Eastern time) to place an order. The order is considered received
immediately. Payment by federal funds must be received before 3:00 p.m. (Eastern
time) that day. Federal funds should be wired as follows: Federated Shareholder
Services Company, c/o State Street Bank and Trust Company, Boston, MA;
Attention: EDGEWIRE; For Credit to: 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. Shares
cannot be purchased by wire on holidays when wire transfers are restricted.
Questions on wire purchases should be directed to your shareholder services
representative at the telephone number listed on your account statement.
PURCHASING SHARES BY CHECK
Shares may be purchased by sending a check to Federated Shareholder Services
Company, P.O. Box 8600, Boston, MA 02266-8600. The check should be made payable
to: Money Market Trust. Please include an account number on the check. Orders by
mail are considered received when payment by check is converted into federal
funds (normally the business day after the check is received), and shares begin
earning dividends the next day.
AUTOMATIC INVESTMENTS
Investors may establish accounts with their financial institutions to have cash
accumulations automatically invested in the Trust. The investments may be made
on predetermined dates or when the investor's account reaches a certain level.
Participating financial institutions are responsible for prompt transmission of
orders relating to the program, and they may charge for their services.
Investors should read this prospectus along with the financial institution's
agreement or literature describing these services and fees.
SUBACCOUNTING SERVICES
Financial institutions are encouraged to open single master accounts. A
subaccounting system is available through the transfer agent to minimize
internal recordkeeping requirements. The transfer agent charges a fee based on
the level of subaccounting services rendered. Financial institutions may charge
or pass through subaccounting fees as part of or in addition to normal trust or
agency account fees. They may also charge fees for other services provided which
may be related to the ownership of Trust shares. This prospectus should,
therefore, be read together with any agreement between the customer and the
financial institution with regard to the services provided, the fees charged for
those services, and any restrictions and limitations imposed.
HOW TO REDEEM SHARES
Shares are redeemed at their net asset value next determined after Federated
Shareholder Services Company receives the redemption request. Redemptions will
be made on days on which the Trust computes its net asset value. Redemption
requests must be received in proper form and can be made as described below.
REDEEMING SHARES BY TELEPHONE
Redemptions in any amount may be made by calling the Trust provided the Trust
has a properly completed authorization form. These forms can be obtained from
Federated Securities Corp. Proceeds from redemption requests received before
3:00 p.m. (Eastern time) will be wired the same day to the shareholder's account
at a domestic commercial bank which is a member of the Federal Reserve System,
but will not include that day's dividend. Proceeds from redemption requests
received after that time include that day's dividend but will be wired the
following business day. Proceeds from redemption requests on holidays when wire
transfers are restricted will be wired the following business day. Questions
about telephone redemptions on days when wire transfers are restricted should be
directed to your shareholder services representative at the telephone number
listed on your account statement.
Telephone instructions may be recorded, and if reasonable procedures are not
followed by the Trust, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If this occurs, "Redeeming Shares by Mail"
should be considered. If at any time the Trust shall determine it necessary to
terminate or modify the telephone redemption privilege, shareholders would be
promptly notified.
REDEEMING SHARES BY MAIL
Shares may be redeemed in any amount by mailing a written request to: Federated
Shareholder Services Company, P.O. Box 8600, Boston, MA 02266- 8600. If share
certificates have been issued, they should be sent unendorsed with the written
request by registered or certified mail to the address noted above.
The written request should state: the Trust name; the account name as registered
with the Trust; the account number; and the number of shares to be redeemed or
the dollar amount requested. All owners of the account must sign the request
exactly as the shares are registered. Normally, a check for the proceeds is
mailed within one business day, but in no event more than seven days, after the
receipt of a proper written redemption request. Dividends are paid up to and
including the day that a redemption request is processed.
Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Trust or a redemption payable other than to
the shareholder of record must have their signatures guaranteed by a commercial
or savings bank, trust company, or savings association whose deposits are
insured by an organization which is administered by the Federal Deposit
Insurance Corporation; a member firm of a domestic stock exchange; or any other
"eligible guarantor institution," as defined in the Securities Exchange Act of
1934. The Trust does not accept signatures guaranteed by a notary public.
ACCOUNT AND SHARE INFORMATION
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are automatically
reinvested on payment dates in additional shares of the Trust unless cash
payments are requested by writing to the Trust. Shares purchased by wire before
3:00 p.m. (Eastern time) begin earning dividends that day. Shares purchased by
check begin earning dividends the day after the check is converted into federal
funds.
CAPITAL GAINS
The Trust does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Trust will distribute in cash or additional shares any realized
net long-term capital gains at least once every 12 months.
ACCOUNT ACTIVITY
Shareholders will receive periodic statements reporting all account activity,
including dividends paid. The Trust will not issue share certificates.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Trust may
redeem shares in any account, except accounts maintained by retirement plans,
and pay the proceeds to the shareholder if the account balance falls below a
required minimum value of $25,000 due to shareholder redemptions. Before shares
are redeemed to close an account, the shareholder is notified in writing and
allowed 30 days to purchase additional shares to meet the minimum requirement.
VOTING RIGHTS
Each share of the Trust owned by a shareholder gives that shareholder one vote
in Trustee elections and other matters submitted to shareholders for vote. The
Trust is not required to hold annual shareholder meetings. Shareholder approval
will be sought only for certain changes in the Trust's operation and for
election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting shall be called by the Trustees upon the written request of
shareholders owning at least 10% of the outstanding shares of the Trust.
TAX INFORMATION
FEDERAL INCOME TAX
The Trust will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional shares.
STATE AND LOCAL TAXES
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
From time to time, the Trust advertises its yield, effective yield, and total
return.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment.
Total return represents the change, over a specified period of time, in the
value of an investment in the Trust after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
From time to time, advertisements for the Trust may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Trust's performance to certain indices.
