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AUTOMATED GOVERNMENT MONEY TRUST
PROSPECTUS
The shares of Automated Government Money Trust (the "Trust") offered
by this prospectus represent interests in an open-end, diversified
management investment company (a mutual fund), investing in
short-term U.S. Treasury securities to achieve stability of principal
and current income consistent with stability of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS
OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT
INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT
RISKS INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE TRUST ATTEMPTS TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE NO
ASSURANCE THAT THE TRUST WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know
before you invest in the Trust. Keep this prospectus for future
reference.
The Trust has also filed a Statement of Additional Information dated
September 30, 1994, with the Securities and Exchange Commission. The
information contained in the Statement of Additional Information is
incorporated by reference into this prospectus. You may request a
copy of the Statement of Additional Information free of charge by
calling 1-800-235-4669. To obtain other information, or make
inquiries about the Trust, contact the Trust at the address listed in
the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated September 30, 1994
TABLE OF CONTENTS
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<TABLE>
<S> <C>
SUMMARY OF TRUST EXPENSES 1
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FINANCIAL HIGHLIGHTS 2
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GENERAL INFORMATION 3
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INVESTMENT INFORMATION 3
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Investment Objective 3
Investment Policies 3
Investment Limitations 4
Regulatory Compliance 4
TRUST INFORMATION 4
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Management of the Trust 4
Distribution of Shares 5
Administration of the Trust 6
NET ASSET VALUE 6
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INVESTING IN THE TRUST 7
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Share Purchases 7
Minimum Investment Required 7
Subaccounting Services 7
Certificates and Confirmations 8
Dividends 8
Capital Gains 8
REDEEMING SHARES 8
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By Mail 8
Telephone Redemption 9
Accounts with Low Balances 10
SHAREHOLDER INFORMATION 10
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Voting Rights 10
Massachusetts Partnership Law 10
TAX INFORMATION 10
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Federal Income Tax 10
Pennsylvania Corporate and Personal
Property Taxes 11
PERFORMANCE INFORMATION 11
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FINANCIAL STATEMENTS 12
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INDEPENDENT AUDITORS' REPORT 19
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ADDRESSES 23
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</TABLE>
I
SUMMARY OF TRUST EXPENSES
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<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............................................................. None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)............................................................. None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds, as applicable)........................................................................ None
Redemption Fees (as a percentage of amount redeemed, if applicable)............................... None
Exchange Fee...................................................................................... None
<CAPTION>
ANNUAL TRUST OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee (after waiver) (1)................................................................. 0.21%
12b-1 Fee......................................................................................... None
Total Other Expenses.............................................................................. 0.36%
Shareholder Services Fee............................................................. 0.25%
Total Trust Operating Expenses (2)........................................................ 0.57%
<FN>
(1) The Management Fee has been reduced to reflect the voluntary waiver of a
portion of the Management Fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum Management Fee is
0.50%.
(2) The Total Trust Operating Expenses in the table above are based on expenses
expected during the fiscal year ending July 31, 1995. The Total Trust
Operating Expenses were 0.57% for the fiscal year ended July 31, 1994 and
were 0.63% absent the voluntary waiver of a portion of the Management Fee.
</TABLE>
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE TRUST WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "TRUST INFORMATION." Wire-transferred redemptions of less than
$5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
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<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return and (2) redemption at the end of
each time period................................................. $6 $18 $32 $71
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
1
AUTOMATED GOVERNMENT MONEY TRUST
FINANCIAL HIGHLIGHTS
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(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Independent Auditors' Report on page 19.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
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1994 1993 1992 1991 1990
------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------
INCOME FROM INVESTMENT OPERATIONS
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Net investment income 0.03 0.03 0.04 0.07 0.08
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LESS DISTRIBUTIONS
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Dividends to shareholders from net investment income (0.03) (0.03) (0.04) (0.07) (0.08)
- ------------------------------- --------- --------- --------- --------- ---------
NET ASSET VALUE,
END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------- --------- --------- --------- --------- ---------
TOTAL RETURN* 2.95% 2.79% 4.26% 6.77% 8.21%
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RATIOS TO AVERAGE NET ASSETS
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Expenses 0.57% 0.55% 0.57% 0.55% 0.55%
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Net investment income 2.88% 2.75% 4.17% 6.55% 7.92%
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Expense waiver/ reimbursement (a) 0.06% 0.01% 0.01% 0.03% 0.03%
- -------------------------------
SUPPLEMENTAL DATA
- -------------------------------
Net assets, end of period (000 omitted) $2,640,384 $3,115,772 $3,177,695 $2,829,602 $2,596,695
- -------------------------------
<CAPTION>
YEAR ENDED JULY 31,
-----------------------------------------------------
1989 1988 1987 1986 1985
------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------
Net investment income 0.08 0.06 0.06 0.07 0.09
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LESS DISTRIBUTIONS
- -------------------------------
Dividends to shareholders from net investment income (0.08) (0.06) (0.06) (0.07) (0.09)
- ------------------------------- --------- --------- --------- --------- ---------
NET ASSET VALUE,
END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------- --------- --------- --------- --------- ---------
TOTAL RETURN* 8.58% 6.55% 5.73% 7.11% 9.05%
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RATIOS TO AVERAGE NET ASSETS
- -------------------------------
Expenses 0.55% 0.55% 0.55% 0.55% 0.55%
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Net investment income 8.30% 6.39% 5.59% 6.86% 8.51%
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Expense waiver/ reimbursement (a) 0.04% 0.03% 0.02% 0.03% 0.03%
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SUPPLEMENTAL DATA
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Net assets, end of period (000 omitted) $2,791,097 $2,388,700 $1,536,678 $1,782,895 $1,302,766
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<FN>
* Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
</TABLE>
(See Notes which are an integral part of the Financial Statements)
2
GENERAL INFORMATION
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The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated June 1, 1982. The Trust is designed for investors as a convenient
means of accumulating an interest in a professionally managed, diversified
portfolio investing only in short-term U.S. Treasury securities. A minimum
initial investment of $25,000 over a 90-day period is required.
The Trust attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
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INVESTMENT OBJECTIVE
The investment objective of the Trust is stability of principal and current
income consistent with stability of principal. This investment objective cannot
be changed without shareholder approval. While there is no assurance that the
Trust will achieve its investment objective, it endeavors to do so by following
the investment policies described in this prospectus. The investment policies
and limitations described below cannot be changed by the Board of Trustees
without approval of shareholders.
INVESTMENT POLICIES
The Trust pursues its investment objective by investing only in short-term U.S.
Treasury securities maturing in one year or less. As a matter of operating
policy, which may be changed without shareholder approval, the average maturity
of the securities in the Trust's portfolio, computed on a dollar-weighted basis,
will be 90 days or less. The Trust may attempt to increase yield by trading
portfolio instruments to take advantage of short-term market variations.
