TRUST FOR GOVERNMENT CASH RESERVES
PROSPECTUS
Trust for Government Cash Reserves (the "Trust") is a no-load, open-end,
diversified management investment company (a mutual fund) investing in
short-term U.S. government securities to achieve high current income consistent
with stability of principal and liquidity.
AN INVESTMENT IN THE TRUST IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THE TRUST ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE; THERE CAN BE NO ASSURANCE THAT THE TRUST WILL BE ABLE TO DO SO.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY.
This prospectus contains the information you should read and know before you
invest in the Trust. Keep this prospectus for future reference.
The Trust has also filed a Statement of Additional Information dated January 31,
1994, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information
free of charge by calling 1-800-235-4669. To obtain other information or to make
inquiries about the Trust, contact this Trust at the address listed in the back
of this prospectus.
The Trust aims to provide institutional investors with a cost-effective,
administratively convenient, highly liquid, cash equivalent vehicle that can be
integrated into an existing or contemplated cash management system. The Trust
will report changes in principal balances and monthly income distributions in a
format that is compatible with all major trust operations systems presently in
use.
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 January 31, 1994
TABLE OF CONTENTS
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SUMMARY OF TRUST EXPENSES 1
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FINANCIAL HIGHLIGHTS 2
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GENERAL INFORMATION 3
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INVESTMENT INFORMATION 3
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Investment Objective 3
Investment Policies 3
Acceptable Investments 3
When-Issued and Delayed
Delivery Transactions 4
Investment Limitations 4
TRUST INFORMATION 4
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Management of the Trust 4
Board of Trustees 4
Investment Adviser 4
Advisory Fees 5
Adviser's Background 5
Distribution of Trust Shares 5
Administration of the Trust 5
Administrative Services
Custodian 5
Transfer Agent and Dividend
Disbursing Agent 5
Legal Counsel 5
Independent Public Accountants 6
NET ASSET VALUE 6
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INVESTING IN THE TRUST 6
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Share Purchases 6
By Wire 6
By Mail 6
Minimum Investment Required 6
Cash Sweep Program 6
Participating Depository Institutions 7
What Shares Cost 7
Subaccounting Services 7
Certificates and Confirmations 7
Dividends 7
Capital Gains 8
REDEEMING SHARES 8
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Telephone Redemption 8
Written Requests 8
Signatures 8
Receiving Payment 9
Redemption Before Purchase
Instruments Clear 9
Accounts with Low Balances 9
Redemption in Kind 9
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
State and Local Taxes 10
Pennsylvania Corporate and
Personal Property Taxes 11
PERFORMANCE INFORMATION 11
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FINANCIAL STATEMENTS 12
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 18
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ADDRESSES Inside Back Cover
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SUMMARY OF TRUST EXPENSES
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<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................................................. None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................................................. None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds, as applicable)............................... None
Redemption Fee (as a percentage of amount redeemed, if applicable).................... None
Exchange Fee.......................................................................... None
ANNUAL TRUST OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1)...................................................... 0.37%
12b-1 Fee............................................................................. None
Other Expenses........................................................................ 0.08%
Total Trust Operating Expenses(2)................................................ 0.45%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary waiver
at any time at its sole discretion. The maximum management fee is 0.40%.
(2) The total Trust operating expenses would have been 0.48% absent the
voluntary waiver of a portion of the management fee.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE TRUST WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE " TRUST INFORMATION." WIRE-TRANSFERRED REDEMPTIONS OF LESS THAN
$5000 MAY BE SUBJECT TO ADDITIONAL FEES.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
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You would pay the following expenses on a $1,000 invest-
ment assuming (1) 5% annual return and (2) redemption
at the end of each time period. As noted in the table
above, the Trust charges no redemption fees........... $5 $14 $25 $ 57
</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.
TRUST FOR GOVERNMENT CASH RESERVES
FINANCIAL HIGHLIGHTS
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(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 18.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
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1993 1992 1991 1990 1989*
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<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 0.03 0.04 0.06 0.08 0.06
- -------------------------------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
- --------------------------------
Dividends to shareholders from
net investment income (0.03) (0.04) (0.06) (0.08) (0.06)
- -------------------------------- ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------- ------ ------ ------ ------ ------
TOTAL RETURN** 2.87% 3.58% 5.95% 7.94% 5.93%
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RATIOS TO AVERAGE NET ASSETS
- --------------------------------
Expenses 0.45% 0.47% 0.47% 0.45% 0.43%(a)
- --------------------------------
Net investment income 2.83% 3.54% 5.76% 7.65% 8.34%(a)
- --------------------------------
Expense
waiver/reimbursement (b) 0.03% 0.02% 0.02% 0.08% 0.19%
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SUPPLEMENTAL DATA
- --------------------------------
Net assets, end of period (000
omitted) $1,060,355 $1,145,009 $1,251,692 $880,997 $331,860
- --------------------------------
</TABLE>
* Reflects operations for the period from March 30, 1989 (date of initial
public offering), to November 30, 1989. For the period from the start of
business, March 20, 1989, to March 29, 1989, net investment income
aggregating $.002 per share ($235) was distributed to the Trust's adviser.
** Based on net asset value which does not reflect the sales load or redemption
fee, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
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The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated January 26, 1989. The Trust is designed for institutional
investors, such as banks, fiduciaries, custodians of public funds, and similar
institutional investors, such as corporations, unions, hospitals, insurance
companies, and municipalities as a convenient means of participating in a
professionally managed, diversified portfolio limited to short-term U.S.
government securities. The Trust is also designed for customers of institutional
investors. A minimum initial investment of $25,000 over a 90-day period is
required.
The Trust attempts to stabilize the value of a share at $1.00. Trust shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
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INVESTMENT OBJECTIVE
The investment objective of the Trust is high current income consistent with
stability of principal and liquidity. This investment objective cannot be
changed without approval of shareholders. 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.
INVESTMENT POLICIES
The Trust pursues its investment objective by investing only in short-term U.S.
government securities. The average maturity of U.S. government securities in the
Trust's portfolio, computed on a dollar-weighted basis, will be 90 days or less.
Unless indicated otherwise, the investment policies may be changed by the Board
of Trustees ("Trustees") without approval of shareholders. Shareholders will be
notified before any material changes in these policies become effective.
