GOVERNMENT CASH SERIES
(A PORTFOLIO OF CASH TRUST SERIES, INC.)
PROSPECTUS
The shares of Government Cash Series (the "Fund") offered by this prospectus
represent interests in a diversified portfolio of Cash Trust Series, Inc. (the
"Company"), an open-end management investment company (a mutual fund). The Fund
invests in U.S. government securities to achieve current income consistent with
stability of principal and liquidity.
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 FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated 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 Fund, contact your financial
institution.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Prospectus dated September 30, 1994
TABLE OF CONTENTS
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SUMMARY OF FUND EXPENSES 1 NET ASSET VALUE 7
- ------------------------------------- -------------------------------------
FINANCIAL HIGHLIGHTS-- INVESTING IN THE FUND 8
GOVERNMENT CASH SERIES 2 -------------------------------------
- -------------------------------------
Share Purchases 8
GENERAL INFORMATION 3 Through a Financial Institution 8
- ------------------------------------- By Wire 8
By Mail 8
INVESTMENT INFORMATION 3 Systematic Investment Program 8
- ------------------------------------- Minimum Investment Required 8
Certificates and Confirmations 8
Investment Objective 3 Dividends 9
Investment Policies 3 Capital Gains 9
Acceptable Investments 3 Retirement Plans 9
Repurchase Agreements 4
When-Issued and Delayed Delivery REDEEMING SHARES 9
Transactions 4 -------------------------------------
Lending of Portfolio Securities 4
Investment Limitations 4 Through a Financial Institution 9
Regulatory Compliance 5 Receiving Payment 9
By Wire 9
CASH TRUST SERIES, INC., By Check 10
INFORMATION 5 By Mail 10
- ------------------------------------- By Writing a Check 10
By VISA Card 10
Management of Cash Trust Series, By Systematic Withdrawal Program 11
Inc. 5 Accounts with Low Balances 11
Board of Directors 5
Investment Adviser 5 SHAREHOLDER INFORMATION 11
Advisory Fees 5 -------------------------------------
Adviser's Background 5
Distribution of Shares 6 Voting Rights 11
Distribution and Shareholder
Services Plans 6
TAX INFORMATION 11
Administration of the Company 7 -------------------------------------
Administrative Services 7
Custodian 7 Federal Income Tax 11
Transfer Agent and Dividend Other State and Local Taxes 12
Disbursing Agent 7
Legal Counsel 7 PERFORMANCE INFORMATION 12
Independent Auditors 7 -------------------------------------
ADDRESSES 13
-------------------------------------
SUMMARY OF FUND EXPENSES
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<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)............................... None
Contingent Sales Charge (as a percentage of original purchase price
or redemption proceeds, as applicable)............................ None
Redemption Fee (as a percentage of amount redeemed, if applica-
ble)............................................................... None
Exchange Fee....................................................... None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fee (after waiver) (1).................................. 0.41%
12b-1 Fee (2)...................................................... 0.10%
Total Other Expenses............................................... 0.48%
Shareholder Services Fee......................................... 0.25%
Total Fund Operating Expenses (3).............................. 0.99%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate its voluntary
waiver at any time at its sole discretion. The maximum management fee is
0.50%.
(2) The maximum 12b-1 fee is 0.35%.
(3) The Total Operating Expenses would have been 1.08% absent the voluntary
waiver of a portion of the management fee.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS
AND EXPENSES, SEE "CASH TRUST SERIES, INC., INFORMATION." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted under the rules of the National
Association of Securities Dealers, Inc. ("NASD"). However, in order for a Fund
investor to exceed the NASD's maximum front-end sales charge of 6.25%, a
continuous investment in the Fund for 62.5 years would be required.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment
assuming (1) 5% annual return and (2) redemp-
tion at the end
of each time period............................ $10 $32 $55 $121
</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.
GOVERNMENT CASH SERIES
FINANCIAL HIGHLIGHTS
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(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report, dated July 8, 1994, on the Fund's financial
statements for the year ended May 31, 1994, and on the following table for each
of the periods presented, is included in the Annual Report, which is
incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.
<TABLE>
<CAPTION>
Year Ended May 31
--------------------------------------------
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 OPERA-
TIONS
- -------------------------------
Net investment income 0.02 0.03 0.04 0.07 0.06
- -------------------------------
LESS DISTRIBUTIONS
- -------------------------------
Dividends to shareholders from
net investment income (0.02) (0.03) (0.04) (0.07) (0.06)
- ------------------------------- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------- ----- ----- ----- ----- -----
TOTAL RETURN** 2.45% 2.54% 4.33% 6.80% 6.53%
- -------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------
Expenses 0.99% 0.99% 0.98% 0.94% 0.73%(b)
- -------------------------------
Net investment income 2.41% 2.53% 4.25% 6.48% 7.74%(b)
- -------------------------------
Expense waiver/reimbursement
(a) 0.09% 0.06% 0.06% 0.13% 0.32%(b)
- -------------------------------
SUPPLEMENTAL DATA
- -------------------------------
Net assets, end of period (000
omitted) $401,334 $400,231 $550,675 $631,718 $493,995
- -------------------------------
</TABLE>
* Reflects operations for the period from August 23, 1989 (date of initial
public investment) to May 31, 1990.