ACCEPTABLE INVESTMENTS. The Trust invests only in short-term securities that
are issued or guaranteed as to principal and interest by the U.S. Treasury.
These securities include (i) U.S. Treasury bills, notes and bonds and (ii)
instruments of the Export-Import Bank of the U.S., the General Services
Administrations, the Small Business Administration and the Washington
Metropolitan Area Transit Authority.
REPURCHASE AGREEMENTS. Certain securities in which the Trust invests may be
purchased pursuant to repurchase agreements which provide for repurchase by the
seller within one year from the date of acquisition. Repurchase agreements are
arrangements in which banks, brokers/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.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Trust may purchase U.S.
Treasury 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
3
failure to complete these transactions may cause the Trust to miss a price or
yield considered to be advantageous. Settlement dates may be a month or more
after entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. Accordingly, the Trust may pay
more/less than the market value of the securities on the settlement date.
The Trust may dispose of a commitment prior to settlement if the adviser deems
it appropriate to do so. In addition, the Trust may enter into transactions to
sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Trust may realize short-term profits or losses upon the sale of such
commitments.
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 up to 10% of the value of those assets to secure such
borrowings.
The above investment limitation cannot be changed without shareholder approval.
The following limitation, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in this limitation becomes effective.
The Trust will not invest more than 10% of its net assets in illiquid
securities, including repurchase agreements providing for settlement in more
than seven days after notice.
REGULATORY COMPLIANCE
The Trust may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in this
prospectus and its Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940, as amended. In particular, the Trust
will comply with the various requirements of Rule 2a-7, which regulates money
market mutual funds. The Trust will determine the effective maturity of its
investments according to Rule 2a-7. The Trust may change these operational
policies to reflect changes in the laws and regulations without the approval of
its shareholders.
TRUST INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Trust are made by Federated
Management, 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.
4
ADVISORY FEES. The adviser receives an annual investment advisory fee equal to
0.50 of 1% of the Trust's average daily net assets. The adviser has undertaken
to reimburse the Trust up to the amount of the advisory fee for operating
expenses in excess of limitations established by certain states. The adviser
also may voluntarily choose to waive a portion of its fee or reimburse other
expenses of the Trust, but reserves the right to terminate such waiver or
reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust organized
on April 11, 1989, is a registered investment adviser under the Investment
Advisers Act of 1940. It is a subsidiary of Federated Investors. All of the
Class A (voting) shares of Federated Investors are owned by a trust, the
trustees of which are John F. Donahue, Chairman and Trustee of Federated
Investors, Mr. Donahue's wife, and Mr. Donahue's son, J. Christopher Donahue,
who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private accounts.
Certain other subsidiaries also provide administrative services to a number of
investment companies. Total assets under management or administration by these
and other subsidiaries of Federated Investors are approximately $70 billion.
Federated Investors, which was founded in 1956 as Federated Investors, Inc.,
develops and manages mutual funds primarily for the financial industry.
Federated Investors' track record of competitive performance and its
disciplined, risk averse investment philosophy serve approximately 3,500 client
institutions nationwide. Through these same client institutions, individual
shareholders also have access to this same level of investment expertise.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for shares of the Trust.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
SHAREHOLDER SERVICES PLAN. The Trust has adopted a Shareholder Services Plan
under which it will pay Federated Shareholder Services, an affiliate of
Federated Investors, an amount not exceeding 0.25 of 1% of the average daily net
asset value of the Trust to provide personal services and/or maintenance of
shareholder accounts to the Trust and its shareholders. Federated Shareholder
Services may, from time to time and for such periods as it deems appropriate,
voluntarily reduce the amount stated above.
Federated Shareholder Services may elect to pay financial institutions fees
based upon shares owned by their clients or customers for services provided to
those clients and customers. The schedules of such fees and the basis upon which
such fees will be paid will be determined from time to time by Federated
Shareholder Services.
5
ADMINISTRATION OF THE TRUST
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and accounting services) necessary to operate the Trust. Federated
Administrative Services provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
----------- ------------------------------------
<C> <S>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
Average aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may choose
voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, MA is custodian for the
securities and cash of the Trust.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, PA is transfer agent for the shares of, and dividend disbursing
agent for, the Trust.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, PA and Dickstein, Shapiro & Morin, L.L.P., Washington, D.C.
INDEPENDENT AUDITORS. The independent Auditors for the Trust are Deloitte &
Touche LLP, Pittsburgh, PA.
NET ASSET VALUE
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The Trust attempts to stabilize the net asset value of its shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per share is determined by subtracting total liabilities from total assets
and dividing the remainder by the number of shares outstanding. The Trust cannot
guarantee that its net asset value will always remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 3:00 p.m., and 4:00 p.m.
(Eastern time) Monday through Friday except on: (i) days on which there are not
sufficient changes in the value of the Trust's portfolio securities that its net
asset value might be materially affected; (ii) days during which no shares are
tendered for redemption and no orders to purchase shares are received; or (iii)
the following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day .
6
INVESTING IN THE TRUST
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SHARE PURCHASES
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange and the Federal Reserve Wire System are open for business. Shares may
be purchased either by wire or mail. The Trust reserves the right to reject any
purchase request.
To make a purchase, open an account by calling Federated Securities Corp.
Information needed to establish the account will be taken by telephone.
BY WIRE. To purchase by Federal Reserve wire, call the Trust before 1:00 p.m.
(Eastern time) to place an order. The order is considered received immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern time) that
day. Federal funds should be wired as follows: Federated Services Company, c/o
State Street Bank and Trust Company, Boston, Massachusetts; Attention: EDGEWIRE;
For Credit to: Automated Government Money Trust; Fund Number (this number can be
found on the account statement or by contacting the Trust); Group Number or
Order Number; Nominee or Institution Name; and ABA Number 011000028.
BY MAIL. To purchase by mail, send a check made payable to Automated Government
Money Trust to: the Trust's transfer agent, Federated Services Company, P.O. Box
8604, Boston, MA 02266-8604. Orders by mail are considered received when payment
by check is converted into federal funds. This is normally the next business day
after the check is received.
AUTOMATIC INVESTMENTS. Investors may establish accounts with their financial
institutions to have cash accumulations automatically invested in the Trust. The
investments may be made on predetermined dates or when the investor's account
reaches a certain level. Participating financial institutions are responsible
for prompt transmission of orders relating to the program, and they may charge
for their services. Investors should read this prospectus along with the
financial institution's agreement or literature describing these services and
fees.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment is $25,000. However, an account may be opened
with a smaller amount as long as the minimum is reached within 90 days. Minimum
investments will be calculated by combining all accounts maintained with the
Trust. Financial institutions may impose different minimum investment
requirements on their customers.