ACCEPTABLE INVESTMENTS. The U.S. government securities in which the Trust
invests are either issued or guaranteed by the U.S. government, its agencies or
instrumentalities. These securities include, but are not limited to:
- direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds; and
- notes, bonds, and discount notes of U.S. government agencies or
instrumentalities, such as Federal Farm Credit Banks, Student Loan
Marketing Association, Federal Home Loan Mortgage Corporation, Federal
Home Loan Banks, and Federal National Mortgage Association.
Some obligations issued or guaranteed by agencies or instrumentalities of the
U.S. government, such as Government National Mortgage Association participation
certificates, are backed by the full faith and credit of the U.S. Treasury. No
assurances can be given that the U.S. government will provide financial
support to other agencies or instrumentalities, since it is not obligated to do
so. These agencies and instrumentalities are supported by:
- the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;
- discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or
- the credit of the agency or instrumentality.
The Trust will limit its investments to those U.S. government securities, the
interest from which is exempt from personal income tax in the various states if
owned directly.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Trust may purchase short-term
U.S. government securities on a when-issued or delayed delivery basis. In
when-issued and delayed delivery transactions, the Trust relies on the seller to
complete the transaction. The seller's failure to complete the transaction may
cause the Trust to miss a price or yield considered to be advantageous.
INVESTMENT LIMITATIONS
The Trust will not:
- borrow money directly or pledge securities except, under certain
circumstances, the Trust may borrow up to one-third of the value of its
total assets and pledge up to 10% of the value of its total assets to
secure such borrowings.
The above investment limitation cannot be changed without shareholder approval.
The following investment 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:
- commit more than 10% of its net assets to illiquid obligations.
TRUST INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees are
responsible for managing the Trust's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Trust are made by Federated
Research, the Trust's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Trust and is responsible for the purchase on sale of portfolio instruments, for
which it receives an annual fee from the Trust.
ADVISORY FEES. The Trust's adviser receives an annual investment advisory
fee equal to .40 of 1% of the Trust's average daily net assets. Under the
investment advisory contract, which provides for voluntary waiver of the
advisory fee by the adviser, the adviser may voluntarily waive some or all
of the advisory fee. This does not include reimbursement to the Trust of
any expenses incurred by shareholders who use the transfer agent's
subaccounting facilities. The adviser can terminate this voluntary
reimbursement of expenses at any time in its sole discretion. The adviser
has also undertaken to reimburse the Trust for operating expenses in excess
of limitations established by certain states.
ADVISER'S BACKGROUND. Federated Research, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Research and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk-averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
DISTRIBUTION OF TRUST SHARES
Federated Securities Corp. is the principal distributor for shares of the Trust.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
ADMINISTRATION OF THE TRUST
ADMINISTRATIVE SERVICES. Federated Administrative Services, Inc., which is a
subsidiary of Federated Investors, provides the Trust with the administrative
personnel and services necessary to operate the Trust. Such services include
shareholder servicing and certain legal and accounting services. Federated
Administrative Services, Inc. provides these at approximate cost.
CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Trust.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, is transfer agent for the shares of the Trust and
dividend disbursing agent for the Trust.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, Washington, D.C.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Trust
are Arthur Andersen & Co., Pittsburgh, Pennsylvania.
NET ASSET VALUE
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The Trust attempts to stabilize the net asset value of shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per Share is determined by subtracting total liabilities from total assets
and dividing the remainder by the number of Shares outstanding. The Trust, of
course, cannot guarantee that its net asset value will always remain at $1.00
per share.
INVESTING IN THE TRUST
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SHARE PURCHASES
Trust shares are sold on days on which the New York Stock Exchange is open.
Shares may be purchased either by wire or by mail. To purchase shares, open an
account by calling Federated Securities Corp. Information needed to establish
the account will be taken over the telephone. The Trust reserves the right to
reject any purchase request.
BY WIRE. To purchase shares of the Trust by Federal Reserve wire, call the Trust
before 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 same day. Federal funds should be wired as follows: State
Street Bank and Trust Company, Boston, Massachusetts; Attention: EDGEWIRE; For
Credit to: Trust for Government Cash Reserves, Fund Number (this number can be
found on the account statement or by contacting the Trust); Group Number or
Order Number; Nominee or Institution Name; and ABA Number 011000028. Shares
cannot be purchased by Federal Reserve wire on days on which the New York Stock
Exchange is closed and on federal holidays restricting wire transfers.
BY MAIL. To purchase shares of the Trust by mail, send a check made payable to
Trust for Government Cash Reserves to Federated Services Company, c/o State
Street Bank and Trust Company, P.O. Box 8602, Boston, Massachusetts 02266-8602.
Orders by mail are considered received after payment by check is converted by
State Street Bank into federal funds. This is normally the next business day
after State Street Bank receives the check.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Trust is $25,000. However, an account may
be opened with a smaller amount as long as the $25,000 minimum is reached within
90 days. An institutional investor's minimum investment will be calculated by
combining all accounts it maintains with the Trust. Accounts established through
a bank or broker may be subject to a different minimum investment.
CASH SWEEP PROGRAM
Cash accumulations in demand deposit accounts with depository institutions such
as banks and savings and loan associations may be automatically invested in
shares on a day selected by the
depository institution and its customer, or when the demand deposit account
reaches a predetermined dollar amount (e.g., $5,000).
PARTICIPATING DEPOSITORY INSTITUTIONS. Participating depository institutions are
responsible for prompt transmission of orders relating to the program. These
depository institutions are the record owners of the shares. Depository
institutions participating in this program may charge their customers for their
services relating to the program. This prospectus should, therefore, be read
together with any agreement between the customer and the depository institution
with regard to the services provided, the fees charged for those services, and
any restrictions and limitations imposed.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Trust.
The net asset value is determined at 12:00 noon (Eastern time), 1:00 p.m.
(Eastern time), and 4:00 p.m. (Eastern time), Monday through Friday, except on:
(i) days on which there are not sufficient changes in the value of the Trust's
portfolio securities that its net asset value might be materially affected; (ii)
days during which no Shares are tendered for redemption and no orders to
purchase shares are received; and (iii) the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
SUBACCOUNTING SERVICES
Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. The transfer agent charges a
fee based on the level of subaccounting services rendered. Institutions holding
shares in a fiduciary, agency, custodial, or similar capacity may charge or pass
through subaccounting fees as part of or in addition to normal trust or agency
account fees. They may also charge fees for other services provided which may be
related to the ownership of Shares. This prospectus should, therefore, be read
together with any agreement between the customer and the institution with regard
to the services provided, the fees charged for those services, and any
restrictions and limitations imposed.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Trust, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Trust.