** 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.
(b) Computed on an annualized basis.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated May 31, 1994, which can be obtained free of charge.
GENERAL INFORMATION
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The Company was established as a Maryland corporation under Articles of
Incorporation dated February 1, 1993. The Articles of Incorporation permit the
Company to offer separate series of shares of beneficial interest representing
interests in separate portfolios of securities. The Fund is designed for
customers of financial institutions such as banks, fiduciaries, custodians of
public funds, investment advisers, and broker/dealers as a convenient means of
accumulating an interest in a professionally managed, diversified portfolio
investing only in short-term U.S. government securities. A minimum initial
investment of $10,000 is required, except for qualified retirement plans which
have a minimum initial investment of $1,000. Subsequent investments must be in
amounts of at least $500.
The Fund 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 Fund is current income consistent with
stability of principal and liquidity. This investment objective cannot be
changed without shareholder approval. While there is no assurance that the
Fund will achieve its investment objective, it endeavors to do so by following
the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing only in a portfolio of
U.S. government securities maturing in 13 months or less. The average maturity
of the securities in the Fund'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 Directors ("Directors") without
shareholder approval. Shareholders will be notified before any material change
in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests only in U.S. government securities.
These instruments 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 Central Banks for Cooperatives, Farmers Home
Administration, Federal Farm Credit Banks, Federal Farm Credit System,
Federal Home Loan Banks, National Bank for Cooperatives, Federal Home
Loan Mortgage Corporation, Federal National Mortgage Association,
Government National Mortgage Association, and Student Loan Marketing
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 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.
REPURCHASE AGREEMENTS. Certain securities in which the Fund invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, brokers/dealers, and other recognized financial
institutions sell securities to the Fund 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 Fund, the Fund could
receive less than the repurchase price on any sale of such securities. In the
event that such a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending court
action. The Fund believes that under the regular procedures normally in effect
for custody of the Fund's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the Fund
and allow retention or disposition of such securities. The Fund will only
enter into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are deemed by the Fund's adviser
to be creditworthy pursuant to guidelines established by the Directors.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund 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 Fund may pay more/less than the market value of the securities
on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter in 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 Fund may realize short-term profits or losses upon the sale of such
commitments.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities on a short-term or long-term basis, or
both, to broker/dealers, banks, or other institutional borrowers of securities.
The Fund will only enter into loan arrangements with broker/dealers, banks, or
other institutions which the adviser has determined are creditworthy under
guidelines established by the Fund's Directors and will receive collateral at
all times equal to at least 100% of the value of the securities loaned.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a money market instrument for a percentage
of its cash value with an agreement to buy it back on a set date) or pledge
securities except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets and pledge up to 10% of the value of
those assets to secure such borrowings.
The above investment limitation cannot be changed without shareholder
approval. The following limitation, however, may be changed by the Directors
without shareholder approval. Shareholders will be notified before any
material change in this limitation becomes effective.
The Fund 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 Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in this
prospectus and its Statement of Additional Information, in order to comply
with applicable laws and regulations, including the provisions of and
regulations under the Investment Company Act of 1940, as amended. In
particular, the Fund will comply with the various requirements of Rule 2a-7,
which regulates money market mutual funds. The Fund will determine the
effective maturity of its investments according to Rule 2a-7. The Fund may
change these operational policies to reflect changes in the laws and
regulations without the approval of its shareholders.
CASH TRUST SERIES, INC., INFORMATION
- -------------------------------------------------------------------------------
MANAGEMENT OF CASH TRUST SERIES, INC.
BOARD OF DIRECTORS. The Company is managed by a Board of Directors. The
Directors are responsible for managing the Fund's business affairs and for
exercising all the Company's powers except those reserved for the shareholders.
The Executive Committee of the Board of Directors handles the Board's
responsibilities between meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Advisers, the Fund's investment adviser, subject to direction by the Directors.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee equal to
.50 of 1% of the Fund's average daily net assets. The adviser has undertaken
to reimburse the Fund 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 Fund, but reserves the right to terminate such waiver or
reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. The Fund's investment adviser is Federated Advisers.
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.
Federated Advisers 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
Fund. It is a Pennsylvania corporation organized on November 14, 1969, and is
the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution
Plan"), the Fund may pay to the distributor an amount, computed at an annual
rate of .35 of 1% of the average daily net asset value of the Fund to finance
any activity which is principally intended to result in the sale of shares
subject to the Distribution Plan. The distributor may select Financial
Institutions such as banks, fiduciaries, custodians for public funds,
investment advisers, and broker/dealers to provide sales support services as
agents for their clients or customers. In addition, the Fund has adopted a
Shareholder Services Plan (the "Services Plan") under which it will pay
Financial Institutions an amount not exceeding .25 of 1% of the average daily
net asset value of the Fund to provide administrative support services to
their customers who own shares of the Fund. From time to time and for such
periods as deemed appropriate, the amounts stated above may be reduced
voluntarily. Activities and services under these arrangements may include, but
are not limited to, providing advertising and marketing materials to
prospective shareholders, providing personal services to shareholders, and
maintaining shareholder accounts.