SUBACCOUNTING SERVICES
Financial institutions are encouraged to open single master accounts. However,
certain financial institutions may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent charges a fee based on the level of subaccounting services
rendered. Financial institutions may charge or pass through subaccounting fees
as part of or in addition to normal trust or agency account fees. They may also
charge fees for other services provided which may be related to the ownership of
Trust shares. This prospectus should, therefore, be
7
read together with any agreement between the customer and the financial
institution with regard to the services provided, the fees charged for those
services and any restrictions and limitations imposed.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Trust, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Trust or Federated Services Company in writing.
Monthly confirmations are sent to report transactions such as all purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are automatically
reinvested on payment dates in additional shares of the Trust unless cash
payments are requested by writing to the Trust. Shares purchased by wire before
3:00 p.m. (Eastern time) begin earning dividends that day. Shares purchased by
check begin earning dividends the day after the check is converted into federal
funds.
CAPITAL GAINS
The Trust does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Trust will distribute in cash or additional shares any realized
net long-term capital gains at least once every 12 months.
REDEEMING SHARES
- --------------------------------------------------------------------------------
Shares are redeemed at their net asset value next determined after the transfer
agent receives the redemption request. Redemptions will be made on days on which
the Trust computes its net asset value. Redemption requests must be received in
proper form and can be made as described below.
BY MAIL
Shares may be redeemed by sending a written request to: Automated Government
Money Trust, P.O. Box 8604, Boston, MA 02266-8604. The written request should
state: name of the Trust; shareholder's name; the account number; and the share
or dollar amount requested. Sign the request exactly as the shares are
registered. Shareholders should call the Trust for assistance in redeeming by
mail.
If share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request.
Shareholders requesting a redemption of $50,000 or more, a redemption of any
amount to be sent to an address other than that on record with the Trust, or a
redemption payable other than to the shareholder of record must have their
signatures guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund, which is administered by the Federal Deposit Insurance
Corporation ("FDIC");
8
- a member firm of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges;
- a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund, which is administered by the
FDIC; or
- any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Trust does not accept signatures guaranteed by a notary public.
The Trust and the transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Trust may elect in the future to
limit eligible signature guarantors to institutions that are members of the
signature guarantee program. The Trust and its transfer agent reserve the right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request. Dividends are paid up to and including the day that a redemption
request is processed.
BY WRITING A CHECK. At the shareholder's request, Federated Services Company
will establish a checking account for redeeming shares. For further information,
contact a representative of Federated Securities Corp.
With this checking account, shares may be redeemed by writing a check for $100
or more. The redemption will be made at the net asset value on the date that the
check is presented to the Trust. A check may not be written to close an account.
A shareholder may obtain cash by negotiating the check through the shareholder's
local bank. Checks should never be made payable or sent to State Street Bank and
Trust Company to redeem shares. Cancelled checks are sent to the shareholder
each month.
TELEPHONE REDEMPTION
Shares may be redeemed by telephoning the Trust. Telephone redemption
instructions may be recorded and if reasonable procedures are not followed by
the Trust, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. An authorization form permitting the Trust to accept
telephone requests must first be completed. Authorization forms and information
on this service are available from Federated Securities Corp.
If the redemption request is received before 3:00 p.m. (Eastern time), the
proceeds will be wired the same day to the shareholder's account at a domestic
commercial bank which is a member of the Federal Reserve System, and those
shares redeemed will not be entitled to that day's dividend. A daily dividend
will be paid on shares redeemed if the redemption request is received after 3:00
p.m. (Eastern time).
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as "By Mail", should be considered. If at any time
the Trust shall determine it necessary to terminate or modify this method of
redemption, shareholders would be promptly notified.
9
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Trust may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $25,000 due to
shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Trust gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust's
operation and for election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the Trust shall be called by the Trustees upon the written
request of shareholders owning at least 10% of the Trust's outstanding shares.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust. These documents require notice of this disclaimer to be given in each
agreement, obligation, or instrument the Trust or its Trustees enter into or
sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for any act or
obligation of the Trust. Therefore, financial loss resulting from liability as a
shareholder will occur only if the Trust itself cannot meet its obligations to
indemnify shareholders and pay judgments against them.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Trust will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code, as amended, applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
10
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional shares.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Trust:
- the Trust is not subject to Pennsylvania corporate or personal property
taxes; and
- Trust shares may be subject to personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania to the
extent that the portfolio securities in the Trust would be subject to such
taxes if owned directly by residents of those jurisdictions.
OTHER STATE AND LOCAL TAXES. Shareholders are urged to consult their own tax
advisers regarding the status of their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Trust advertises its yield and effective yield.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment.
Advertisements and sales literature may also refer to total return. Total return
represents the change, over a specified period of time, in the value of an
investment in the Trust after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed as
a percentage.
From time to time, the Trust may advertise its performance using certain
reporting services and/or compare its performance to certain indices.
11
AUTOMATED GOVERNMENT MONEY TRUST
PORTFOLIO OF INVESTMENTS
JULY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- --------------
<C> <S> <C>
SHORT-TERM U.S. TREASURY OBLIGATIONS--18.5%
- ----------------------------------------------------------------------------
*U.S. TREASURY BILLS--5.9%
---------------------------------------------------------------
$159,000,000 8/4/94-7/27/95 $ 155,070,280
---------------------------------------------------------------
U.S. TREASURY NOTES--12.6%
---------------------------------------------------------------
331,000,000 3.875%-11.625%, 8/15/94-2/28/95 332,469,843
--------------------------------------------------------------- --------------
TOTAL SHORT-TERM U.S. TREASURY OBLIGATIONS 487,540,123
--------------------------------------------------------------- --------------
**REPURCHASE AGREEMENTS--80.4%
- ----------------------------------------------------------------------------
10,000,000 A.G. Lanston & Co., Inc., 4.20%, dated 7/29/94, due 8/1/94 10,000,000
---------------------------------------------------------------
75,000,000 BOT Securities, Inc., 4.22%, dated 7/29/94, due 8/1/94 75,000,000
---------------------------------------------------------------
150,000,000 BZW Securities, Inc., 4.23%, dated 7/29/94, due 8/1/94 150,000,000
---------------------------------------------------------------
125,000,000 Bear, Stearns & Co., Inc., 4.22%, dated 7/29/94, due 8/1/94 125,000,000
---------------------------------------------------------------
125,000,000 BT Securities Inc., 4.27%, dated 7/29/94, due 8/1/94 125,000,000
---------------------------------------------------------------
75,000,000 Chemical Securities, Inc., 4.22%, dated 7/29/94, due 8/1/94 75,000,000
---------------------------------------------------------------
120,000,000 Daiwa Securities America, Inc., 4.20%, dated 7/29/94, due
8/1/94 120,000,000
---------------------------------------------------------------
65,000,000 Deutsche Bank Government Securities, Inc., 4.27%, dated