Monthly confirmations are sent to report transactions such as purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Shares purchased by wire before
3:00 p.m. (Eastern time) begin earning dividends that day. Shares purchased by
check begin earning dividends on the day after the check is converted, upon
instruction of the transfer agent, into federal funds. Dividends are
automatically reinvested on payment dates in additional shares unless cash
payments are requested by contacting the Trust.
CAPITAL GAINS
Capital gains, if any, could result in an increase in dividends. Capital losses
could result in a decrease in dividends. If, for some extraordinary reason, the
Trust realizes net long-term capital gains, it will distribute them at least
once every 12 months.
REDEEMING SHARES
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The Trust redeems Shares at their net asset value next determined after the
Trust receives the redemption request. Redemptions will be made on days on which
the Trust computes its net asset value. Redemption requests must be received in
proper form and can be made by telephone request or by written request.
TELEPHONE REDEMPTION
Shareholders may redeem their shares by telephoning the Trust before 12:00 noon
(Eastern time). The proceeds will be wired the same day to the shareholder's
account at a domestic commercial bank that is a member of the Federal Reserve
system. If at any time, the Trust shall determine it necessary to terminate or
modify this method of redemption, shareholders will be promptly notified.
A daily dividend will be paid on Shares redeemed if the redemption request is
received after 12:00 noon (Eastern time). However, the proceeds are not wired
until the following business day. Redemption requests received before 12:00 noon
(Eastern time) will be paid the same day but will not be entitled to that day's
dividend.
An authorization form permitting the Trust to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp. Telephone redemption instructions may
be recorded. If reasonable procedures are not followed by the Trust, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as Written Requests, should be considered.
WRITTEN REQUESTS
Shares may also be redeemed by sending a written request to the Trust. Call the
Trust for specific instructions before redeeming by letter. The shareholder will
be asked to provide in the request his name, the Trust name, his account number,
and the share or dollar amount requested. If share certificates have been
issued, they must be properly endorsed and should be sent by registered or
certified mail with the written request.
SIGNATURES. Shareholders requesting a redemption of $10,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Trust, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
- a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
- any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Trust does not accept signatures guaranteed by a notary public.
The Trust and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Trust may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Trust and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.
REDEMPTION BEFORE PURCHASE INSTRUMENTS CLEAR
When shares are purchased by check, or through the Automated Clearing House
("ACH"), proceeds from the redemption of those shares are not available, and
those Shares may not be exchanged, until the Trust or its agents are reasonably
certain that the purchase check has cleared, which could take up to ten calendar
days.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Trust may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $25,000 due to
shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
REDEMPTION IN KIND
The Trust is obligated to redeem Shares solely in cash up to $250,000 or 1% of
the Trust's net asset value, whichever is less, for any one shareholder within a
90-day period.
Any redemption beyond this amount will also be in cash unless the Trustees
determine that further cash payments will have a material adverse effect on
remaining shareholders. In such a case, the Trust will pay all or a portion of
the remainder of the redemption in portfolio instruments, valued in the same way
as the Trust determines net asset value. The portfolio instruments will be
selected in a manner that the Trustees deem fair and equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.
SHAREHOLDER INFORMATION
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VOTING RIGHTS
Each share of the Trust gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust's
operation and for the election of Trustees under certain circumstances. Trustees
may be removed by the Trustees or by shareholders at a special meeting. A
special meeting of the Trust shall be called by the Trustees upon the written
request of shareholders owning at least 10% of the Trust's outstanding shares.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust. These documents require notice of this disclaimer to be given in each
agreement, obligation, or instrument the Trust or its Trustees enter into or
sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required to use its property to protect or to
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 cannot meet its obligations to indemnify shareholders and to
pay judgments against them from the assets of the Trust.
TAX INFORMATION
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FEDERAL INCOME TAX
The Trust will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
are received in cash or as additional Shares.
STATE AND LOCAL TAXES
The Trust intends to limit its investments to U.S. government securities paying
interest which, if owned directly by shareholders of the Trust, would be exempt
from state personal income tax. However, under the laws of some states, the net
investment income distributed by the Trust may be taxable to shareholders. State
laws differ on this issue, and shareholders are urged to consult their own tax
advisers regarding the status of their accounts under state and local tax laws.
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.
PERFORMANCE INFORMATION
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From time to time the Trust advertises its yield and effective yield.
The yield of the Trust represents the annualized rate of income earned on an
investment in the Trust over a seven-day period. It is the annualized dividends
earned during the period on the investment, shown as a percentage of the
investment. The effective yield is calculated similarly to the yield, but when
annualized, the income earned by an investment in the Trust is assumed to be
reinvested daily. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.
Advertisements and other sales literature may also refer to total return. Total
return represents the change, over a specified period of time, in the value of
an investment in the Trust after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed as
a percentage.
From time to time, the Trust may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
TRUST FOR GOVERNMENT CASH RESERVES
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1993
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<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------ ------------------------------------------------------------- --------------
SHORT-TERM U.S. GOVERNMENT OBLIGATIONS--84.4%
- ----------------------------------------------------------------------------------
$194,040,000 * Student Loan Marketing Assoc., Floating Rate Notes,
3.51%-3.89%, 12/7/93 $ 194,161,556
-------------------------------------------------------------
165,100,000 * Student Loan Marketing Assoc., Floating Rate Master Note,
3.19%, 10/6/94 165,100,000
-------------------------------------------------------------
213,270,000 ** Federal Home Loan Bank, Discount Notes, 3.01%-3.70%,
12/1/93-8/1/94 212,442,761
-------------------------------------------------------------
271,340,000 ** Federal Farm Credit Bank, Discount Notes, 3.04%-3.50%,
12/6/93-8/10/94 270,075,798
-------------------------------------------------------------
14,500,000 Federal Home Loan Bank Notes, 8.625%-12.00%, 2/15/94-6/27/94 14,855,537
-------------------------------------------------------------
38,000,000 ** Tennessee Valley Authority Discount Notes, 3.05%-3.07%,
12/1/93-12/16/93 37,983,392
------------------------------------------------------------- --------------
TOTAL SHORT-TERM U.S. GOVERNMENT OBLIGATIONS 894,619,044
------------------------------------------------------------- --------------
U.S. TREASURY OBLIGATIONS--15.6%
- ----------------------------------------------------------------------------------
55,000,000 U.S. Treasury Bills, 12/16/93-9/22/94 54,266,472
-------------------------------------------------------------
110,000,000 U.S. Treasury Notes, 4.25%-7.00%, 2/15/94-8/31/94 110,934,073
------------------------------------------------------------- --------------
TOTAL U.S. TREASURY OBLIGATIONS 165,200,545
------------------------------------------------------------- --------------
TOTAL INVESTMENTS (AT AMORTIZED COST) $1,059,819,589+
------------------------------------------------------------- --------------
</TABLE>
* Denotes variable rate obligation for which current rate and next reset date
are shown.