LAST MEETING OF SHAREHOLDERS
A Special Meeting of Trust shareholders was held on April 30, 1998. On March 6,
1998, the record date for shareholders voting at the meeting, there were
436,944,223 total outstanding shares. The following items were considered by
shareholders and the results of their voting were as follows:
AGENDA ITEM 1: To elect Trustees.*
<TABLE>
<CAPTION>
SHARES VOTED FOR SHARES WITHHELD AUTHORITY
<S> <C> <C>
Thomas G Bigley 277,340,488 303,334
John T. Conroy, Jr. 277,340,488 303,334
Peter E. Madden 277,340,488 303,334
John E. Murray, Jr., JD., S.J.D. 277,340,488 303,334
Nicholas P. Constantakis 277,340,488 303,334
</TABLE>
AGENDA ITEM 2: To approve or disprove an amendment in the Trust's fundamental
investment policy on diversification of its investments.
The results of shareholders voting were as follows:
<TABLE>
<CAPTION>
SHARES VOTED FOR SHARES VOTED AGAINST SHARES ABSTAIN BROKER NON-VOTE
<S> <C> <C>
267,717,482 8,955,556 534,090 <C>436,694
</TABLE>
AGENDA ITEM 3: To approve or disapprove amending and changing from fundamental
to an operating policy the Trust's policy regarding the maturity of money market
securities in which it will invest.
The results of shareholders voting were as follows:
SHARES VOTED FOR SHARES VOTED AGAINST SHARES ABSTAIN BROKER NON-VOTE
274,675,064 1,936,440 595,624 436,694
* The following Trustees of the Trust continued their terms as Trustees of
the Trust: John F. Donahue, William J. Copeland, James E. Dowd, Esq.,
Lawrence D. Ellis, M.D., Edward L. Flaherty, Jr., Esq., Wesley W. Posvar,
Marjorie P. Smuts, Glen R. Johnson, J. Christopher Donahue, Edward C.
Gonzales, John W. McGonigle, Richard B. Fisher.
AGENDA ITEM 4: To approve or disapprove amending and changing from fundamental
to an operating policy the Trust's ability to invest in restricted securities.
The results of shareholders voting were as follows:
<TABLE>
<CAPTION>
SHARES VOTED FOR SHARES VOTED AGAINST SHARES ABSTAIN BROKER NON-VOTE
<S> <C> <C> <C>
246,648,667 29,967,704 590,757 436,694
</TABLE>
AGENDA ITEM 5: To approve or disapprove removing the Trust's fundamental
investment policy on investing in new issuers.
The results of shareholders voting were as follows:
<TABLE>
<CAPTION>
SHARES VOTED FOR SHARES VOTED AGAINST SHARES ABSTAIN BROKER NON-VOTE
<S> <C> <C> <C>
265,121,567 11,448,903 636,658 436,694
</TABLE>
AGENDA ITEM 6: To approve or disapprove removing the Trust's fundamental
investment policy on investing in options.
The results of shareholders voting were as follows:
<TABLE>
<CAPTION>
SHARES VOTED FOR SHARES VOTED AGAINST SHARES ABSTAIN BROKER NON-VOTE
<S> <C> <C> <C>
258,406,830 17,945,176 855,122 436,694
</TABLE>
PORTFOLIO OF INVESTMENTS
MONEY MARKET TRUST
JULY 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM NOTES-6.7%
FINANCE - AUTOMOTIVE-4.2%
<C> <S> <C>
$ 2,263,370 Chase Manhattan Auto Owner Trust 1998-B, Class A-1, 5.578%, 5/10/1999 $ 2,263,370
15,000,000 Ford Credit Auto Owner Trust 1998-C, Class A-2, 5.670%, 6/15/1999 15,000,000
Total 17,263,370
FINANCE - EQUIPMENT-0.1%
574,702 Caterpillar Financial Asset Trust 1997-B, Class A-1, 5.805%, 11/25/1998 574,702
INSURANCE-2.0%
1,903,811 ContiMortgage Home Equity Loan Trust 1998-2, Class A-1, (Guaranteed by MBIA INS ),
5.649%,6/15/1999 1,903,811
4,617,991 WFS Financial Owner Trust 1998-A, Class A-1, (Guaranteed by FSA), 5.618%, 2/20/1999 4,617,991
1,500,000 WFS Financial Owner Trust 1998-B, Class A-1, 5.658%, (Guaranteed by FSA), 7/20/1999 1,500,000
Total 8,021,802
FINANCE - CONSUMER-0.4%
1,641,830 GreenTree Recreational, Equipment & Consumer Trust 1998-B, Class
A-1, 5.669%,
7/15/1999 1,641,830
TOTAL SHORT-TERM NOTES 27,501,704
CERTIFICATE OF DEPOSIT-4.9%
BANKING-4.9%
20,000,000 BANKERS TRUST CO., NEW YORK, 5.610% - 5.880%, 10/13/1998 - 2/26/1999 19,997,429
(A)COMMERCIAL PAPER5-3.5%
BANKING-5.5%
5,000,000 Comerica, Inc., 5.530%, 8/27/1998 4,980,030
18,000,000 J.P. Morgan & Co., Inc., 5.450% - 5.490%, 11/16/1998 - 12/31/1998 17,625,962
Total 22,605,992
BROKERAGE-4.7%
19,500,000 Merrill Lynch & Co., Inc., 5.520%, 8/17/1998 - 9/17/1998 19,422,567
FINANCE - AUTOMOTIVE-11.7%
19,000,000 Chrysler Financial Corp., 5.530% - 5.540%, 8/19/1998 - 9/14/1998 18,911,470
10,000,000 Ford Motor Credit Corp., 5.450%, 12/10/1998 9,801,681
20,000,000 General Motors Acceptance Corp., 5.510% - 5.512%, 10/27/1998 - 11/6/1998 19,715,278
Total 48,428,429
</TABLE>
MONEY MARKET TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(A)COMMERCIAL PAPER-CONTINUED
FINANCE - COMMERCIAL-16.5%
<C> <S> <C>
$ 5,000,000 Falcon Asset Securitization Corp., 5.550%, 8/21/1998 $ 4,984,583
18,200,000 General Electric Capital Corp., 5.490% - 5.510%, 10/7/1998 - 11/12/1998 17,940,794
17,375,000 Preferred Receivables Funding Co., (PREFCO), 5.540% - 5.550%, 8/19/1998 - 8/20/1998 17,324,942
11,852,000 Receivables Capital Corp., 5.540%, 8/26/1998 11,806,403
15,900,000 Sheffield Receivables Corp., 5.520% - 5.570%, 8/21/1998 - 9/8/1998 15,842,045
Total 67,898,767
FINANCE - RETAIL-6.0%
5,000,000 American General Finance Corp., 5.490%, 10/13/1998 4,944,338
9,900,000 Associates Corp. of North America, 5.520%, 10/16/1998 9,784,632
10,000,000 Associates First Capital Corp., 5.490%, 11/3/1998 9,856,650
Total 24,585,620
INSURANCE-4.5%
19,000,000 Marsh & McLennan Cos., Inc., 5.400% - 5.490%, 10/20/1998 - 12/14/1998 18,703,800
OIL & OIL FINANCE-4.6%