7/29/94, due 8/1/94 65,000,000
---------------------------------------------------------------
100,000,000 Donaldson, Lufkin & Jenrette Securities Corp., 4.22%, dated
7/29/94, due 8/1/94 100,000,000
---------------------------------------------------------------
50,000,000 First Chicago Capital Markets, 4.22%, dated 7/29/94, due 8/1/94 50,000,000
---------------------------------------------------------------
100,000,000 Fuji Securities, Inc., 4.21%, dated 7/29/94, due 8/1/94 100,000,000
---------------------------------------------------------------
74,600,000 J.P. Morgan Securities, Inc., 4.25%, dated 7/29/94, due 8/1/94 74,600,000
---------------------------------------------------------------
125,000,000 Kidder, Peabody & Co., Inc., 4.22%, dated 7/29/94, due 8/1/94 125,000,000
---------------------------------------------------------------
25,000,000 Lehman Government Securities, 4.20%, dated 7/29/94, due 8/1/94 25,000,000
---------------------------------------------------------------
100,000,000 Nationsbank Corp., 4.22%, dated 7/29/94, due 8/1/94 100,000,000
---------------------------------------------------------------
80,000,000 Nikko Securities Co. International, Inc., 4.22%, dated 7/29/94,
due 8/1/94 80,000,000
---------------------------------------------------------------
75,000,000 Nomura Securities International, Inc., 4.22%, dated 7/29/94,
due 8/1/94 75,000,000
---------------------------------------------------------------
</TABLE>
12
AUTOMATED GOVERNMENT MONEY TRUST
- ---------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- --------------
<C> <S> <C>
**REPURCHASE AGREEMENTS--CONTINUED
- ----------------------------------------------------------------------------
$75,000,000 Sanwa-BGK Securities Co., L.P., 4.22%, dated 7/29/94, due
8/1/94 $ 75,000,000
---------------------------------------------------------------
85,000,000 State Street Bank & Trust Company, 4.23%, dated 7/29/94, due
8/1/94 85,000,000
---------------------------------------------------------------
100,000,000 UBS Securities, Inc., 4.30%, dated 7/29/94, due 8/1/94 100,000,000
---------------------------------------------------------------
121,000,000 ++First Boston Corp., 4.40%, dated 7/14/94, due 8/15/94 121,000,000
---------------------------------------------------------------
54,000,000 ++Goldman, Sachs & Co., 4.58%, dated 6/30/94, due 9/28/94 54,000,000
---------------------------------------------------------------
51,000,000 ++Goldman, Sachs & Co., 4.58%, dated 7/20/94, due 10/18/94 51,000,000
---------------------------------------------------------------
35,000,000 ++Merrill Lynch Government Securities, Inc., 4.25%, dated
5/6/94, due 8/4/94 35,000,000
---------------------------------------------------------------
18,000,000 ++Merrill Lynch Government Securities, Inc., 4.45%, dated
6/7/94, due 9/6/94 18,000,000
---------------------------------------------------------------
55,000,000 ++Merrill Lynch Government Securities, Inc., 4.55%, dated
7/28/94, due 9/26/94 55,000,000
---------------------------------------------------------------
34,000,000 ++Morgan Stanley & Co., Inc., 4.53%, dated 7/7/94, due 9/6/94 34,000,000
---------------------------------------------------------------
20,000,000 ++Nikko Securities Co. International Inc., 4.25%, dated 5/6/94,
due 8/4/94 20,000,000
--------------------------------------------------------------- --------------
TOTAL REPURCHASE AGREEMENTS (NOTE 2B) 2,122,600,000
--------------------------------------------------------------- --------------
TOTAL INVESTMENTS, AT AMORTIZED COST (NOTE 2A) $2,610,140,123+
--------------------------------------------------------------- --------------
<FN>
+ Also represents cost for federal tax purposes.
++ Although final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase
agreement within seven days.
* Reflects rate of discount at time of purchase.
** Repurchase agreements are fully collateralized by U.S. Treasury
Obligations based on market prices at the date of the portfolio. The
investments in the repurchase agreements are through participation in
joint accounts with other Federated funds.
Note: The categories of investments are shown as a percentage of net assets
($2,640,383,867) at July 31, 1994.
(See Notes which are an integral part of the Financial Statements)
</TABLE>
13
AUTOMATED GOVERNMENT MONEY TRUST
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ----------------------------------------------------------------------
Investments in repurchase agreements (Note 2B) $ 2,122,600,000
- ----------------------------------------------------------------------
Investment in other securities (Note 2A) 487,540,123
- ---------------------------------------------------------------------- ---------------
Total investments, at value $ 2,610,140,123
- ----------------------------------------------------------------------------------------
Cash 1,790,122
- ----------------------------------------------------------------------------------------
Receivable for investments sold 25,000,000
- ----------------------------------------------------------------------------------------
Interest receivable 10,124,741
- ----------------------------------------------------------------------------------------
Receivable for Trust shares sold 17,820
- ---------------------------------------------------------------------------------------- ---------------
Total assets 2,647,072,806
- ----------------------------------------------------------------------------------------
LIABILITIES:
- ----------------------------------------------------------------------------------------
Dividends payable 5,548,769
- ----------------------------------------------------------------------
Payable to Shareholder Services Agent (Note 4) 1,003,974
- ----------------------------------------------------------------------
Payable for Trust shares redeemed 38,719
- ----------------------------------------------------------------------
Accrued expenses 97,477
- ---------------------------------------------------------------------- ---------------
Total liabilities 6,688,939
- ---------------------------------------------------------------------------------------- ---------------
NET ASSETS for 2,640,383,867 shares of beneficial interest outstanding $ 2,640,383,867
- ---------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, Offering Price, and Redemption Price Per Share
($2,640,383,867 DIVIDED BY 2,640,383,867 shares of beneficial interest
outstanding) $ 1.00
- ---------------------------------------------------------------------------------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
14
AUTOMATED GOVERNMENT MONEY TRUST
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------
Interest income (Note 2C) $ 103,299,988
- ---------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------
Investment advisory fee* $ 14,983,300
- ------------------------------------------------------------
Trustees' fees 27,603
- ------------------------------------------------------------
Administrative personnel and services fees* 1,634,269
- ------------------------------------------------------------
Shareholder services fee* 1,453,554
- ------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses* 86,484
- ------------------------------------------------------------
Custodian and recordkeeping fees and expenses 387,206
- ------------------------------------------------------------
Trust share registration costs 36,076
- ------------------------------------------------------------
Auditing fees 15,115
- ------------------------------------------------------------
Legal fees 75,519
- ------------------------------------------------------------
Printing and postage 10,180
- ------------------------------------------------------------
Insurance premiums 39,146
- ------------------------------------------------------------
Taxes 6,727
- ------------------------------------------------------------
Miscellaneous 39,556
- ------------------------------------------------------------ ------------
Total expenses 18,794,735
- ------------------------------------------------------------
Deduct--Waiver of investment advisory fee* 1,870,206
- ------------------------------------------------------------ ------------
Net expenses 16,924,529
- --------------------------------------------------------------------------- -------------
Net investment income $ 86,375,459
- --------------------------------------------------------------------------- -------------
<FN>
* See Note 4
(See Notes which are an integral part of the Financial Statements)
</TABLE>
15
AUTOMATED GOVERNMENT MONEY TRUST
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
----------------------------------
1994 1993
--------------------------------------------- --------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------------------
Net investment income $ 86,375,459 $ 95,575,611
- --------------------------------------------------------------------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- ---------------------------------------------------------------------------
Dividends to shareholders from net investment income (86,375,459) (95,575,611)
- --------------------------------------------------------------------------- --------------- ---------------
TRUST SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- ---------------------------------------------------------------------------
Net proceeds from sale of shares 20,353,705,672 19,248,350,900
- ---------------------------------------------------------------------------