** Each issue shows the rate of discount at time of purchase.
+ Also represents cost for federal tax purposes.
Note: The category of investments is shown as a percentage of net assets
($1,060,354,761) at November 30, 1993.
(See Notes which are an integral part of the Financial Statements)
TRUST FOR GOVERNMENT CASH RESERVES
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------------------------------------
Investments, at amortized cost and value (Note 1A) $1,059,819,589
- ------------------------------------------------------------------------------
Cash 28,465
- ------------------------------------------------------------------------------
Interest receivable 2,902,696
- ------------------------------------------------------------------------------
Receivable for Trust shares sold 3,049
- ------------------------------------------------------------------------------
Deferred expenses (Note 1E) 5,181
- ------------------------------------------------------------------------------ --------------
Total assets 1,062,758,980
- ------------------------------------------------------------------------------
LIABILITIES:
- ------------------------------------------------------------------------------
Dividends payable $2,283,670
- -----------------------------------------------------------------
Payable for Trust shares redeemed 1,870
- -----------------------------------------------------------------
Accrued expenses and other liabilities 118,679
- ----------------------------------------------------------------- ----------
Total liabilities 2,404,219
- ------------------------------------------------------------------------------ --------------
NET ASSETS for 1,060,354,761 shares of beneficial interest outstanding $1,060,354,761
- ------------------------------------------------------------------------------ --------------
NET ASSET VALUE, Offering Price, and Redemption Price Per Share
($1,060,354,761 / 1,060,354,761 shares of beneficial interest outstanding) $1.00
- ------------------------------------------------------------------------------ --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
TRUST FOR GOVERNMENT CASH RESERVES
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------
Interest income (Note 1B) $35,826,310
- ---------------------------------------------------------------------------------
EXPENSES--
- --------------------------------------------------------------------
Investment advisory fee (Note 4) $4,366,904
- --------------------------------------------------------------------
Trustees' fees 21,929
- --------------------------------------------------------------------
Administrative personnel and services fees (Note 4) 554,513
- --------------------------------------------------------------------
Custodian, transfer and dividend disbursing agent fees and expenses 277,955
- --------------------------------------------------------------------
Trust share registration fees 4,010
- --------------------------------------------------------------------
Auditing fees 16,074
- --------------------------------------------------------------------
Legal fees 17,918
- --------------------------------------------------------------------
Printing and postage 5,929
- --------------------------------------------------------------------
Insurance premiums 11,909
- --------------------------------------------------------------------
Taxes 85
- --------------------------------------------------------------------
Miscellaneous 8,824
- -------------------------------------------------------------------- ----------
Total expenses 5,286,050
- --------------------------------------------------------------------
Deduct--Waiver of investment advisory fee (Note 4) 357,710
- -------------------------------------------------------------------- ----------
Net expenses 4,928,340
- --------------------------------------------------------------------------------- -----------
Net investment income $30,897,970
- --------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
TRUST FOR GOVERNMENT CASH RESERVES
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------------
1993 1992
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------
Net investment income $ 30,897,970 $ 41,409,702
- ------------------------------------------------------------ --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2)--
- ------------------------------------------------------------
Dividends to shareholders from net investment income (30,897,970) (41,409,702)
- ------------------------------------------------------------ --------------- ---------------
TRUST SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- ------------------------------------------------------------
Proceeds from sale of shares 3,320,318,297 3,118,484,340
- ------------------------------------------------------------
Net asset value of shares issued to shareholders electing
to receive payment of dividends in Trust shares 2,837,236 3,423,366
- ------------------------------------------------------------
Cost of shares redeemed (3,407,809,994) (3,228,590,861)
- ------------------------------------------------------------ --------------- ---------------
Change in net assets from Trust share transactions (84,654,461) (106,683,155)
- ------------------------------------------------------------ --------------- ---------------
Change in net assets (84,654,461) (106,683,155)
- ------------------------------------------------------------
NET ASSETS--
- ------------------------------------------------------------
Beginning of period 1,145,009,222 1,251,692,377
- ------------------------------------------------------------ --------------- ---------------
End of period $ 1,060,354,761 $ 1,145,009,222
- ------------------------------------------------------------ --------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
TRUST FOR GOVERNMENT CASH RESERVES
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
The Trust is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. The following is a
summary of significant accounting policies consistently followed by the Trust in
the preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles.
A. INVESTMENT VALUATIONS--The Trustees have determined that the best method
currently available for valuing portfolio securities is amortized cost. The
Trust's use of the amortized cost method to value portfolio securities is
conditioned on its compliance with Rule 2a-7 under the Investment Company Act
of 1940.
B. INCOME--Interest income is recorded on the accrual basis. Interest income
includes interest and discount earned (net of premium), including original
issue discount as required by the Internal Revenue Code, plus or minus
realized gains or losses, if any, on portfolio securities.
C. FEDERAL TAXES--It is the Trust's policy to comply with the provisions of the
Internal Revenue Code available to investment companies and to distribute to
shareholders each year all of its taxable income. Accordingly, no provision
for federal tax is necessary.
D. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Trust may engage in
when-issued or delayed delivery transactions. To the extent the Trust engages
in such transactions, it will do so for the purpose of acquiring portfolio
securities consistent with its investment objective and policies and not for
the purpose of investment leverage. The Trust will record a when-issued
security and the related liability on the trade date. Until the securities
are received and paid for, the Trust will maintain security positions such
that sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
E. DEFERRED EXPENSES--Costs incurred by the Trust in connection with its initial
share registration, other than organization expenses, were deferred and are
being amortized on a straight line basis through March 1994.
F. OTHER--Investment transactions are accounted for on the date of the
transaction.