Financial Institutions will receive fees based upon shares owned by their
clients or customers. The schedules of such fees and the basis upon which such
fees will be paid will be determined from time to time by the Fund or the
distributor, as appropriate.
The Distribution Plan is a compensation-type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund
does not pay for unreimbursed expenses of the distributor, including amounts
expended by the distributor in excess of amounts received by it from the Fund,
interest, carrying or other financing charges in connection with excess
amounts expended, or the distributor's overhead expenses. However, the
distributor may be able to recover such amounts or may earn a profit from
future payments made by the Fund under the Distribution Plan.
ADMINISTRATION OF THE COMPANY
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 Fund. Federated
Administrative Services provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
----------- -----------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
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, Boston, MA is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, PA is transfer agent for the shares of, and dividend disbursing
agent for, the Fund.
LEGAL COUNSEL. Legal counsel is provided by Dickstein, Shapiro & Morin,
L.L.P., Washington, D.C. and Houston, Houston and Donnelly, Pittsburgh, PA.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Deloitte &
Touche LLP, Pittsburgh, PA.
NET ASSET VALUE
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The Fund attempts to stabilize the net asset value of its shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net
asset value per share is determined by subtracting total liabilities from
total assets and dividing the remainder by the number of shares outstanding.
The Fund 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 expect on: (i) days on which there are
not sufficient changes in the value of the Fund's portfolio securities that
its net asset value might be materially affected; (ii) days during which no
shares are tendered for redemption and no orders to purchase shares are
received; or (iii) the following holidays: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
INVESTING IN THE FUND
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SHARE PURCHASES
Shares are sold at their net asset value, 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 as described below.
Accounts may be opened through a Financial Institution (such as a bank or
broker/dealer) or by completing, signing, and returning the new account form
available from the Fund. In connection with any sale, Federated Securities
Corp. may from time to time offer certain items of nominal value to any
shareholder or investor. The Fund reserves the right to reject any purchase
request.
THROUGH A FINANCIAL INSTITUTION. Investors may call their Financial
Institutions to place an order. Orders through a Financial Institution are
considered received when the Fund receives payment by wire or converts payment
by check from the Financial Institution into federal funds. It is the
Financial Institution's responsibility to transmit orders promptly. Financial
Institutions may charge additional fees for their services.
BY WIRE. To purchase by wire, call the Fund before 3:00 p.m. (Eastern time) to
place an order. All information needed will be taken over the telephone, and
the order is considered received immediately. Payment by federal funds must be
received before 3 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: Government Cash Series; Fund Number (this
number can be found on the account statement or by contacting the Fund); 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 Government Cash
Series to: Government Cash Series, 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.
SYSTEMATIC INVESTMENT PROGRAM. Under this program, funds in a minimum of $500
are automatically withdrawn periodically from the shareholder's checking
account and invested in Fund shares.
Shareholders should contact their Financial Institution and/or the Fund to
participate in this program.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment is $10,000. Minimum subsequent investments must
be $500. For investments by retirement plans these amounts are $1,000 and $500
respectively. Minimum investments will be calculated by combining all accounts
maintained with the Fund. The Fund may from time to time waive the minimum
investment requirements.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless
requested by contacting the Fund 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 Fund unless cash
payments are requested by writing to the Fund. 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 Fund 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 Fund will distribute in cash or additional shares any realized
net long-term capital gains at least once every 12 months.
RETIREMENT PLANS. Shares of the Fund can be purchased as an investment for
retirement plans or IRA accounts. For further details contact the Fund or
Federated Securities Corporation and consult a tax adviser.
REDEEMING SHARES
- -------------------------------------------------------------------------------
Shares are redeemed at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Redemption requests must be received in
proper form and can be made as described below.
THROUGH A FINANCIAL INSTITUTION
Shares may be redeemed by calling the shareholder's Financial Institution.
Shares will be redeemed at the net asset value next determined after Federated
Services Company receives the redemption request from the Financial
Institution. The Financial Institution is responsible for promptly submitting
redemption requests and providing proper written redemption instructions. The
Financial Institution may charge customary fees and commissions for this
service.
An authorization form permitting redemption requests by telephone must first
be completed. Authorization forms and information on this service are
available from Federated Securities Corp. Telephone redemption instructions
may be recorded. If reasonable procedures are not followed by the Fund, it may
be liable for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If this occurs, another
method of redemption, such as "By Mail", should be considered.
RECEIVING PAYMENT. Pursuant to instructions from the Financial Institution,
redemptions will be made by check or by wire.