Net asset value of shares issued to shareholders electing to receive
payment of dividends in Trust shares 28,190,212 32,924,624
- ---------------------------------------------------------------------------
Cost of shares redeemed (20,857,284,325) (19,343,198,321)
- --------------------------------------------------------------------------- --------------- ---------------
Change in net assets from Trust share transactions (475,388,441) (61,922,797)
- --------------------------------------------------------------------------- --------------- ---------------
Change in net assets (475,388,441) (61,922,797)
- ---------------------------------------------------------------------------
NET ASSETS--
- ---------------------------------------------------------------------------
Beginning of period 3,115,772,308 3,177,695,105
- --------------------------------------------------------------------------- --------------- ---------------
End of period $ 2,640,383,867 $ 3,115,772,308
- --------------------------------------------------------------------------- --------------- ---------------
<FN>
(See Notes which are an integral part of the Financial Statements)
</TABLE>
16
AUTOMATED GOVERNMENT MONEY TRUST
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
The Trust is registered under the Investment Company Act of 1940, as amended
(the "Act"), as a diversified, open-end, management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--The Trust's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
B. REPURCHASE AGREEMENTS--It is the policy of the Trust to require the
custodian bank to take possession, to have legally segregated in the Federal
Reserve Book Entry System or to have segregated within the custodian bank's
vault, all securities held as collateral in support of repurchase agreement
investments. Additionally, procedures have been established by the Trust to
monitor on a daily basis the market value of each repurchase agreement's
underlying collateral to ensure the value of collateral at least equals the
principal amount of the repurchase agreement, including accrued interest.
The Trust will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Trust's adviser to be creditworthy pursuant to guidelines established
by the Board of Trustees ("Trustees").
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
D. FEDERAL TAXES--It is the Trust's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income. Accordingly,
no provisions for federal tax are necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Trust may engage in
when-issued or delayed delivery transactions. The Trust records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. OTHER--Investment transactions are accounted for on the trade date.
17
AUTOMATED GOVERNMENT MONEY TRUST
- ---------------------------------------------------------
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At July
31, 1994, capital paid-in aggregated $2,640,383,867. Transactions in Trust
shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
---------------------------------
1994 1993
--------------- ---------------
<S> <C> <C>
- --------------------------------------------------
Shares sold 20,353,705,672 19,248,350,900
- --------------------------------------------------
Shares issued to shareholders in payment of
dividends declared 28,190,212 32,924,624
- --------------------------------------------------
Shares redeemed (20,857,284,325) (19,343,198,321)
- -------------------------------------------------- --------------- ---------------
Net change resulting from Trust share
transactions (475,388,441) (61,922,797)
- -------------------------------------------------- --------------- ---------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Trust's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to 0.50 of 1% of the Trust's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Trust
administrative personnel and services. Prior to March 1, 1994, these services
were provided at approximate cost. Effective March 1, 1994, the FAS fee is based
on the level of average aggregate daily net assets of all funds advised by
subsidiaries of Federated Investors for the period. The administrative fee
received during the period of the Administrative Services Agreement shall be at
least $125,000 per portfolio and $30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Trust will pay FSS up to 0.25
of 1% of average net assets of the trust for the period. This fee is to obtain
certain personal services for shareholders and to maintain the shareholder
accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Trust. The
FServ fee is based on the size, type and number of accounts and transactions
made by shareholders.
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
18
INDEPENDENT AUDITORS' REPORT
- -------------------------------------------------------------
To the Board of Trustees and Shareholders of
AUTOMATED GOVERNMENT MONEY TRUST :
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Automated Government Money Trust as of July 31,
1994, the related statement of operations for the year then ended, the statement
of changes in net assets for the years ended July 31, 1994 and 1993, and the
financial highlights (see page 2 of the prospectus) for each of the years in the
ten-year period ended July 31, 1994. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1994 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Automated Government
Money Trust as of July 31, 1994, the results of its operations, the changes in
its net assets, and its financial highlights for the respective stated periods
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
September 9, 1994
19
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Automated Government Money Trust Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222
- -------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- -------------------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company P.O. Box 8604
Boston, MA 02266-8604
- -------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, PA 15222
- -------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, PA 15222
- -------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin, LLP 2101 L Street, N.W.
Washington, D.C. 20037
- -------------------------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche LLP One PPG Place
Pittsburgh, PA 15222
</TABLE>
20
- --------------------------------------------------------------------------------
AUTOMATED GOVERNMENT
MONEY TRUST
PROSPECTUS
AN OPEN-END MANAGEMENT INVESTMENT
COMPANY
PROSPECTUS DATED SEPTEMBER 30, 1994
[LOGO]
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
[LOGO]
RECYCLED
PAPER
052831104
8082201A (9/94)
AUTOMATED GOVERNMENT MONEY TRUST
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of Automated Government Money Trust (the "Trust") dated
September 30, 1994. This Statement is not a prospectus. To receive a
copy of a prospectus, write or call the Trust.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated September 30, 1994
[LOGO]
DISTRIBUTOR
A SUBSIDIARY OF FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT POLICIES 1
- ---------------------------------------------------------
When-Issued And Delayed Delivery
Transactions 1
Repurchase Agreements 1
Reverse Repurchase Agreements 1
INVESTMENT LIMITATIONS 1
- ---------------------------------------------------------
Selling Short and Buying on Margin 1
Borrowing Money 1
Pledging Assets 2
Lending Cash or Securities 2
Issuing Senior Securities 2
Investing in Restricted Securities 2
Investing in Illiquid Securities 2
Investing in Securities of Other Investment
Companies 2
Investing in New Issuers 2
Investing for Control 2
Investing in Issuers Whose Securities Are
Owned by Officers of the Trust 2
Investing in Options 2
Investing in Minerals 2
BROKERAGE TRANSACTIONS 3
- ---------------------------------------------------------
AUTOMATED GOVERNMENT MONEY TRUST MANAGEMENT 3
- ---------------------------------------------------------
The Funds 6
Trust Ownership 7
Trustee Liability 7
INVESTMENT ADVISORY SERVICES 7
- ---------------------------------------------------------
Investment Adviser 7
Advisory Fees 7
State Expense Limitations 7
TRUST ADMINISTRATION 8
- ---------------------------------------------------------
SHAREHOLDER SERVICES PLAN 8
- ---------------------------------------------------------
DETERMINING NET ASSET VALUE 8
- ---------------------------------------------------------
Redemption in Kind 9
The Trust's Tax Status 9
PERFORMANCE INFORMATION 9
- ---------------------------------------------------------
Yield 9
Effective Yield 9
Total Return 9
Performance Comparisons 10
</TABLE>
I
INVESTMENT POLICIES
- ------------------------------------------------------------------
Unless indicated otherwise, the policies described below may not be changed by
the Trustees without shareholder approval. Shareholders will be notified before
any material change in these policies becomes effective.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Trust. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Trust sufficient
to make payment for the U.S. Treasury securities to be purchased are segregated
on the Trust's records at the trade date. These assets are marked to market
daily and are maintained until the transaction has been settled. As a matter of
operational policy, which may be changed without shareholder approval, the Trust
does not intend to engage in when-issued and delayed delivery transactions to an
extent that would cause the segregation of more than 20% of the total value of
its assets.