(2) DIVIDENDS
The Trust computes its net income daily and, immediately prior to the
calculation of its net asset value at the close of business, declares and
records dividends to shareholders of record at the time of the previous
computation of the Trust's net asset value. Payment of dividends is made monthly
in cash or in additional shares at the net asset value on the payable date.
TRUST FOR GOVERNMENT CASH RESERVES
- --------------------------------------------------------------------------------
(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
November 30, 1993, capital paid-in aggregated $1,060,354,761. Transactions in
Trust shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
---------------------------------
1993 1992
-------------- --------------
<S> <C> <C>
- ------------------------------------------------------------
Shares outstanding, beginning of period 1,145,009,222 1,251,692,377
- ------------------------------------------------------------
Shares sold 3,320,318,297 3,118,484,340
- ------------------------------------------------------------
Shares issued to shareholders electing to receive payment of
dividends in Trust shares 2,837,236 3,423,366
- ------------------------------------------------------------
Shares redeemed (3,407,809,994) (3,228,590,861)
- ------------------------------------------------------------ -------------- --------------
Shares outstanding, end of period 1,060,354,761 1,145,009,222
- ------------------------------------------------------------ -------------- --------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Federated Research ("Adviser"), received for its services an annual investment
advisory fee equal to .40% of the Trust's average daily net assets. Adviser may
voluntarily choose to waive a portion of its fee, limited to the amount of the
advisory fee. Adviser can terminate this voluntary waiver of expenses at any
time at its sole discretion. Adviser has also undertaken to reimburse the Trust
for operating expenses in excess of limitations established by certain states.
For the year ended November 30, 1993, the advisory fee amounted to $4,366,904 of
which $357,710 was voluntarily waived.
Administrative personnel and services were provided at approximate cost by
Federated Administrative Services, Inc. Certain of the Officers and Trustees of
the Trust are Officers and Directors of the above corporations.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
TRUST FOR GOVERNMENT CASH RESERVES:
We have audited the accompanying statement of assets and liabilities of Trust
for Government Cash Reserves (a Massachusetts business trust), including the
schedule of portfolio investments, as of November 30, 1993, and the related
statement of operations for the year then ended, and the statement of changes in
net assets, and the financial highlights (see page 2 of the prospectus) for the
periods presented. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
November 30, 1993, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Trust
for Government Cash Reserves, as of November 30, 1993, the results of its
operations for the year then ended, and changes in its net assets and financial
highlights for the periods presented, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN & CO
Pittsburgh, Pennsylvania
January 14, 1994
[THIS PAGE INTENTIONALLY LEFT BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Trust for Government Cash Reserves Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Investment Adviser
Federated Research Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8602
Trust Company Boston, Massachusetts 02266-8602
- ------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- ------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen & Co. 2100 One PPG Place
Pittsburgh, Pennsylvania 15222
- ------------------------------------------------------------------------------------------------
</TABLE>
TRUST FOR GOVERNMENT
CASH RESERVES
PROSPECTUS
A No-Load, Open-End, Diversified
Management Investment Company
January 31, 1994
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
9022103A (1/94)
TRUST FOR GOVERNMENT CASH RESERVES
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus of
Trust for Government Cash Reserves (the "Trust") dated January 31, 1994. This
Statement is not a prospectus itself. To receive a copy of the prospectus, write
or call the Trust.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated January 31, 1994
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE TRUST 1
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ---------------------------------------------------------------
Types of Investments 1
When-Issued and Delayed
Delivery Transactions 1
Investment Limitations 1
TRUST MANAGEMENT 2
- ---------------------------------------------------------------
Officers and Trustees 2
The Funds 4
Trust Ownership 4
Trustee Liability 4
INVESTMENT ADVISORY SERVICES 5
- ---------------------------------------------------------------
Adviser to the Trust 5
Advisory Fees 5
ADMINISTRATIVE SERVICES 5
- ---------------------------------------------------------------
BROKERAGE TRANSACTIONS 5
- ---------------------------------------------------------------
PURCHASING SHARES 6
- ---------------------------------------------------------------
Conversion to Federal Funds 6
DETERMINING NET ASSET VALUE 6
- ---------------------------------------------------------------
Use of the Amortized Cost Method 6
REDEEMING SHARES 7
- ---------------------------------------------------------------
Redemption in Kind 7
TAX STATUS 7
- ---------------------------------------------------------------
The Trust's Tax Status 7
Shareholders' Tax Status 7
YIELD 8
- ---------------------------------------------------------------
EFFECTIVE YIELD 8
- ---------------------------------------------------------------
PERFORMANCE COMPARISONS 8
- ---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE TRUST
- --------------------------------------------------------------------------------
Trust for Government Cash Reserves was established as a Massachusetts business
trust under a Declaration of Trust dated January 26, 1989.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Trust's investment objective is to provide high current income consistent
with stability of principal and liquidity. The investment objective cannot be
changed without approval of shareholders.
TYPES OF INVESTMENTS
The Trust invests only in short-term U.S. government securities.
VARIABLE RATE U.S. GOVERNMENT SECURITIES
Some of the short-term U.S. government securities the Trust may purchase
carry variable interest rates. These securities have a rate of interest
subject to adjustment at least annually. This adjusted interest rate is
ordinarily tied to some objective standard, such as the 91-day U.S.
Treasury bill rate.
Variable interest rates will reduce the changes in the market value of
such securities from their original purchase prices. Accordingly, the
potential for capital appreciation or capital depreciation should not be
greater than the potential for capital appreciation or capital
depreciation of fixed interest rate U.S. government securities having
maturities equal to the interest rate adjustment dates of the variable
rate U.S. government securities.
The Trust may purchase variable rate U.S. government securities upon the
determination by the Board of Trustees ("Trustees") that the interest
rate as adjusted will cause the instrument to have a current market value
that approximates its par value on the adjustment date.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are arrangements in which the Trust purchases securities with
payment and delivery scheduled for a later time. The Trust engages in
when-issued and delayed delivery transactions only for the purpose of acquiring
portfolio securities consistent with the Trust's investment objective and
policies, not for investment leverage.
These transactions are made to secure what is considered to be an advantageous
price and yield for the Trust. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.
No fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of the Trust sufficient to make payment for the
securities to be purchased are segregated at the trade date. These assets are
marked to market daily and maintained until the transaction is settled.