19,000,000 Chevron Transport Corp., (Guaranteed by Chevron Corp.), 5.500% - 5.613%, 9/8/1998 -
9/22/1998 18,868,211
TOTAL COMMERCIAL PAPER 220,513,386
CORPORATE NOTE-3.4%
BROKERAGE-3.4%
14,000,000 GOLDMAN SACHS GROUP, LP, 5.687%, 10/26/1998 14,000,000
(B)VARIABLE RATE OBLIGATIONS-15.4%
BANKING-5.2%
3,765,000 500 South Front St. LP, Series A, (Huntington National Bank, Columbus, OH LOC), 5.670%,
8/6/1998 3,765,000
3,300,000 Economic Development Partnership of Alabama, Inc., Series 1998, (Amsouth Bank N.A.,
Birmingham LOC), 5.690%, 8/6/1998 3,300,000
20,000 Kenny, Donald R. and Cheryl A., (Huntington National Bank, Columbus, OH LOC), 5.670%,
8/6/1998 20,000
3,600,000 Scranton Times, LP, (PNC Bank, N.A. LOC), 5.639%, 8/3/1998 3,600,000
5,000,000 Scranton Times, LP, Series 1997, (PNC Bank, N.A. LOC), 5.639%, 8/3/1998 5,000,000
5,990,000 Westminster Village Terre Haute, Inc., (Huntington National Bank, Columbus, OH LOC),
5.670%,8/6/1998 5,990,000
Total 21,675,000
</TABLE>
MONEY MARKET TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(B)VARIABLE RATE OBLIGATIONS-CONTINUED
ELECTRICAL EQUIPMENT-5.8%
<C> <S> <C>
$ 3,700,000 Alabama State IDA, General Electric Project, (General Electric Co. LOC), 5.640%,
8/5/1998 $ 3,700,000
2,804,713 Marta Leasing Ltd., (Guaranteed by General Electric Co.), 5.639%, 8/3/1998 2,804,713
17,422,897 Northwest Airlines, Inc., (Guaranteed by General Electric Co.), 5.639%, 8/3/1998 17,422,897
Total 23,927,610
INSURANCE-4.4%
18,000,000 Peoples Security Life Insurance Company, 5.840%, 9/1/1998 18,000,000
TOTAL VARIABLE RATE OBLIGATIONS 63,602,610
(C)REPURCHASE AGREEMENTS-15.8%
21,800,000 ABN AMRO Chicago Corp., 5.690%, dated 7/31/1998, due 8/3/1998 21,800,000
5,200,000 First Union Capital Markets, 5.630%, dated 7/31/1998, due 8/3/1998 5,200,000
5,000,000 Fuji Government Securities, Inc., 5.650%, dated 7/31/1998, due 8/3/1998 5,000,000
15,000,000 Goldman Sachs Group, LP, 5.700%, dated 7/31/1998, due 8/3/1998 15,000,000
15,000,000 HSBC Securities, Inc., 5.690%, dated 7/31/1998, due 8/3/1998 15,000,000
3,200,000 Societe Generale Securities Corp., 5.625%, dated 7/31/1998, due 8/3/1998 3,200,000
TOTAL REPURCHASE AGREEMENTS 65,200,000
TOTAL INVESTMENTS (AT AMORTIZED COST)(D) $410,815,129
</TABLE>
(a) Each issue shows the rate of discount at the time of purchase for discount
issues, or the coupon for interest bearing issues.
(b) Current rate and next reset date shown.
(c) The repurchase agreements are fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the portfolio.
The investments in the repurchase agreements are through participation in joint
accounts with other Federated funds.
(d) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($412,103,840) at July 31, 1998.
The following acronyms are used throughout this portfolio:
FSA Financial Security Assurance
IDA Industrial Development Authority
LOC Letter of Credit
LP Limited Partnership
MBIA Municipal Bond Investors Assurance
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
MONEY MARKET TRUST
JULY 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Investments in repurchase agreements $ 65,200,000
Investments in securities 345,615,129
Total investments at amortized cost and value $410,815,129
Cash 256,964
Income receivable 1,161,558
Receivable for shares sold 1,445,195
Prepaid expenses 21,418
Total assets 413,700,264
LIABILITIES:
Payable for shares redeemed 48,371
Income distribution payable 1,430,446
Accrued expenses 117,607
Total liabilities 1,596,424
NET ASSETS for 412,103,840 shares outstanding $412,103,840
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER SHARE:
$412,103,840 / 412,103,840 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
MONEY MARKET TRUST
YEAR ENDED JULY 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $24,446,846
EXPENSES:
Investment advisory fee $ 1,715,287
Administrative personnel and services fee 323,485
Custodian fees 36,016
Transfer and dividend disbursing agent fees and expenses 75,509
Directors'/Trustees' fees 16,132
Auditing fees 13,489
Legal fees 5,611
Portfolio accounting fees 84,434
Shareholder services fee 1,072,054
Share registration costs 31,866
Printing and postage 14,905
Insurance premiums 15,207
Taxes 530
Miscellaneous 14,309
Total expenses 3,418,834
Waivers--
Waiver of investment advisory fee $(599,001)
Waiver of shareholder services fee (857,644)
Total waivers (1,456,645)
Net expenses 1,962,189
Net investment income $22,484,657
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
MONEY MARKET TRUST
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 22,484,657 $ 25,685,832
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (22,484,657) (25,685,832)
SHARE TRANSACTIONS--
Proceeds from sale of shares 2,195,189,173 2,424,533,267
Net asset value of shares issued to shareholders in
payment of distributions declared 3,867,601 4,283,370
Cost of shares redeemed (2,250,964,853) (2,478,491,926)
Change in net assets resulting from share transactions (51,908,079) (49,675,289)
Change in net assets (51,908,079) (49,675,289)
NET ASSETS:
Beginning of period 464,011,919 513,687,208
End of period $ 412,103,840 $ 464,011,919
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
MONEY MARKET TRUST
JULY 31, 1998
ORGANIZATION
Money Market Trust (the "Trust") is registered under the Investment Company Act
of 1940, as amended (the "Act"), as an open-end management investment company.