REPURCHASE AGREEMENTS
The Trust or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market daily. In
the event that a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Trust might be delayed pending court
action. The Trust believes that under the regular procedures normally in effect
for custody of the Trust's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the Trust
and allow retention or disposition of such securities. The Trust will only enter
into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are deemed by the Trust's adviser to
be creditworthy pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Trust may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Trust
transfers possession of a portfolio instrument in return for a percentage of the
instrument's market value in cash and agrees that on a stipulated date in the
future the Trust will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Trust to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but does
not ensure this result. When effecting reverse repurchase agreements, liquid
assets of the Trust, in a dollar amount sufficient to make payment for the
obligations to be purchased, are: segregated on the Trust's records at the trade
date; marked to market daily; and maintained until the transaction is settled.
INVESTMENT LIMITATIONS
- ------------------------------------------------------------------
SELLING SHORT AND BUYING ON MARGIN
The Trust will not sell any portfolio instruments short or purchase any
portfolio instruments on margin but may obtain such short-term credits as may be
necessary for clearance of purchases and sales of portfolio instruments.
BORROWING MONEY
The Trust will not borrow money except as a temporary measure for extraordinary
or emergency purposes and then only in amounts not in excess of 5% of the value
of its total assets. In addition, the Trust may enter into reverse repurchase
agreements and otherwise borrow up to one-third of the value of its total
assets, including the amount borrowed, in order to meet redemption requests
without immediately selling portfolio instruments. This latter practice is not
for investment leverage but solely to facilitate management of the portfolio by
enabling the Trust to meet redemption requests when the liquidation of portfolio
instruments would be inconvenient or disadvantageous.
Interest paid on borrowed funds will not be available for investment. The Trust
will liquidate any such borrowings as soon as possible and may not purchase any
portfolio instruments while any borrowings are outstanding.
1
- --------------------------------------------------------------------------------
PLEDGING ASSETS
The Trust will not mortgage, pledge, or hypothecate any assets except to secure
permitted borrowings. In those cases, it may mortgage, pledge, or hypothecate
assets having a market value not exceeding the lesser of the dollar amounts
borrowed or 10% of the value of Trust assets at the time of the borrowing.
LENDING CASH OR SECURITIES
The Trust will not lend any of its assets, except that it may purchase or hold
U.S. Treasury obligations, including repurchase agreements, permitted by its
investment objective and policies.
ISSUING SENIOR SECURITIES
The Trust will not issue senior securities, except as permitted by the
investment objective and policies.
The above limitations cannot be changed without shareholder approval. The
following investment limitations, however, may be changed by Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.
INVESTING IN RESTRICTED SECURITIES
The Trust will not invest in securities subject to restrictions on resale under
federal securities law.
INVESTING IN ILLIQUID SECURITIES
The Trust will not invest more than 10% of the value of its net assets in
illiquid securities.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Trust will not purchase securities of other investment companies, except as
part of a merger, consolidation, or other acquisition.
INVESTING IN NEW ISSUERS
The Trust will not invest more than 5% of the value of its total assets in
securities of issuers which have records of less than three years of continuous
operations, including the operation of any predecessor.
INVESTING FOR CONTROL
The Trust will not invest in securities of a company for the purpose of
exercising control or management.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS OF THE TRUST
The Trust will not purchase or retain the securities of any issuer if the
Officers and Trustees of the Trust or its investment adviser owning individually
more than .50 of 1% of the issuer's securities together own more than 5% of the
issuer's securities.
INVESTING IN OPTIONS
The Trust will not invest in puts, calls, straddles, spreads, or any combination
of them.
INVESTING IN MINERALS
The Trust will not purchase or sell interests in oil, gas, or other mineral
exploration or development programs or leases, although it may purchase the
securities of issuers which invest in or sponsor such programs.
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.
2
- --------------------------------------------------------------------------------
BROKERAGE TRANSACTIONS
- ------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
guidelines established by the Board of Trustees. The adviser may select brokers
and dealers who offer brokerage and research services. These services may be
furnished directly to the Trust or to the adviser and may include: advice as to
the advisability of investing in securities; security analysis and reports;
economic studies; industry studies; receipt of quotations for portfolio
evaluations; and similar services. Research services provided by brokers and
dealers may be used by the adviser or its affiliates in advising the Trust and
other accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The adviser and its affiliates exercise
reasonable business judgment in selecting brokers who offer brokerage and
research services to execute securities transactions. They determine in good
faith that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided. During the fiscal
years ended July 31, 1994, 1993, and 1992, the Trust paid no brokerage
commissions.
Although investment decisions for the Trust are made independently from those of
the other accounts managed by the adviser, investments of the type the Trust may
make may also be made by those other accounts. When the Trust and one or more
other accounts managed by the adviser are prepared to invest in, or desire to
dispose of, the same security, available investments or opportunities for sales
will be allocated in a manner believed by the adviser to be equitable to each.
In some cases, this procedure may adversely affect the price paid or received by
the Trust or the size of the position obtained or disposed of by the Trust. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Trust.
AUTOMATED GOVERNMENT MONEY TRUST MANAGEMENT
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Officers and Trustees are listed with their addresses, principal occupations,
and present positions.
- --------------------------------------------------------------------------------
John F. Donahue+*
Federated Investors Tower
Pittsburgh, PA
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or Managing General
Partner of the Funds. Mr. Donahue is the father of J. Christopher Donahue, Vice
President of the Trust.
- --------------------------------------------------------------------------------
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Trustee
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate ventures in Southwest
Florida; Director, Trustee, or Managing General Partner of the Funds; formerly,
President, Naples Property Management, Inc.
3
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William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice Chairman and
Director, PNC Bank, N.A., and PNC Bank Corp.; and Director, Ryan Homes, Inc.