The Trust will limit its purchase of securities on a when-issued or delayed
delivery basis to no more than 20% of the value of its total assets.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Trust will not sell any securities short or purchase any securities
on margin but may obtain such short-term credits as may be necessary for
clearance of transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Trust will not issue senior securities except that the Trust may
borrow money in amounts up to one-third of the value of its total assets,
including the amounts borrowed.
The Trust will not borrow money except as a temporary, extraordinary, or
emergency measure or to facilitate management of the portfolio by
enabling the Trust to meet redemption requests when the liquidation of
portfolio securities is deemed to be inconvenient or disadvantageous. The
Trust will not purchase any securities while borrowings in excess of 5%
of its total assets are outstanding.
PLEDGING ASSETS
The Trust will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may pledge assets having
a market value not exceeding the lesser of the dollar amounts borrowed or
10% of the value of total assets at the time of the pledge.
LENDING CASH OR SECURITIES
The Trust will not lend any of its assets, except that it may purchase or
hold U.S. government securities, permitted by its investment objective,
policies and limitations.
- --------------------------------------------------------------------------------
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, can be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in those limitations becomes effective.
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 ILLIQUID SECURITIES
The Trust will not invest more than 10% of the value of its net assets in
illiquid securities.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
The Trust did not borrow money 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
in the coming fiscal year.
TRUST MANAGEMENT
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with Federated Research,
Federated Investors, Federated Securities Corp., Federated Services Company,
Federated Administrative Services, Inc., and the Funds (as defined below).
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
John F. Donahue* Chairman Chairman and Trustee, Federated Investors; Chairman and
Federated Investors and Trustee Trustee, Federated Advisers, Federated Management, and
Tower Federated Research; Director, AEtna Life and Casualty
Pittsburgh, PA Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds; formerly, Director,
The Standard Fire Insurance Company. Mr. Donahue is the
father of J. Christopher Donahue, Vice President of the
Trust.
- ---------------------------------------------------------------------------------------------------------------
John T. Conroy, Jr Trustee Senior Vice President, John R. Wood and Associates, Inc.,
Wood/IPC Commercial Realtors; President, Northgate Village Development
Department Corporation; General Partner or Trustee in private real
John R. Wood and estate ventures in Southwest Florida; Director, Trustee, or
Associates, Inc., Managing General Partner of the Funds; formerly, President,
Realtors Naples Property Management, Inc.
3255 Tamiami Trail North
Naples, FL
- ---------------------------------------------------------------------------------------------------------------
William J. Copeland Trustee Director and Member of the Executive Committee, Michael
One PNC Plaza- Baker, Inc.; Director, Trustee, or Managing General Partner
23rd Floor of the Funds; formerly, Vice Chairman and Director, PNC
Pittsburgh, PA Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes,
Inc.
- ---------------------------------------------------------------------------------------------------------------
James E. Dowd Trustee Attorney-at-law; Director, The Emerging Germany Fund, Inc.;
571 Hayward Mill Road Director, Trustee, or Managing General Partner of the Funds;
Concord, MA formerly, Director, Blue Cross of Massachusetts, Inc.
- ---------------------------------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and Internist, Presbyterian and
3471 Fifth Avenue Montefiore Hospitals; Clinical Professor of Medicine and
Suite 1111 Trustee, University of Pittsburgh; Director, Trustee, or
Pittsburgh, PA Managing General Partner of the Funds.
- ---------------------------------------------------------------------------------------------------------------
Edward L. Flaherty, Jr. Trustee Attorney-at-law; Partner, Meyer and Flaherty; Director,
5916 Penn Mall Eat'N Park Restaurants, Inc. and Statewide Settlement
Pittsburgh, PA Agency, Inc.; Director, Trustee, or Managing General Partner
of the Funds; formerly, Counsel, Horizon Financial, F.A.,
Western Region.
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Glen R. Johnson President and Trustee, Federated Investors; President and/or Trustee of
Federated Investors Trustee some of the Funds; staff member, Federated Securities Corp.,
Tower and Federated Administrative Services, Inc.
Pittsburgh, PA
- ---------------------------------------------------------------------------------------------------------------
Peter E. Madden Trustee Consultant; State Representative, Commonwealth of
225 Franklin Street Massachusetts; Director, Trustee, or Managing General
Boston, MA Partner of the Funds; formerly President, State Street Bank
and Trust Company and State Street Boston Corporation and
Trustee, Lahey Clinic Foundation, Inc.
- ---------------------------------------------------------------------------------------------------------------
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer and Flaherty; Chairman,
5916 Penn Mall Meritcare, Inc.; Director, Eat'N Park Restaurants; Director,
Pittsburgh, PA Trustee, or Managing General Partner of the Funds; formerly,
Vice Chairman, Horizon Financial, F.A.
- ---------------------------------------------------------------------------------------------------------------
Wesley W. Posvar Trustee Professor, Foreign Policy and Management Consultant;
1202 Cathedral of Trustee, Carnegie Endowment for International Peace, RAND
Learning Corporation, Online Computer Library Center, Inc., and U.S.
University of Pittsburgh Space Foundation; Chairman, Czecho Slovak Management Center;
Pittsburgh, PA 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 Trustee Public relations/marketing consultant; Director, Trustee, or
4905 Bayard Street Managing General Partner of the Funds.
Pittsburgh, PA
- ---------------------------------------------------------------------------------------------------------------
J. Christopher Donahue Vice President President and Trustee, Federated Investors; Trustee,
Federated Investors Federated Advisers, Federated Management, and Federated
Tower Research; President and Director, Federated Administrative
Pittsburgh, PA Services, Inc.; Trustee, Federated Services Company;
President or Vice President of the Funds; Director, Trustee
or Managing General Partner of some of the Funds. Mr.
Donahue is the son of John F. Donahue, Chairman and Trustee
of the Trust.
- ---------------------------------------------------------------------------------------------------------------
Richard B. Fisher Vice President Executive Vice President and Trustee, Federated Investors;
Federated Investors Chairman and Director, Federated Securities Corp.; President
Tower or Vice President of the Funds; Director or Trustee of some
Pittsburgh, PA of the Funds.
- ---------------------------------------------------------------------------------------------------------------
Edward C. Gonzales Vice President Vice President, Treasurer and Trustee, Federated Investors;
Federated Investors and Treasurer Vice President and Treasurer, Federated Advisers, Federated
Tower Management, and Federated Research; Executive Vice
Pittsburgh, PA President, Treasurer, and Director, Federated Securities
Corp.; Trustee, Federated Services Company; Chairman,
Treasurer, and Director, Federated Administrative Services,
Inc.; Trustee of some of the Funds; Vice President and
Treasurer of the Funds.