BY WIRE. Proceeds for redemption requests received before 12:00 noon,
(Eastern time) will be wired the same day but will not be entitled to that
day's dividend. Redemption requests received after 12:00 noon, (Eastern
time) will receive that day's dividends and will be wired the following
business day.
BY CHECK. 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
redemption request. Dividends are paid up to and including the day that a
redemption request is processed.
BY MAIL
Shares may be redeemed by sending a written request to: Government Cash Series,
P.O. Box 8604, Boston, MA 02266-8604. The written request should state:
Government Cash Series; 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 Fund 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 Fund, or a
redemption payable other than to the shareholder of record must have their
signatures guaranteed by:
. a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund which is administered by the Federal Deposit Insurance
Corporation ("FDIC");
. a member firm of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges;
. a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund, which is administered by the
FDIC; or
. any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and the transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of the
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request. Dividends are paid up to and including the day that a redemption
request is processed.
BY WRITING A CHECK. At the shareholder's request, State Street Bank will
establish a checking account for redeeming shares. For further information,
contact the Fund.
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 Fund. 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 to redeem shares. Cancelled checks are sent to the shareholder each
month.
BY VISA CARD. At the shareholder's request, State Street Bank will establish a
VISA account. This account allows a shareholder to redeem shares by using a
VISA card. A fee, determined by State Street Bank, will be charged to the
account for this service. For further information, contact the Fund.
BY A SYSTEMATIC WITHDRAWAL PROGRAM
If a shareholder's account has a value of at least $10,000, a systematic
withdrawal program may be established whereby automatic redemptions are made
from the account and transferred electronically to any commercial bank, savings
bank, or credit union that is an ACH member. Shareholders may apply for
participation in this program through their Financial Institution.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account, except accounts maintained by retirement plans,
and pay the proceeds to the shareholder if the account balance falls below a
required minimum value of $10,000 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 Company gives the shareholder one vote in Director elections
and other matters submitted to shareholders for vote. All shares of all classes
of each portfolio in the Company have equal voting rights, except that in
matters affecting only a particular portfolio or class, only shares of that
portfolio or class are entitled to vote. As a Maryland corporation, the Company
is not required to hold annual shareholder meetings. Shareholder approval will
be sought only for certain changes in the Company's or the Fund's operation and
for the election of Directors under certain circumstances.
Directors may be removed by the Directors or by shareholders at a special
meeting. A special meeting of the shareholders for this purpose shall be called
by the Directors upon the written request of shareholders owning at least 10%
of the outstanding shares of the Company.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and
to receive the special tax treatment afforded to such companies. The Fund will
be treated as a single, separate entity for federal income tax purposes so that
income (including capital gains) and losses realized by the Company's other
portfolios will not be combined for tax purposes with those realized by the
Fund.
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.
In the opinion of Houston, Houston, & Donnelly, counsel to the Trust:
. the Company is subject to Pennsylvania corporate franchise tax; and
. Company shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.
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 Fund 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 Fund after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed
as a percentage.
From time to time, the Fund may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
ADDRESSES
- --------------------------------------------------------------------------------
Cash Trust Series, Inc. Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- --------------------------------------------------------------------------------
Distributor
Federated Securities Corporation Federated Investors Tower
Pittsburgh, PA 15222
- --------------------------------------------------------------------------------
Investment Adviser
Federated Advisers Federated Investors Tower
Pittsburgh, PA 15222
- --------------------------------------------------------------------------------
Custodian
State Street Bank and Trust 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
Dickstein, Shapiro & Morin, L.L.P. 2101 L Street, N.W.
Washington, D.C. 20037
- --------------------------------------------------------------------------------
Legal Counsel
Houston, Houston and Donnelly 2510 Centre City Tower
Pittsburgh, PA 15222
- --------------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche LLP One PPG Place Pittsburgh, PA
15222
- --------------------------------------------------------------------------------
GOVERNMENT CASH SERIES
PROSPECTUS
A Diversified Portfolio of
Cash Trust Series, Inc. an Open-End
Management Investment Company
September 30, 1994
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
147551204
9080103A (9/94)
GOVERNMENT CASH SERIES
(A PORTFOLIO OF CASH TRUST SERIES, INC.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus of
Government Cash Series (the "Fund") dated September 30, 1994. This Statement is
not a prospectus. To receive a copy of a prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated September 30, 1994
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- --------------------------------------
INVESTMENT POLICIES 1
- --------------------------------------
Acceptable Investments 1
When-Issued and Delayed Delivery
Transactions 1
Reverse Repurchase Agreements 1
Lending of Portfolio Securities 1
INVESTMENT LIMITATIONS 1
- --------------------------------------
Selling Short and Buying on Margin 1
Issuing Senior Securities and
Borrowing Money 1
Pledging Assets 2
Lending Cash or Securities 2
Investing in Commodities 2
Investing in Real Estate 2
Underwriting 2
Concentration of Investments 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 3
BROKERAGE TRANSACTIONS 3
- --------------------------------------
CASH TRUST SERIES, INC. MANAGEMENT 3
- --------------------------------------
THE FUNDS 5
- --------------------------------------
Share Ownership 6
Fund Ownership 6
Director Liability 6
INVESTMENT ADVISORY SERVICES 6
- --------------------------------------
Investment Adviser 6
Advisory Fees 6
FUND ADMINISTRATION 7
- --------------------------------------
DISTRIBUTION AND SHAREHOLDER SERVICES
PLANS 7
- --------------------------------------
DETERMINING NET ASSET VALUE 7
- --------------------------------------
Redemption in Kind 8
The Fund's Tax Status 8
PERFORMANCE INFORMATION 8
- --------------------------------------
Yield 8
Effective Yield 8
Total Return 8
Performance Comparisons 9
Financial Statements 9
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund is a portfolio of Cash Trust Series, Inc. (the "Company"). The Fund
was established as a portfolio of Cash Trust Series, a Massachusetts business
trust, on May 16, 1989, and on June 15, 1993, reorganized as a portfolio of a
corporation organized under the laws of the State of Maryland. It is qualified
to do business as a foreign corporation in Pennsylvania.