- --------------------------------------------------------------------------------
James E. Dowd
571 Hayward Mill Road
Concord, MA
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds; formerly, Director, Blue Cross of
Massachusetts, Inc.
- --------------------------------------------------------------------------------
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Trustee
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore Hospitals;
Professor of Medicine and Trustee, University of Pittsburgh; Director of
Corporate Health, University of Pittsburgh Medical Center; Director, Trustee, or
Managing General Partner of the Funds.
- --------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+
5916 Penn Mall
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat'N Park Restaurants,
Inc., and Statewide Settlement Agency, Inc.; Director, Trustee, or Managing
General Partner of the Funds; formerly, Counsel, Horizon Financial, F.A.,
Western Region.
- --------------------------------------------------------------------------------
Peter E. Madden
225 Franklin Street
Boston, MA
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President, State
Street Bank and Trust Company and State Street Boston Corporation; and Trustee,
Lahey Clinic Foundation, Inc.
4
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Gregor F. Meyer
5916 Penn Mall
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare, Inc.;
Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or Managing General
Partner of the Funds; formerly, Vice Chairman, Horizon Financial, F.A.
- --------------------------------------------------------------------------------
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie Endowment
for International Peace, RAND Corporation, Online Computer Library Center, Inc.,
and U.S. Space Foundation; Chairman, Czecho Slovak Management Center; Director,
Trustee, or Managing General Partner of the Funds; President Emeritus,
University of Pittsburgh; formerly, Chairman, National Advisory Council for
Environmental Policy and Technology.
- --------------------------------------------------------------------------------
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing General
Partner of the Funds.
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Glen R. Johnson
Federated Investors Tower
Pittsburgh, PA
President
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Administrative Services.
- --------------------------------------------------------------------------------
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp.; President, Passport Research, Ltd.; Trustee, Federated Administrative
Services, Federated Services Company, and Federated Shareholder Services;
President or Vice President of the Funds; Director, Trustee, or Managing General
Partner of some of the Funds. Mr. Donahue is the son of John F. Donahue,
Chairman and Trustee of the Trust.
5
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Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Vice President
Executive Vice President and Trustee, Federated Investors; Director, Federated
Research Corp.; Chairman and Director Federated Securities Corp.; President or
Vice President of some of the Funds; Director or Trustee of some of the Funds.
- --------------------------------------------------------------------------------
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice President and
Treasurer, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Executive Vice President,
Treasurer, and Director, Federated Securities Corp.; Trustee, Federated Services
Company and Federated Shareholder Services; Chairman, Treasurer, and Trustee,
Federated Administrative Services; Trustee or Director of some of the Funds;
Vice President and Treasurer of the Funds.
- --------------------------------------------------------------------------------
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated Investors;
Vice President, Secretary, and Trustee, Federated Advisers, Federated
Management, and Federated Research; Vice President and Secretary, Federated
Research Corp. and Passport Research, Ltd.; Trustee, Federated Services Company;
Executive Vice President, Secretary, and Trustee, Federated Administrative
Services; Secretary and Trustee, Federated Shareholder Services; Executive Vice
President and Director, Federated Securities Corp.; Vice President and Secretary
of the Funds.
- --------------------------------------------------------------------------------
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
+ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board of Trustees between
meetings of the Board.
THE FUNDS
As referred to in the list of Trustees and Officers, "Funds" includes the
following investment companies: American Leaders Fund, Inc.; Annuity Management
Series; Automated Cash Management Trust; Automated Government Money Trust;
California Municipal Cash Trust; Cash Trust Series II; Cash Trust Series, Inc.;
DG Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
ARMs Fund; Federated Exchange Fund, Ltd.; Federated GNMA Trust; Federated
Government Trust; Federated Growth Trust; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Intermediate Government Trust; Federated Master Trust; Federated
Municipal Trust; Federated Short-Intermediate Government Trust; Federated
Short-Term U.S. Government Trust; Federated Stock Trust; Federated Tax-Free
Trust; Federated U.S. Government Bond Fund; First Priority Funds; Fixed Income
Securities, Inc.; Fortress Adjustable Rate U.S. Government Fund, Inc.; Fortress
Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.; Fund for U.S.
Government Securities, Inc.; Government Income Securities, Inc.; High Yield Cash
Trust; Insight Institutional Series, Inc.; Insurance Management Series;
Intermediate Municipal Trust; International Series, Inc.; Investment Series
Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty
High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty
Term Trust, Inc. - 1999; Liberty U.S. Government Money Market Trust; Liberty
Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Mark Twain Funds;
The Medalist
6
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Funds; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Trust; Municipal Securities Income Trust; New York Municipal Cash Trust;
111 Corcoran Funds; Peachtree Funds; The Planters Funds; Portage Funds; RIMCO
Monument Funds; The Shawmut Funds; Short-Term Municipal Trust; Star Funds; The
Starburst Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; Trademark Funds;
Trust for Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations; and
World Investment Series, Inc.
TRUST OWNERSHIP
Officers and Trustees own less than 1% of the Trust's outstanding shares.
As of September 6, 1994, the following shareholders of record owned 5% or more
of the outstanding shares of the Trust: BOVA & Co., Richmond, Virginia, owned
approximately 164,600,438.07 shares (6.40%), and State Street Bank and Trust
Company, North Quincy, Massachusetts, owned approximately 240,212,537.19 shares
(9.34%).
TRUSTEE LIABILITY
The Declaration of Trust provides that the Trustees will not be liable for
errors of judgment or mistakes or fact or law. However, they are not protected
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- ------------------------------------------------------------------
INVESTMENT ADVISER
The Trust's investment adviser is Federated Management. It is a subsidiary of
Federated Investors. All the voting securities of Federated Investors are owned
by a trust, the trustees of which are John F. Donahue, his wife and his son, J.
Christopher Donahue.
The adviser shall not be liable to the Trust or any shareholder for any losses
that may be sustained in the purchase, holding, or sale of any security or for
anything done or omitted by it, except acts or omissions involving willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
imposed upon it by its contract with Trust.
ADVISORY FEES
For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectus.
For the fiscal years ended July 31, 1994, 1993, and 1992, the adviser earned
$14,983,300, $17,405,951, and $15,938,765, respectively, of which $1,870,206,
$142,202, and $195,226, respectively, was voluntarily waived.
STATE EXPENSE LIMITATIONS
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Trust's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses) exceed
2 1/2% per year of the first $30 million of average net assets, 2% per
year of the next $70 million of average net assets, and 1 1/2% per year of
the remaining average net assets, the adviser will reimburse the Trust for
its expenses over the limitation.
If the Trust's monthly projected operating expenses exceed this limitation, the
investment advisory fee paid will be reduced by the amount of the excess,
subject to an annual adjustment. If the expense limitation is exceeded, the
amount to be reimbursed by the adviser will be limited, in any single fiscal
year, by the amount of the investment advisory fees.