The investment objective of the Trust is stability of principal and current
income.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS
The Trust's use of the amortized cost method to value its portfolio securities
is in accordance with Rule 2a-7 under the Act.
REPURCHASE AGREEMENTS
It is the policy of the Trust to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System, or to have
segregated within the custodian bank's vault, all securities held as collateral
under repurchase agreement transactions. Additionally, procedures have been
established by the Trust to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of collateral at
least equals the repurchase price to be paid under the repurchase agreement
transaction.
The Trust will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Trust's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Trust could receive less
than the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Distributions to shareholders are recorded on the ex- dividend
date.
FEDERAL TAXES
It is the Trust's policy to comply with the provisions of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax are
necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Trust may engage in when-issued or delayed delivery transactions. The Trust
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when- issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
RESTRICTED SECURITIES
Restricted securities are securities that may only be resold upon registration
under federal securities laws or in transactions exempt from such registration.
Many restricted securities may be resold in the secondary market in transactions
exempt from registration. In some cases, the restricted securities may be resold
without registration upon exercise of a demand feature. Such restricted
securities may be determined to be liquid under criteria established by the
Trustees. The Trust will not incur any registration costs upon such resales.
Restricted securities are valued at amortized cost in accordance with Rule 2a-7
under the Investment Company Act of 1940.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses, and revenues reported in
the financial statements. Actual results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
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, 1998, capital paid-in aggregated $412,103,840. Transactions in shares were
as follows: <TABLE> <CAPTION>
YEAR ENDED JULY 31,
1998 1997
<S> <C> <C>
Shares sold 2,195,189,173 2,424,533,267
Shares issued to shareholders in payment of distributions declared 3,867,601 4,283,370
Shares redeemed (2,250,964,853) (2,478,491,926)
Net change resulting from share transactions (51,908,079) (49,675,289)
</TABLE>
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Research, the Trust's investment adviser (the "Adviser"), receives for
its services an annual investment advisory fee equal to 0.40% of the Trust's
average daily net assets. The Adviser will waive, to the extent of its advisory
fee, the amount, if any, by which the Trust's aggregate annual operating
expenses (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
average daily net assets of the Trust.
ADMINISTRATIVE FEE
Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Trust with administrative personnel and services. The
fee paid to FServ is based on the level of average aggregate daily net assets of
all funds advised by subsidiaries of Federated Investors, Inc. for the period.
The administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Trust will pay FSS up to 0.25% of average daily net assets
of the Trust for the period. The fee paid to FSS is used to finance certain
services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive any portion of its fee. FSS can modify or terminate
this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ, through its subsidiary, Federated Shareholder Services Company ("FSSC")
serves as transfer and dividend disbursing agent for the Trust. The fee paid to
FSSC is based on the size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Trust's accounting records for which it receives a fee. The
fee is based on the level of the Trust's average daily net assets for the
period, plus out-of-pocket expenses.
GENERAL
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
YEAR 2000 (UNAUDITED)
Similar to other financial organizations, the Trust could be adversely affected
if the computer systems used by the Trust's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Trust's Adviser and Administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Trust's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Trust.
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, 1998, the
related statement of operations for the year then ended, the statements of
changes in net assets for the years ended July 31, 1998 and 1997, and the
financial highlights for the periods presented. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
July 31, 1998 by correspondence with the custodian and brokers; where replies
were not received, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Money Market Trust
as of July 31, 1998, the results of its operations, the changes in its net
assets and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
September 8, 1998
[graphic]
Money Market Trust
PROSPECTUS
SEPTEMBER 30, 1998
An Open-End, Management Investment Company
Money Market Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Federated Research
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT AUDITORS
Deloitte & Touche LLP
2500 One PPG Place
Pittsburgh, PA 15222-5401
[graphic]
Federated Securities Corp., Distributor
1-800-341-7400
Cusip 609900105
8083102A (9/98)
[graphic]
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, 1998. This Statement is not
a prospectus. You may request a copy of a prospectus or a paper copy of this
Statement, if you have received it electronically, free of charge by calling
1-800-341-7400.
MONEY MARKET TRUST
FEDERATED INVESTORS FUNDS
5800 CORPORATE DRIVE
PITTSBURGH, PA 15237-7000
Statement dated September 30, 1998
[graphic]
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 609900105
8083102B (9/98)
[graphic]
TABLE OF CONTENTS
Investment Policies 1
Acceptable Investments 1
U.S. Government Securities 1
Bank Instruments 1
Ratings 1
When-Issued and Delayed Delivery Transactions 1
Repurchase Agreements 1
Restricted and Illiquid Securities 2
Investing in Securities of
Other Investment Companies 2
Credit Enhancement 2
Investment Limitations 2
Selling Short and Buying on Margin 2
Borrowing Money 2
Pledging Assets 2
Investing in Commodities, Minerals, or Real Estate 2
Underwriting 2
Lending Cash or Securities 2
Acquiring Securities 2
Investing in Foreign Securities 3
Investing in Issuers Whose Securities are
Owned by Officers of the Trust 3
Concentration of Investments 3
Investing in Restricted and Illiquid Securities 3
Money Market Trust Management 4
Share Ownership 7
Trustee Compensation 8
Trustee Liability 8
Investment Advisory Services 8
Investment Adviser 8
Advisory Fees 9
Brokerage Transactions 9
Other Services 9
Trust Administration 9
Custodian and Portfolio Accountant 9
Transfer Agent 9
Independent Auditors 9
Shareholder Services 10
Determining Net Asset Value 10
Redemption in Kind 10
Massachusetts Partnership Law 10
The Trust's Tax Status 11
Performance Information 11
Yield 11
Effective Yield 11
Total Return 11
Performance Comparisons 11
Economic and Market Information 12
About Federated Investors, Inc. 12
Mutual Fund Market 12
Institutional Clients 12
Bank Marketing 13
Broker/Dealers and
Bank Broker/Dealer Subsidiaries 13
INVESTMENT POLICIES
Unless indicated otherwise, the policies described below may be changed by the
Board of Trustees (the "Trustees") without shareholder approval. Shareholders
will be notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of the
security; the issuer of any demand feature applicable to the security; or any
guarantor of either the security or any demand feature.