INVESTMENT POLICIES
- --------------------------------------------------------------------------------
Unless indicated otherwise, the policies described below may be changed by the
Directors without shareholder approval. Shareholders will be notified before
any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
Some of the short-term U.S. government securities the Fund 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 that 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 Fund may purchase variable rate U.S. government securities upon the
determination by the Board of Directors 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 made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the Fund's
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund 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.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
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 Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but does
not ensure this result. When effecting reverse repurchase agreements, liquid
assets of the Fund, in a dollar amount sufficient to make payment for the
obligations to be purchased, are segregated on the Fund's records at the trade
date; marked to market daily; and maintained until the transaction is settled.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the
option of the Fund or the borrower. The Fund may pay reasonable administrative
and custodial fees in connection with a loan and may pay a negotiated portion
of the interest earned on the cash or equivalent collateral to the borrower or
placing broker.
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as are necessary for clearance of
transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow money
directly or through reverse repurchase agreements in amounts up to one-third of
the value of its total assets, including the amounts borrowed.
The Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary, or emergency
measure or to facilitate management of the portfolio by enabling the Fund to
meet redemption requests when the liquidation of portfolio securities is deemed
to be inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings in excess of 5% of the value of its total assets
are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except as
necessary to secure permitted borrowings. In these 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 borrowing.
LENDING CASH OR SECURITIES
The Fund will not lend any assets, except portfolio securities. This shall not
prevent the Fund from engaging in transactions permitted by its investment
objective, policies, limitations, or Articles of Incorporation.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited partnership
interests, although it may invest in securities of issuers whose business
involves the purchase or sale of real estate or in securities which are secured
by real estate or interests in real estate.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection with
the sale of securities in accordance with its investment objective, policies,
and limitations.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets in any
one industry, except that the Fund may invest 25% or more of the value of its
total assets in cash, cash items, or securities issued or guaranteed by the
government of the United States or its agencies, or instrumentalities and
repurchase agreement collateralized by such U.S. government securities.
The above limitations cannot be changed without shareholder approval. The
following investment limitations, however, may be changed by Directors without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest in securities subject to restrictions on resale under
federal securities law.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies, except as
part of a merger, consolidation, or other acquisition.
INVESTING IN NEW ISSUERS
The Fund 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 Fund 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 Fund 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 Fund will not invest in puts, calls, straddles, spreads, or any combination
of them.
INVESTING IN MINERALS
The Fund 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.
For purposes of the above limitations, the Fund considers instruments issued by
a U.S. branch of a domestic bank or savings and loan having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of investment to be
"cash items". Except with respect to borrowing money, if a percentage
limitation is adhered to at the time of investment, a later increase or
decrease in percentage resulting from any change in value or net assets will
not result in a violation of such limitation.
The Fund did not borrow money or pledge securities in excess of 5% of the value
of its net assets during the last fiscal year and has no present intent to do
so during the coming fiscal year.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
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 Directors. The adviser may select
brokers and dealers who offer brokerage and research services. These services
may be furnished directly to the Fund or to the adviser and may include: advice
as to the advisability of investing in securities; security analysis and
reports; economic studies; industry studies; receipt of quotations for
portfolio evaluations; and similar services. Research services provided by
brokers and dealers may be used by the adviser or its affiliates in advising
the Company and other accounts. To the extent that receipt of these services
may supplant services for which the adviser or its affiliates might otherwise
have paid, it would tend to reduce their expenses. The adviser and its
affiliates exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are reasonable
in relationship to the value of the brokerage and research services provided.
Although investment decisions for the Fund are made independently from those of
the other accounts managed by the adviser, investments of the type the Fund may
make may also be made by those other accounts. When the Fund 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 Fund or the size of the position obtained or disposed of by the Fund. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
CASH TRUST SERIES, INC. MANAGEMENT
- --------------------------------------------------------------------------------
Officers and Directors are listed with their addresses, principal occupations,
and present positions.