This arrangement is not part of the advisory contract and may be amended or
rescinded in the future.
7
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TRUST ADMINISTRATION
- ------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Trust for a fee as described in the
prospectus. Prior to March 1, 1994, Federated Administrative Services, Inc.,
also a subsidiary of Federated Investors, served as the Trust's administrator.
(For purposes of this Statement of Additional Information, Federated
Administrative Service and Federated Administrative Services, Inc. may
hereinafter collectively be referred to as, the "Administrators".) For the
fiscal years ended July 31, 1994, 1993, and 1992, the Administrators
collectively earned $1,634,269, $1,190,166, and $1,043,489, respectively. Dr.
Henry J. Gailliot, an officer of Federated Management, the adviser to the Trust,
holds approximately 20% of the outstanding common stock and serves as a director
of Commercial Data Services, Inc., a company which provides computer processing
services to Federated Administrative Services.
SHAREHOLDER SERVICES PLAN
- ------------------------------------------------------------------
This arrangement permits the payment of fees to Federated Shareholder Services
and financial institutions to cause services to be provided which are necessary
for the maintenance of shareholder accounts and to encourage personal services
to shareholders by a representative who has knowledge of the shareholders
particular circumstances and goals. These activities and services may include,
but are not limited to: providing office space, equipment, telephone facilities,
and various clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and addresses.
By adopting the Shareholder Services Plan, the Board of Trustees expects that
the Trust will benefit by: (1) providing personal services to shareholders; (2)
investing shareholder assets with a minimum of delay and administrative detail;
(3) enhancing shareholder recordkeeping systems; and (4) responding promptly to
shareholder's requests and inquiries concerning their accounts.
For the fiscal period ending July 31, 1994, payments in the amount of
$1,453,554.13 were made pursuant to the Shareholder Services Plan.
CUSTODIAN AND PORTFOLIO RECORDKEEPER. State Street Bank and Trust Company,
Boston, MA is custodian for the securities and cash of the Trust. Federated
Services Company, Pittsburgh, PA, provides certain accounting and recordkeeping
services with respect to the Trust's portfolio investments.
TRANSFER AGENT. As transfer agent, Federated Services Company maintains all
necessary shareholder records. For its services, the transfer agent receives a
fee based on the number of shareholder accounts.
DETERMINING NET ASSET VALUE
- ------------------------------------------------------------------
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
Accordingly, neither the amount of daily income nor the net asset value is
affected by any unrealized appreciation or depreciation of the portfolio. In
periods of declining interest rates, the indicated daily yield on shares of the
Trust computed by dividing the annualized daily income on the Trust's portfolio
by the net asset value computed as above may tend to be higher than a similar
computation made by using a method of valuation based upon market prices and
estimates. In periods of rising interest rates, the opposite may be true.
The Trust's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in Rule 2a-7 (the "Rule")
promulgated by the Securities and Exchange Commission under the Investment
Company Act of 1940. Under the Rule, the Trustees must establish procedures
reasonably designed to stabilize the net asset value per share, as computed for
purposes of distribution and redemption, at $1.00 per share, taking into account
current market conditions and the Trust's investment objective. The procedures
include monitoring the relationship between the amortized cost value per share
and the net asset value per share based upon available indications of market
value. The Trustees will decide what, if any, steps should be taken if there is
a difference of more than 0.5 of 1% between the two values. The Trustees will
take any steps they consider
8
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appropriate (such as redemption in kind or shortening the average portfolio
maturity) to minimize any material dilution or other unfair results arising from
differences between the two methods of determining net asset value.
REDEMPTION IN KIND
The Trust is obligated to redeem shares solely in cash up to $250,000 or 1% of
the Trust's net asset value, whichever is less, for any one shareholder within a
90-day period. Any redemption beyond this amount will also be in cash unless the
Trustees determine that further payments should be in kind. In such cases, the
Trust will pay all or a portion of the remainder of the redemption in portfolio
instruments valued in the same way as the Trust determines net asset value. The
portfolio instruments will be selected in a manner that the Trustees deem fair
and equitable. Redemption in kind is not as liquid as a cash redemption. If
redemption is made in kind, shareholders who sell these securities could receive
less than the redemption value and could incur certain transaction costs.
THE TRUST'S TAX STATUS
To qualify for the special tax treatment afforded to regulated investment
companies, the Trust must, among other requirements: derive at least 90% of its
gross income from dividends, interest, and gains from the sale of securities;
derive less than 30% of its gross income from the sale of securities held less
than three months; invest in securities within certain statutory limits; and
distribute to its shareholders at least 90% of its net income earned during the
year.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------
Performance depends upon such variables as: portfolio quality; average portfolio
maturity; type of instruments in which the portfolio is invested; changes in
interest rates; changes in expenses; and the relative amount of cash flow. To
the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in shares of
the Trust, the performance will be reduced for those shareholders paying those
fees.
YIELD
The Trust calculates its yield based upon the seven days ending on the day of
the calculation, called the "base period." This yield is computed by:
determining the net change in the value of a hypothetical account with a balance
of one share at the beginning of the base period, with the net change excluding
capital changes but including the value of any additional shares purchased with
dividends earned from the original one share and all dividends declared on the
original and any purchased shares; dividing the net change in the account's
value by the value of the account at the beginning of the base period to
determine the base period return; and multiplying the base period return by
365/7.
The Trust's yield for the seven-day period ended July 31, 1994, was 3.72%.
EFFECTIVE YIELD
The Trust calculates its effective yield by compounding the unannualized base
period return by: adding 1 to the base period return; raising the sum to the
365/7th power; and subtracting 1 from the result.
The Trust's effective yield for the seven-day period ended July 31, 1994, was
3.79%.
TOTAL RETURN
Average annual total return is the average compounded rate of return for a given
period that would equate a $1,000 initial investment to the ending redeemable
value of that investment. The ending redeemable value is compounded by
multiplying the number of shares owned at the end of the period by the net asset
value per share at the end of the period. The number of shares owned at the end
of the period is based on the number of shares purchased at the 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
periods ended July 31, 1994 were 2.95%, 4.98% and 6.18%, respectively.
9
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PERFORMANCE COMPARISONS
Investors may use financial publications and/or indices to obtain a more
complete view of the Trust's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute net asset value. The financial
publications and/or indices which the Trust uses in advertising may include:
- - LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories based
on total return, which assumes the reinvestment of all income dividends and
capital gains distributions, if any.
- - DONOGHUE'S MONEY FUND REPORT publishes annualized yields of money market funds
weekly. Donoghue's MONEY MARKET INSIGHT publication reports monthly and
12-month-to-date investment results for the same money funds.
- - MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
- - SALOMON 30-DAY TREASURY BILL INDEX is a weekly quote of the most
representative yields for selected securities, issued by the U.S. Treasury,
maturing in 30 days.
052831104
10 8082201B (9/94)