- ---------------------------------------------------------------------------------------------------------------
John W. McGonigle Vice President Vice President, Secretary, General Counsel, and Trustee,
Federated Investors and Secretary Federated Investors; Vice President, Secretary and Trustee,
Tower Federated Advisers, Federated Management, and Federated
Pittsburgh, PA Research; Trustee, Federated Services Company; Executive
Vice President, Secretary, and Director, Federated
Administrative Services, Inc.; Director and Executive Vice
President, Federated Securities Corp.; Vice President and
Secretary of the Funds.
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
John A. Staley, IV Vice President Vice President and Trustee, Federated Investors; Executive
Federated Investors Vice President, Federated Securities Corp.; President and
Tower Trustee, Federated Advisers, Federated Management, and
Pittsburgh, PA Federated Research; Vice President of the Funds; Director,
Trustee, or Managing General Partner of some of the Funds;
formerly, Vice President, The Standard Fire Insurance
Company and President of its Federated Research Division.
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* This Trustee is deemed to be an "interested person" of the Trust as defined in
the Investment Company Act of 1940.
+ Member of the Trust's Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of Trustees
between meetings of the Board.
THE FUNDS
The Funds," and "Funds" mean the following investment companies: A.T. Ohio
Tax-Free Money Fund; American Leaders Fund, Inc.; Annuity Management Series;
Automated Cash Management Trust; Automated Government Money Trust; BankSouth
Select Funds; The Boulevard Funds; California Municipal Cash Trust; Cash Trust
Series; Cash Trust Series II; Cash Trust Series, Inc.; DG Investor Series;
Edward D. Jones & Co. Daily Passport Cash Trust; FT Series, Inc.; Federated ARMs
Fund; Federated Exchange Fund, Ltd.; Federated GNMA Trust; Federated Government
Trust; Federated Growth Trust; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated Index Trust; Federated
Intermediate Government Trust; Federated Master Trust; Federated Municipal
Trust; Federated Short-Intermediate Government Trust; Federated Short-Term U.S.
Government Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated
U.S. Government Bond Fund; First Priority Funds; Federated 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;
Insurance Management Series; Intermediate Municipal Trust; 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; Mark Twain Funds; Money Market Management
Inc.; Money Market Obligations Trust; Money Market Trust; Municipal Securities
Income Trust; New York Municipal Cash Trust; 111 Corcoran Funds; The Planters
Funds; Portage Funds; RIMCO Monument Funds; The Shawmut Funds; Short-Term
Municipal Trust; Signet Select Funds; Star Funds; The Starburst Funds; The
Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted Duration
Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for Financial
Institutions; Trust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; and Trust for U.S. Treasury Obligations.
TRUST OWNERSHIP
Officers and Trustees own less than 1% of the Trust's outstanding shares.
As of December 31, 1993, the following shareholders owned 5% or more of the
outstanding shares of the Trust:
Anderson & Co., Philadelphia, PA, owned approximately 75,951,183 Shares (7.46%);
Kenpar & Co., Santa Ana, CA, owned approximately 82,292,821 Shares (8.08%);
Currier & Co., Salem, MA, owned approximately 61,593,635 shares (6.05%); and
Scaup & Co., Boston, MA, owned approximately 51,245,377 Shares (5.03%).
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
to the Trust or its shareholders for money damages except where such exemption
from liability is not permitted by law. However, nothing in the Declaration of
Trust protects the Trustees against any liability to which they would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
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ADVISER TO THE TRUST
The Trust's investment adviser is Federated Research. It is a subsidiary of
Federated Investors. All of the voting securities of Federated Investors are
owned by a trust, the trustees of which are John F. Donahue, his wife, and his
son, J. Christopher Donahue. John F. Donahue, Chairman and Trustee of Federated
Research, is Chairman and Trustee of Federated Investors and Chairman and
Trustee of the Trust. John A. Staley, IV, President and Trustee of Federated
Research, is Vice President and Trustee of Federated Investors, Executive Vice
President of Federated Securities Corp., and Vice President of the Trust. J.
Christopher Donahue, Trustee of Federated Research, is President and Trustee of
Federated Investors, President and Director of Federated Administrative
Services, Inc., and Trustee of Federated Services Company, Vice President of the
Trust. John W. McGonigle, Trustee of Federated Research, is Trustee, Vice
President, Secretary, and General Counsel of Federated Investors, Director,
Executive Vice President, and Secretary of Federated Administrative Services,
Inc., Trustee of Federated Services Company, Director and Executive Vice
President of Federated Securities Corp., and Vice President and Secretary of the
Trust.
The adviser shall not be liable to the Trust or any shareholder for any losses
that may be sustained in the purchase, holding, or sale of any security, or for
anything done or omitted by it, except acts or omissions involving willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, Federated Research receives an annual investment
advisory fee as described in the prospectus. During the fiscal years ended
November 30, 1993, 1992, and 1991, the Trust's adviser earned $4,366,904,
$4,670,053, and $4,474,598, respectively, of which $357,710, $280,690, and
$218,163, respectively, were voluntarily waived because of undertakings to limit
the Trust's expenses.
STATE EXPENSE LIMITATION
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 2.5% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1.5% per year
of the remaining average net assets, the adviser will reimburse the 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 fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
ADMINISTRATIVE SERVICES
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Federated Administrative Services, Inc., a subsidiary of Federated Investors,
provides administrative personnel and services to the Trust at approximate cost.
For the fiscal years ended November 30, 1993, 1992, and 1991, the Trust incurred
administrative service fees of $554,513, $484,781, and $486,145, respectively.
John A. Staley, IV, an officer of the Trust, and Dr. Henry J. Gailliot, an
officer of Federated Research, the adviser to the Trust, each hold approximately
15% and 20%, respectively, of the outstanding common stock and serve as
Directors of Commercial Data Services, Inc., a company which provides computer
processing services to Federated Administrative Services, Inc. For the fiscal
years ended November 30, 1993, 1992, and 1991, Federated Administrative
Services, Inc. paid approximately $164,324, $186,144, and $193,178,
respectively, for services provided by Commercial Data Services, Inc.
BROKERAGE TRANSACTIONS
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When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the investment 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 review by the Trustees.
The adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Trust or to the
adviser and may include:
- - advice as to the advisability of investing in securities;
- - security analysis and reports;
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- - economic studies;
- - industry studies;
- - receipt of quotations for portfolio evaluations; and
- - similar services.
The adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage and
research services provided.
Research services provided by brokers may be used by the adviser or by
affiliates of Federated Investors in advising Federated Funds and other
accounts. To the extent that receipt of these services may supplant services for
which the adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses.
PURCHASING SHARES
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Shares are sold at their net asset value without a sales charge on days the New
York Stock Exchange is open for business. The procedure for purchasing shares of
the Trust is explained in the prospectus under "Investing in the Trust."
CONVERSION TO FEDERAL FUNDS
It is the Trust's policy to be as fully invested as possible so that maximum
interest can be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds. State Street Bank acts as the
shareholder's agent in depositing checks and converting them to federal funds.
DETERMINING NET ASSET VALUE
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The Trust attempts to stabilize the value of a share at $1.00. The days on which
net asset value is calculated by the Trust are described in the prospectus.
USE OF THE AMORTIZED COST METHOD
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
The Trust's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions 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.
Under the Rule, the Trust is permitted to purchase instruments which are subject
to demand features or standby commitments. As defined by the Rule, a demand
feature entitles the Trust to receive the principal amount of the instrument
from the issuer or a third party on (1) no more than 30 days' notice or (2) at
specified intervals not exceeding one year on no more than 30 days' notice. A
standby commitment entitles the Trust to achieve same day settlement and to
receive an exercise price equal to the amortized cost of the underlying
instrument plus accrued interest at the time of exercise.
MONITORING PROCEDURES
The Trustees' procedures include monitoring the relationship between the
amortized cost value per share and the net asset value per share based
upon available indications of market value. The Trustees will decide
what, if any, steps should be taken if there is a difference of more than
.5 of 1% between the two values. The Trustees will take any steps they
consider appropriate (such as redemption in kind or shortening the
average portfolio maturity) to minimize any material dilution or other
unfair results arising from differences between the two methods of
determining net asset value.
INVESTMENT RESTRICTIONS
The Rule requires that the Trust limit its investments to instruments
that, in the opinion of the Trustees, present minimal credit risk and
have received the requisite rating from one or more nationally recognized
statistical rating organizations. If the instruments are not rated, the
Trustees must determine that they are of comparable quality. The Rule
also requires the Trust to maintain a dollar-weighted average portfolio
maturity (not more than 90 days) appropriate to the objective of
maintaining a stable net asset value of $1.00 per
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share. In addition, no instrument with a remaining maturity of more than
397 days can be purchased by the Trust.
Should the disposition of a portfolio security result in a
dollar-weighted average portfolio maturity of more than 90 days, the
Trust will invest its available cash to reduce the average maturity to 90
days or less as soon as possible.
The Trust may attempt to increase yield by trading portfolio securities to take
advantage of short-term market variations. This policy may, from time to time,
result in high portfolio turnover. Under the amortized cost method of valuation,
neither the amount of daily income nor the net asset value is affected by any
unrealized appreciation or depreciation of the portfolio.
In periods of declining interest rates, the indicated daily yield on Shares
computed by dividing the annualized daily income on the Trust's portfolio by the
net asset value computed as above may tend to be higher than a similar
computation made by using a method of valuation based upon market prices and
estimates.
In periods of rising interest rates, the indicated daily yield on Shares
computed the same way may tend to be lower than a similar computation made by
using a method of calculation based upon market prices and estimates.
REDEEMING SHARES
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The Trust redeems shares at the next computed net asset value after the Trust
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Shares." Although State Street Bank does not charge
for telephone redemptions, it reserves the right to charge a fee for the cost of
wire-transferred redemptions of less than $5,000.
REDEMPTION IN KIND
Although the Trust intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the Trust's portfolio.
Redemption in kind will be made in conformity with applicable Securities and
Exchange Commission rules, taking such securities at the same value employed in
determining net asset value and selecting the securities in a manner the
Trustees determine to be fair and equitable.
The Trust has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940 under which the Trust is obligated to redeem shares for any one
shareholder in cash only up to the lesser of $250,000 or 1% of the Trust's net
asset value during any 90-day period.
TAX STATUS
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THE TRUST'S TAX STATUS
The Trust will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Trust must, among other
requirements:
- - derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
- - derive less than 30% of its gross income from the sale of securities held less
than three months;
- - invest in securities within certain statutory limits; and
- - distribute to its shareholders at least 90% of its net income earned during
the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends received as cash or
additional shares. No portion of any income dividend paid by the Trust is
eligible for the dividends received deduction available to corporations. These
dividends, and any short-term capital gains, are taxable as ordinary income.
CAPITAL GAINS
Capital gains experienced by the Trust could result in an increase in
dividends. Capital losses could result in a decrease in dividends. If,
for some extraordinary reason, the Trust realizes net long-term capital
gains, it will distribute them at least once every 12 months.
YIELD
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The Trust's yield for the seven-day period ended November 30, 1993 was 2.88%.
The Trust calculates its yield daily, based upon the seven days ending on the
day of the calculation, called the 'base period.' This yield is computed by:
- - determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net change
excluding capital changes but including the value of any additional shares
purchased with dividends earned from the original one share and all dividends
declared on the original and any purchased shares;
- - dividing the net change in the account's value by the value of the account at
the beginning of the base period to determine the base period return; and
- - multiplying the base period return by (365/7).
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the
Trust, the performance will be reduced for those shareholders paying those fees.
EFFECTIVE YIELD
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The Trust's effective yield for the seven-day period ending November 30, 1993
was 2.92%.
The Trust's effective yield is computed by compounding the unannualized base
period return by:
- - adding 1 to the base period return;
- - raising the sum to the 365/7 power; and
- - subtracting 1 from the result.
PERFORMANCE COMPARISONS
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The Trust's performance depends upon such variables as:
- - portfolio quality;
- - average portfolio maturity;
- - type of instruments in which the portfolio is invested;
- - changes in interest rates on money market instruments;
- - changes in Trust expenses; and
- - the relative amount of Trust cash flow.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute net asset value. The financial
publications and/or indices which the Fund uses in advertising may include:
- - DISCOUNT CORPORATION OF NEW YORK 30-DAY FEDERAL AGENCIES, for example, is a
weekly quote of the average daily offering price for selected federal agency
issues maturing in 30 days.
- - 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.
9022103B (1/94)