U.S. GOVERNMENT SECURITIES
The types of U.S. government securities in which the Trust may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued or guaranteed by
U.S. government agencies or instrumentalities. These securities are backed
by:
* the full faith and credit of the U.S. Treasury;
* the issuer's right to borrow from the U.S. Treasury;
* the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
* the credit of the agency or instrumentality issuing the obligations.
BANK INSTRUMENTS
The instruments of banks and savings associations whose deposits are insured by
the Bank Insurance Fund ("BIF") or the Savings Association Insurance Fund
("SAIF"), such as certificates of deposit, demand and time deposits, savings
shares, and bankers' acceptances, are not necessarily guaranteed by those
organizations. In addition to domestic bank instruments, the Trust may invest
in: Eurodollar Certificates of Deposit issued by foreign branches of U.S. or
foreign banks; Eurodollar Time Deposits, which are U.S. dollar-denominated
deposits in foreign branches of U.S. or foreign banks; Canadian Time Deposits,
which are U.S. dollar-denominated deposits issued by branches of major Canadian
banks located in the United States; and Yankee Certificates of Deposit, which
are U.S. dollar-denominated certificates of deposit issued by U.S. branches of
foreign banks and held in the United States.
RATINGS
A nationally recognized statistical rating organization ("NRSRO") 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 ("S&P"), Prime-1 by
Moody's Investors Service, Inc. ("Moody's"), or F-1 (+ or -) by Fitch IBCA, Inc.
("Fitch") are all considered rated in the highest short-term rating category.
The Trust will follow applicable regulations in determining whether a security
rated by more than one NRSRO can be treated as being in the highest short-term
rating category; currently, such securities must be rated by two NRSROs in their
highest rating category. See "Regulatory Compliance."
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Trust. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Trust in a dollar
amount sufficient to make payment for the securities to be purchased are:
segregated on the Trust's records at the trade date; marked to market daily; and
maintained until the transaction is settled. The Trust does not intend to engage
in when-issued and delayed delivery transactions to an extent that would cause
the segregation of more than 20% of the total value of its assets.
REPURCHASE AGREEMENTS
The Trust believes that under the regular procedures normally in effect for
custody of the Trust's portfolio securities subject to repurchase agreements, a
court of competent jurisdiction would rule in favor of the Trust and allow
retention or disposition of such securities. The Trust will only enter into
repurchase agreements with banks and other recognized financial institutions,
such as broker/dealers, which are deemed by the Trust's adviser to be
creditworthy pursuant to guidelines established by the Trustees.
RESTRICTED AND ILLIQUID SECURITIES
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission staff
position set forth in the adopting release for Rule 144A under the Securities
Act of 1933. The Trustees consider the following criteria in determining the
liquidity of certain restricted securities:
* the frequency of trades and quotes for the security;
* the number of dealers willing to purchase or sell the security and the number
of other potential buyers;
* dealer undertakings to make a market in the security; and
* the nature of the security and the nature of the marketplace trades.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
In conjunction with the Fund's ability to invest in the securities of other
investment companies, the Fund may invest in the securities of affiliated money
market funds as an efficient means of managing the Fund's uninvested cash.
CREDIT ENHANCEMENT
The Trust typically evaluates the credit quality and ratings of credit- enhanced
securities based upon the financial condition and ratings of the party providing
the credit enhancement (the "credit enhancer"), rather than the issuer.
Generally, the Trust will not treat credit-enhanced securities as being issued
by the credit enhancer for diversification purposes. However, under certain
circumstances applicable regulations may require the Trust to treat securities
as having been issued by both the issuer and the credit enhancer.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Trust will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as 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 (any such borrowings under
this section will not be collateralized).
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.
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.
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 in its portfolio securities issued by an
issuer, any of whose officers, directors or security holders is an officer,
director or Trustee of the Trust or adviser if, after the purchase of the
securities of such issuer by the Trust, one or more of such officers, directors
or Trustees owns beneficially more than 1/2 of 1% of the shares or securities or
both of such issuer, and such officer, director and trustee owning more than 1/2
of 1% of such shares or securities, together own beneficially more than 5% of
such shares or securities.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if as a result of such purchase more than
25% of the value of its total assets would be invested in any one industry.
However, investing in bank instruments such as time and demand deposits and
certificates of deposit, U.S. Treasury Bills or securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities, or instruments
secured by these money market instruments, such as repurchase agreements for
Government securities, shall not be considered investments in any one industry.
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.
INVESTING IN RESTRICTED AND ILLIQUID SECURITIES
The Trust will not invest more than 10% of the value of its net assets in
illiquid securities including certain restricted securities not determined to be
liquid under criteria established by the Trustees and repurchase agreements
providing for settlement in more than seven days after notice.
MONEY MARKET TRUST MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with Money Market Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chief Executive Officer and Director or Trustee of the
Funds; Chairman and Director, Federated Investors, Inc.;
Chairman and Trustee, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director,
Federated Research Corp. and Federated Global Research
Corp.; Chairman, Passport Research, Ltd.; Mr. Donahue is the
father of J. Christopher Donahue, Executive Vice President
of the Trust.
Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Director or Trustee of the Funds; Director, Member of Executive Committee,
Children's Hospital of Pittsburgh; formerly, Senior Partner, Ernst & Young LLP;
Director, MED 3000 Group, Inc.; Director, Member of Executive Committee,
University of Pittsburgh.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
Director or Trustee of the Funds; President, Investment
Properties Corporation; Senior Vice-President, John R. Wood
and Associates, Inc., Realtors; Partner or Trustee in
private real estate ventures in Southwest Florida; formerly,
President, Naples Property Management, Inc. and Northgate
Village Development Corporation.
Nicholas P. Constantakis
175 Woodshire Drive
Pittsburgh, PA
Birthdate: September 3, 1939
Trustee
Director or Trustee of the Funds; formerly, Partner,
Andersen Worldwide SC.
William J. Copeland
One PNC Plaza-23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director or Trustee of the Funds; Director and Member of the
Executive Committee, Michael Baker, Inc.; formerly, Vice
Chairman and Director, PNC Bank, N.A. and PNC Bank Corp.;
Director, Ryan Homes, Inc.; Director, United Refinery;
Chairman, Pittsburgh Foundation; Director, Forbes Fund;
Chairman, Pittsburgh Civic Light Opera.
James E. Dowd, Esq.
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Director or Trustee of the Funds; Attorney-at-law; Director,
The Emerging Germany Fund, Inc.; formerly, President, Boston
Stock Exchange, Inc.; Regional Administrator, United States
Securities and Exchange Commission.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Director or Trustee of the Funds; Professor of Medicine,
University of Pittsburgh; Medical Director, University of
Pittsburgh Medical Center-Downtown; Hematologist, Oncologist, and Internist,
Presbyterian and Montefiore Hospitals; formerly, Member, National Board
of Trustees, Leukemia Society of America.
Edward L. Flaherty, Jr., Esq. @
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Director or Trustee of the Funds; Attorney of Counsel, Miller, Ament, Henny &
Kochuba; Director, Eat'N Park Restaurants, Inc.; formerly, Counsel, Horizon
Financial, F.A., Western Region; Partner, Meyer and Flaherty.
Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Trustee
Director or Trustee of the Funds; formerly, Representative, Commonwealth of
Massachusetts General Court; President, State Street Bank and Trust Company and
State Street Corporation; Director, VISA USA and VISA International; Chairman
and Director, Massachusetts Banker Association; Director, Depository Trust
Corporation.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
Director or Trustee of the Funds; President, Law Professor, Duquesne University;
Consulting Partner, Mollica & Murray; formerly, Dean and Professor of Law,
University of Pittsburgh School of Law; Dean and Professor of Law, Villanova
University School of Law.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Director or Trustee of the Funds; President, World Society for Ekistics, Athens;
Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University and U.S. Space Foundation; President
Emeritus, University of Pittsburgh; Founding Chairman, National Advisory Council
for Environmental Policy and Technology, Federal Emergency Management Advisory
Board and Czech Management Center, Prague; formerly, Professor, United States
Military Academy; Professor, United States Air Force Academy.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Director or Trustee of the Funds; Public Relations/ Marketing/Conference
Planning; formerly, National Spokesperson, Aluminum Company of America; business
owner.
Glen R. Johnson
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President
President and/or Trustee of some of the Funds; staff member, Federated
Securities Corp.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President or Executive Vice President of the Funds;
President and Director, Federated Investors, Inc.; President
and Trustee, Federated Advisers, Federated Management, and
Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.;
President, Passport Research, Ltd.; Trustee, Federated
Shareholder Services Company, and Federated Shareholder
Services; Director, Federated Services Company; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman
and Trustee of the Trust.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Trustee or Director of some of the Funds; President, Executive Vice President
and Treasurer of some of the Funds; Vice Chairman, Federated Investors, Inc.;
Vice President, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President, Secretary, and Treasurer
Executive Vice President and Secretary of the Funds; Treasurer of some of the
Funds; Executive Vice President, Secretary, and Director, Federated Investors,
Inc.; Trustee, Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.; Trustee,
Federated Shareholder Services Company; Director, Federated Services Company;
President and Trustee, Federated Shareholder Services; Director, Federated
Securities Corp.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
President or Vice President of some of the Funds; Director or Trustee of some of
the Funds; Executive Vice President, Federated Investors, Inc.; Chairman and
Director, Federated Securities Corp.
*This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board between meetings of the
Board.
As referred to in the list of Trustees and Officers, "Funds" includes the
following investment companies:
Automated Government Money Trust; Blanchard Funds; Blanchard Precious Metals
Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; CCB Funds; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
Adjustable Rate U.S. Government Fund, Inc.; Federated American Leaders Fund,
Inc.; Federated ARMs Fund; Federated Core Trust; Federated Equity Funds;
Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Investment Portfolios; Federated Investment Trust; Federated
Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated Stock and Bond
Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; Fixed Income Securities, Inc.; High Yield Cash
Trust; Intermediate Municipal Trust; International Series, Inc.; Investment
Series Funds, Inc.; Investment Series Trust; Liberty Term Trust, Inc.-1999;
Liberty U.S. Government Money Market Trust; Liquid Cash Trust; Managed Series
Trust; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Obligations Trust II; Money Market Trust; Municipal Securities Income
Trust; Newpoint Funds; Regions Funds; RIGGS Funds; Targeted Duration Trust; Tax-
Free Instruments Trust; The Planters Funds; The Virtus Funds; Trust for
Financial Institutions; Trust for Government Cash Reserves; Trust for Short-
Term U.S. Government Securities; Trust for U.S. Treasury Obligations; WesMark
Funds; WCT Funds; and World Investment Series, Inc.
SHARE OWNERSHIP
Officers and Trustees as a group own less than 1% of the Trust.
As of September 3, 1998, the following shareholders of record owned 5% or more
of the outstanding shares of the Trust: Fiduciary Trust Company International,
New York, NY, owned approximately 106,084,900 shares (22.15%).