- --------------------------------------------------------------------------------
John F. Donahue+*
Federated Investors Tower
Pittsburgh, PA
Chairman and Director
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director, ^tna 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 and Director of the Corporation.
- --------------------------------------------------------------------------------
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Director
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.
- --------------------------------------------------------------------------------
William J. Copeland
One PNC Plaza--23rd Floor
Pittsburgh, PA
Director
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.
- --------------------------------------------------------------------------------
J. Christopher Donahue*
Federated Investors Tower
Pittsburgh, PA
Vice President and Director
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 Director of the Corporation.
- --------------------------------------------------------------------------------
James E. Dowd
571 Hayward Mill Road
Concord, MA
Director
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
Director
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
Director
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
Director
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.
- --------------------------------------------------------------------------------
Gregor F. Meyer
5916 Penn Mall
Pittsburgh, PA
Director
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
Director
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
Director
Public relations/marketing consultant; Director, Trustee, or Managing General
Partner of the Funds.
- --------------------------------------------------------------------------------
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
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/Director is deemed to be an "interested person" of the
Trust/Fund as defined in the Investment Company Act of 1940, as amended.
+ Member of the Trust/Fund's Executive Committee. The Executive Committee of
the Board of Trustee/Director handles the responsibilities of the Board of
Trustees/Directors between meetings of the Board
THE FUNDS
- --------------------------------------------------------------------------------
As referred to in the list of Directors 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 U.S. Government Money Market Trust; Liberty Term
Trust, Inc.--1999; Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series
Trust; Mark Twain Funds; The Medalist Funds: Money Market Management, Inc.;
Money Market Obligations Trust; Money Market Trust; Municipal Securities Income
Trust; New York Municipal Cash Trust; 111 Corcoran Funds; Peachtree Funds; The
Planters Funds; Portage Funds; RIMCO Monument Funds; The Shawmut Funds;
Short-Term Municipal Trust; Star Funds; The Starburst Funds; The Starburst Funds
II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; Trademark Funds; Trust for Financial Institutions; Trust For
Government Cash Reserves; Trust for Short-Term U.S. Government Securities; Trust
for U.S. Treasury Obligations; World Investment Series, Inc.
SHARE OWNERSHIP
Officers and Directors own less than 1% of the Company's outstanding shares.
FUND OWNERSHIP
As of September 6, 1994, the following companies held 5% or more of the
outstanding shares of Government Cash Series in nominee name accounts for the
benefit of their customers: BHC Securities, Inc., Philadelphia, Pennsylvania,
owned approximately 39,941,976 shares (10.19%); Trust Company of America,
Boulder, Colorado, owned approximately 21,118,907 shares (5.39%); Nationsbank
Trust Company, N.A., Silver Spring, Maryland, owned approximately 49,124,358
shares (12.53%); Bank IV Wichita, Wichita, Kansas, owned approximately
25,818,278 shares (6.59%).
DIRECTOR LIABILITY
The Articles of Incorporation provide that the Directors will not be liable for
errors of judgment or mistakes of fact or law. However, they are not protected
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Government Cash Series's investment adviser is Federated Advisers. 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 Company, the Fund, or any shareholder of
the Fund 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 Company.
ADVISORY FEES
For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus.
For the fiscal years ended May 31, 1994, 1993, and 1992, the adviser earned
$2,214,398, $2,620,146, and $3,175,921, respectively, of which $401,216,
$337,190, and $365,229, 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 Fund'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
Fund for its expenses over the limitation.
If the Fund'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.
FUND ADMINISTRATION
- --------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund 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 Fund's
administrator. (For purposes of this Statement of Additional Information,
Federated Administrative Services and Federated Administrative Services, Inc.,
may hereinafter collectively be referred to as, the "Administrators"). For the
fiscal year ended May 31, 1994, the Administrators collectively earned
$400,965. For the fiscal years ended May 31, 1993, and 1992, Federated
Administrative Services, Inc., earned $429,715, and $442,001, respectively. Dr.
Henry J. Gailliot, an officer of Federated Advisers, the adviser to the Fund,
holds approximately 20% of the outstanding common stock and serves as director
of Commercial Data Services, Inc., a company which provides computer processing
services to Federated Administrative Services.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS
- --------------------------------------------------------------------------------
These arrangements permit the payment of fees to Financial Institutions to
stimulate distribution activities and services to shareholders provided by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to,
marketing efforts; 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 Distribution Plan, the Board of Directors expects that the Fund
will be able to achieve a more predictable flow of cash for investment purposes
and to meet redemptions. This will facilitate more efficient portfolio
management and assist the Fund in pursuing its investment objectives. By
identifying potential investors whose needs are served by the Fund's
objectives, and properly servicing these accounts, it may be possible to curb
sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may include:
(1) providing personal services to shareholders; (2) investing shareholder
assets with a minimum of delay and administrative detail; and (3) enhancing
shareholder recordkeeping systems; and (4) responding promptly to shareholders'
requests and inquiries concerning their accounts.