TRUSTEE COMPENSATION
<TABLE>
<CAPTION>
NAME, AGGREGATE
POSITION WITH COMPENSATION TOTAL COMPENSATION PAID
TRUST FROM TRUST*# FROM FUND COMPLEX+
<S> <C> <C>
John F. Donahue $0 $0 for the Trust and
Chairman and Trustee 56 other investment companies in the Fund Complex
Thomas G. Bigley $1,350 $111,222 for the Trust and
Trustee 56 other investment companies in the Fund Complex
John T. Conroy, Jr. $1,486 $122,362 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Nicholas P. Constantakis@ $196 $0 for the Trust and
Trustee 36 other investment companies in the Fund Complex
William J. Copeland $1,486 $122,362 for the Trust and
Trustee 56 other investment companies in the Fund Complex
James E. Dowd, Esq. $1,486 $122,362 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D. $1,350 $111,222 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Edward L. Flaherty, Jr., Esq. $1,486 $122,362 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Peter E. Madden $1,350 $111,222 for the Trust and
Trustee 56 other investment companies in the Fund Complex
John E. Murray, Jr., J.D., S.J.D. $1,350 $111,222 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Wesley W. Posvar $1,350 $111,222 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Marjorie P. Smuts $1,350 $111,222 for the Trust and
Trustee 56 other investment companies in the Fund Complex
</TABLE>
*Information is furnished for the fiscal year ended July 31, 1998.
#The aggregate compensation is provided for the Trust which is comprised of
one portfolio.
+The information is provided for the last calendar year.
@Mr. Constantakis became a member of the Board of Trustees on April 30, 1998.
He did not earn any fees for serving the Fund Complex since these fees are
reported as of the end of the last calendar year.
TRUSTEE LIABILITY
The Declaration of Trust provides that the Trustees will not be liable for
errors of judgment or mistakes of fact or law. However, they are not protected
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
INVESTMENT ADVISER
The Trust's investment adviser is Federated Research. It is a subsidiary of
Federated Investors, Inc. All the voting securities of Federated Investors,
Inc. are owned by a trust, the trustees of which are John F. Donahue, his
wife, and his son, J. Christopher Donahue.
The adviser shall not be liable to the Trust or any shareholder for any losses
that may be sustained in the purchase, holding, or sale of any security or for
anything done or omitted by it, except acts or omissions involving willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, Federated Research receives an annual investment
advisory fee as described in the prospectus. For the fiscal years ended July 31,
1998, 1997, and 1996, the adviser earned $1,715,287, $2,020,387, and $1,925,061,
respectively, of which $599,001, $662,649, and $666,410, respectively, were
waived.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
guidelines established by the Trustees. The adviser may select brokers and
dealers who offer brokerage and research services. These services may be
furnished directly to the Trust or to the adviser and may include: advice as to
the advisability of investing in securities; security analysis and reports;
economic studies; industry studies; receipt of quotations for portfolio
evaluations; and similar services. Research services provided by brokers and
dealers may be used by the adviser or its affiliates in advising the Trust and
other accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The adviser and its affiliates exercise
reasonable business judgment in selecting brokers who offer brokerage and
research services to execute securities transactions. They determine in good
faith that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided.
Although investment decisions for the Trust are made independently from those of
the other accounts managed by the adviser, investments of the type the Trust may
make may also be made by those other accounts. When the Trust and one or more
other accounts managed by the adviser are prepared to invest in, or desire to
dispose of, the same security, available investments or opportunities for sales
will be allocated in a manner believed by the adviser to be equitable to each.
In some cases, this procedure may adversely affect the price paid or received by
the Trust or the size of the position obtained or disposed of by the Trust. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Trust.
OTHER SERVICES
TRUST ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors, Inc., provides
administrative personnel and services to the Trust for a fee as described in the
prospectus. From March 1, 1994, to March 1, 1996, Federated Administrative
Services, a subsidiary of Federated Investors, Inc., served as the Trust's
Administrator. For purposes of this Statement of Additional Information,
Federated Services Company and Federated Administrative Services may hereinafter
collectively be referred to as the "Administrators." For the fiscal years ended
July 31, 1998, 1997, and 1996, the Administrators earned $323,485, $381,501, and
$364,005, respectively.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Trust. Federated Services Company, Pittsburgh,
Pennsylvania, provides certain accounting and recordkeeping services with
respect to the Trust's portfolio investments. The fee paid for this service is
based upon the level of the Trust's average net assets for the period plus
out-of-pocket expenses.
TRANSFER AGENT
Federated Services Company, through its registered transfer agent, Federated
Shareholder Services Company, maintains all necessary shareholder records. For
its services, the transfer agent receives a fee based on the number of
shareholder accounts.
INDEPENDENT AUDITORS
The independent auditors for the Trust are Deloitte & Touche LLP, Pittsburgh,
Pennsylvania.
SHAREHOLDER SERVICES
This arrangement permits the payment of fees to Federated Shareholder Services
to cause services to be provided which are necessary for the maintenance of
shareholder accounts and to encourage personal services to shareholders by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include but are not limited to
providing office space, equipment, telephone facilities, and various clerical,
supervisory, computer, and other personnel as necessary or beneficial to
establish and maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries; and assisting clients in changing
dividend options, account designations, and addresses.
By adopting the Shareholder Services Agreement, the Trustees expect that the
Trust will benefit by: (1) providing personal services to shareholders; (2)
investing shareholder assets with a minimum of delay and administrative detail;
(3) enhancing shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts.
For the fiscal year ended July 31, 1998, the Trust paid shareholder service fees
in the amount of $1,072,054, of which $857,644 was waived.
DETERMINING NET ASSET VALUE
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
Accordingly, neither the amount of daily income nor the net asset value is
affected by any unrealized appreciation or depreciation of the portfolio. In
periods of declining interest rates, the indicated daily yield on shares of the
Trust computed by dividing the annualized daily income on the Trust's portfolio
by the net asset value computed as above may tend to be higher than a similar
computation made by using a method of valuation based upon market prices and
estimates. In periods of rising interest rates, the opposite may be true.
The Trust's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in Rule 2a-7 (the "Rule")
promulgated by the Securities and Exchange Commission under the Investment
Company Act of 1940. Under the Rule, the Trustees must establish procedures
reasonably designed to stabilize the net asset value per share, as computed for
purposes of distribution and redemption, at $1.00 per share, taking into account
current market conditions and the Trust's investment objective. The procedures
include monitoring the relationship between the amortized cost value per share
and the net asset value per share based upon available indications of market
value. The Trustees will decide what, if any, steps should be taken if there is
a difference of more than 0.5% between the two values. The Trustees will take
any steps they consider appropriate (such as redemption in kind or shortening
the average portfolio maturity) to minimize any material dilution or other
unfair results arising from differences between the two methods of determining
net asset value.