For the fiscal period ended May 31, 1994, payments in the amount of $1,281,316
were made pursuant to the Distribution Plan. Payments in the amount of $268,762
were made pursuant to the Shareholder Services Plan.
CUSTODIAN AND PORTFOLIO RECORDKEEPER. State Street Bank and Trust, Boston, MA
is custodian for the securities and cash of the Fund. It also provides certain
accounting and recordkeeping services with respect to the Fund'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 Directors have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
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
Fund computed by dividing the annualized daily income on the Fund's portfolio
by the net asset value computed as above may tend to be higher than a similar
computation made by using a method of valuation based upon market prices and
estimates. In periods of rising interest rates, the opposite may be true.
The Fund'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 Directors must establish procedures
reasonably designed to stabilize the net asset value per share, as computed for
purposes of distribution and redemption, at $1.00 per share, taking into
account current market conditions and the Fund's investment objective. 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 Directors will decide what, if any, steps should be taken if
there is a difference of more than 0.5 of 1% between the two values. The
Directors will take any steps they consider appropriate (such as redemption in
kind or shortening the average portfolio maturity) to minimize any material
dilution or other unfair results arising from differences between the two
methods of determining net asset value.
REDEMPTION IN KIND
The Fund is obligated to redeem shares solely in cash up to $250,000 or 1% of
the Fund's net asset value, whichever is less, for any one shareholder within a
90-day period. Any redemption beyond this amount will also be in cash unless
the Directors determine that further payments should be in kind. In such cases,
the Fund will pay all or a portion of the remainder of the redemption in
portfolio instruments valued in the same way as the Fund determines net asset
value. The portfolio instruments will be selected in a manner that the
Directors deem fair and equitable. Redemption in kind is not as liquid as a
cash redemption. If redemption is made in kind, shareholders who sell these
securities could receive less than the redemption value and could incur certain
transaction costs.
THE FUND'S TAX STATUS
To qualify for the special tax treatment afforded to regulated investment
companies, the Fund must, among other requirements: derive at least 90% of its
gross income from dividends, interest, and gains from the sale of securities;
derive less than 30% of its gross income from the sale of securities held less
than three months; invest in securities within certain statutory limits; and
distribute to its shareholders at least 90% of its net income earned during the
year.
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 Fund, the performance will be reduced for those shareholders
paying those fees.
YIELD
The Fund 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 Fund's yield for the seven-day period ended May 31, 1994,
was 3.19%.
EFFECTIVE YIELD
The Fund 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 Fund's effective yield
for the seven-day period ended May 31, 1994, was 3.24%.
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 Fund's average annual total returns for the one year period ended May 31,
1994, and for the period from August 15, 1989 (start of performance) through
May 31, 1994 were 2.45%, and 4.71%, respectively.
PERFORMANCE COMPARISONS
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:
. 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.
FINANCIAL STATEMENTS
The financial statements for Government Cash Series for the fiscal year ended
May 31, 1994 are incorporated herein by reference to the Annual Report to
Shareholders of the Government Cash Series dated May 31, 1994.
9080103B (9/94)
MUNICIPAL CASH SERIES
(A PORTFOLIO OF CASH TRUST SERIES, INC.)
PROSPECTUS
The shares of Municipal Cash Series (the "Fund") offered by this prospectus
represent interests in a non-diversified portfolio of Cash Trust Series, Inc.
(the "Company"), an open-end management investment company (a mutual fund). The
Fund invests in municipal securities to achieve current income exempt from
federal regular income tax 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 FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated 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 Fund, contact your financial
institution.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Prospectus dated September 30, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1 Custodian 9
- ------------------------------------- Transfer Agent and Dividend
Disbursing Agent 9
FINANCIAL HIGHLIGHTS--MUNICIPAL CASH Legal Counsel 9
SERIES 2 Independent Auditors 9
- -------------------------------------
GENERAL INFORMATION 3 NET ASSET VALUE 9
- ------------------------------------- -------------------------------------
INVESTMENT INFORMATION 3 INVESTING IN THE FUND 10
- ------------------------------------- -------------------------------------
Share Purchases 10
Investment Objective 3 Through a Financial Institution 10
Investment Policies 3 By Wire 10
Acceptable Investments 3 By Mail 10
Variable Rate Demand Notes 4 Systematic Investment Program 10
Participation Interests 4 Minimum Investment Required 11
Municipal Leases 4 Certificates and Confirmations 11
Ratings 4 Dividends 11
Credit Enhancement 5 Capital Gains 11
Demand Features 5
When-Issued and Delayed Delivery REDEEMING SHARES 11
Transactions 5 -------------------------------------
Restricted and Illiquid
Securities 5 Through a Financial Institution 11
Temporary Investments 5 Receiving Payment 12
Municipal Securities 6 By Wire 12
Investment Risks 6 By Check 12
Non-Diversification 7 By Mail 12
Investment Limitations 7 By Writing a Check 12
Regulatory Compliance 7 By VISA Card 13
By a Systematic Withdrawal
CASH TRUST SERIES, INC., Program 13
INFORMATION 7 Accounts with Low Balances 13
- -------------------------------------
SHAREHOLDER INFORMATION 13
Management of Cash Trust Series -------------------------------------
Inc. 7
Board of Directors 7 Voting Rights 13
Investment Adviser 8
Advisory Fees 8 TAX INFORMATION 14
Adviser's Background 8 -------------------------------------
Distribution of Shares 8
Distribution and Shareholder FEDERAL INCOME TAX 14
Services Plans 8
Administration of the Company 9 PERFORMANCE INFORMATION 14
Administrative Services 9 -------------------------------------
ADDRESSES 15
-------------------------------------
SUMMARY OF FUND EXPENSES
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)............................... None
Contingent Deferred Sales Charge (as a percentage of original pur-
chase price
or redemption proceeds, as applicable)............................ None
Redemption Fee (as a percentage of amount redeemed, if applicable). None
Exchange Fee....................................................... None
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fee (after waiver) (1).................................. 0.44%
12b-1 Fee (2)...................................................... 0.10%
Total Other Expenses............................................... 0.45%
Shareholder Services Fee......................................... 0.25%
Total Fund Operating Expenses (3).............................. 0.99%
</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 managment fee is
0.50%.