REDEMPTION IN KIND
The Trust is obligated to redeem shares solely in cash up to $250,000 or 1% of
the Trust's net asset value, whichever is less, for any one shareholder within a
90-day period. Any redemption beyond this amount will also be in cash unless the
Trustees determine that further payments should be in kind. In such cases, the
Trust will pay all or a portion of the remainder of the redemption in portfolio
instruments valued in the same way as the Trust determines net asset value. The
portfolio instruments will be selected in a manner that the Trustees deem fair
and equitable. Redemption in kind is not as liquid as a cash redemption. If
redemption is made in kind, shareholders who sell these securities could receive
less than the redemption value and could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust. These documents require notice of this disclaimer to be given in each
agreement, obligation, or instrument the Trust or its Trustees enter into or
sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for any act or
obligation of the Trust. Therefore, financial loss resulting from liability as a
shareholder will occur only if the Trust itself cannot meet its obligations to
indemnify shareholders and pay judgments against them.
THE TRUST'S TAX STATUS
To qualify for the special tax treatment afforded to regulated investment
companies, the Trust must, among other requirements: derive at least 90% of its
gross income from dividends, interest, and gains from the sale of securities;
invest in securities within certain statutory limits; and distribute to its
shareholders at least 90% of its net income earned during the year.
PERFORMANCE INFORMATION
Performance depends upon such variables as: portfolio quality; average portfolio
maturity; type of instruments in which the portfolio is invested; changes in
interest rates; changes in expenses; and the relative amount of cash flow. To
the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in shares of
the Trust, the performance will be reduced for those shareholders paying those
fees.
YIELD
The yield is calculated based upon the seven days ending on the day of the
calculation, called the "base period." This yield is computed by: determining
the net change in the value of a hypothetical account with a balance of one
share at the beginning of the base period, with the net change excluding capital
changes but including the value of any additional shares purchased with
dividends earned from the original one share and all dividends declared on the
original and any purchased shares; dividing the net change in the account's
value by the value of the account at the beginning of the base period to
determine the base period return; and multiplying the base period return by
365/7.
The Trust's yield for the seven-day period ended July 31, 1998, was 5.24%.
EFFECTIVE YIELD
The effective yield is calculated by compounding the unannualized base period
return by: adding 1 to the base period return; raising the sum to the 365/7th
power; and subtracting 1 from the result. The Trust's effective yield for the
seven-day period ended July 31, 1998, was 5.38%.
TOTAL RETURN
Average annual total return is the average compounded rate of return for a given
period that would equate a $1,000 initial investment to the ending redeemable
value of that investment. The ending redeemable value is computed by multiplying
the number of shares owned at the end of the period by the net asset value per
share at the end of the period. The number of shares owned at the end of the
period is based on the number of shares purchased at the beginning of the period
with $1,000, adjusted over the period by any additional shares, assuming the
monthly reinvestment of all dividends and distributions.
The Trust's average annual total returns for the one- five- and ten-year period
ended July 31, 1998, were 5.35%, 4.89%, and 5.62%, respectively.
PERFORMANCE COMPARISONS
Investors may use financial publications and/or indices to obtain a more
complete view of the Trust's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Trust uses in advertising may include:
* 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.
* IBC/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.
Advertising and other promotional literature may include charts, graphs, and
other illustrations using the Trust's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Trust can
compare its performance, or performance for the types of securities in which it
invests, to a variety of other investments, such as bank savings accounts,
certificates of deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Trust may include discussions of
economic, financial, and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by portfolio managers and their views and analysis on how such
developments could affect the funds. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute.
ABOUT FEDERATED INVESTORS, INC.
Federated Investors, Inc. is dedicated to meeting investor needs which is
reflected in its investment decision making-structured, straightforward, and
consistent. This has resulted in a history of competitive performance with a
range of competitive investment products that have gained the confidence of
thousands of clients and their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment decisions
are made and executed by teams of portfolio managers, analysts, and traders
dedicated to specific market sectors. These traders handle trillions of dollars
in annual trading volume.
In the money market sector, Federated Investors, Inc. gained prominence in the
mutual fund industry in 1974 with the creation of the first institutional money
market fund. Simultaneously, the company pioneered the use of the amortized cost
method of accounting for valuing shares of money market funds, a principal means
used by money managers today to value money market fund shares. Other
innovations include the first institutional tax-free money market fund. As of
December 31, 1997, Federated Investors, Inc. managed more than $63.1 billion in
assets across 51 money market funds, including 18 government, 11 prime, and 22
municipal with assets approximating $35 billion, $17.1 billion and $10.9
billion, respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated Investors, Inc. are: U.S. equity and high
yield-J. Thomas Madden; U.S. fixed-income-William D. Dawson, III; and global
equities and fixed income-Henry A. Frantzen. The Chief Investment Officers
are Executive Vice Presidents of the Federated advisory companies.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $4.4 trillion to the more than 6,700 funds available.*
Federated Investors, Inc. through its subsidiaries, distributes mutual funds
for a variety of investment applications. Specific markets include:
Institutional Clients
Federated Investors, Inc. meets the needs of approximately 900 institutional
clients nationwide by managing and servicing separate accounts and mutual funds
for a variety of applications, including defined benefit and defined
contribution programs, cash management, and asset/liability management.
Institutional clients include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division.
*Source: Investment Company Institute
BANK MARKETING
Other institutional clients include close relationships with more than 1,600
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios. The
marketing effort to trust clients is headed by Timothy C. Pillion, Senior Vice
President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide-we have over 2,200 broker/dealer and bank broker/dealer relationships
across the country-supported by more wholesalers than any other mutual fund
distributor. Federated's service to financial professionals and institutions has
earned it high ratings in several surveys performed by DALBAR, Inc. DALBAR is
recognized as the industry benchmark for service quality measurement. The
marketing effort to these firms is headed by James F. Getz, President, Federated
Securities Corp.