(2) The maximum 12b-1 fee is 0.35%.
(3) The Total Fund Operating Expenses would have been 1.05% absent the
voluntary waiver of a portion of the management fee.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS
AND EXPENSES, SEE "CASH TRUST SERIES, INC., INFORMATION." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted under the rules of the National
Association of Securities Dealers, Inc. ("NASD"). However, in order for a Fund
investor to exceed the NASD's maximum front-end sales charge of 6.25%, a
continuous investment in the Fund for 62.5 years would be required.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment assuming (1) 5% annual return
and (2) redemption at the end of each time pe-
riod........................................... $10 $32 $55 $121
</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.
MUNICIPAL CASH SERIES
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report, dated July 8, 1994, on the Fund's financial
statements for the year ended May 31, 1994, and on the following table for each
of the periods presented, is included in the Annual Report, which is
incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
--------------------------------------------
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 OPERA-
TIONS
- -------------------------------
Net investment income 0.02 0.03 0.04 0.05 0.04
- -------------------------------
LESS DISTRIBUTIONS
- -------------------------------
Dividends to shareholders from
net investment income (0.02) (0.03) (0.04) (0.05) (0.04)
- ------------------------------- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------- ----- ----- ----- ----- -----
TOTAL RETURN** 1.83% 2.11% 3.53% 5.24% 4.68%
- -------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------
Expenses 0.99% 0.99% 0.98% 0.94% 0.73%(b)
- -------------------------------
Net investment income 1.81% 2.10% 3.42% 5.02% 5.76%(b)
- -------------------------------
Expense waiver/reimbursement
(a) 0.06% 0.03% 0.03% 0.17% 0.45%(b)
- -------------------------------
SUPPLEMENTAL DATA
- -------------------------------
Net assets, end of period
(000 omitted) $574,801 $456,205 $516,814 $403,151 $195,897
- -------------------------------
</TABLE>
* Reflects operations for the period from August 25, 1989 (date of initial
public investment), to May 31, 1990.
** 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.
(b) Computed on an annualized basis.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated May 31, 1994, which can be obtained free of charge.
GENERAL INFORMATION
- -------------------------------------------------------------------------------
The Company was established as a Maryland corporation under Articles of
Incorporation dated February 1, 1993. The Articles of Incorporation permit the
Company to offer separate series of shares representing interests in separate
portfolios of securities. The Fund is designed for customers of financial
institutions such as banks, fiduciaries, custodians of public funds,
investment advisers, and broker/dealers as a convenient means of accumulating
an interest in a professionally managed, non-diversified portfolio investing
primarily in short-term municipal securities. The Company may not be a
suitable investment for retirement plans because it invests in municipal
securities. A minimum initial investment of $10,000 is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from federal
regular income tax consistent with stability of principal. This investment
objective cannot be changed without shareholder approval. While there is no
assurance that the Fund will achieve its investment objective, it endeavors to
do so by following the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
municipal securities (as defined below) maturing in 13 months or less. As a
matter of investment policy, which cannot be changed without shareholder
approval, at least 80% of the Fund's annual interest income will be exempt
from federal regular income tax. (Federal regular income tax does not include
the federal individual alternative minimum tax or the federal alternative
minimum tax for corporations). The average maturity of the securities in the
Fund'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 Directors ("Directors") without shareholder approval.
Shareholders will be notified before any material change in these policies
becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations issued
by or on behalf of states, territories, and possessions of the United States,
including the District of Columbia, and any political subdivision or financing
authority of any of these, the income from which is, in the opinion of
qualified legal counsel, exempt from federal regular income tax ("Municipal
Securities"). Examples of Municipal Securities include, but are not limited
to:
. tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
. bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
. municipal commercial paper and other short-term notes;
. variable rate demand notes;
. municipal bonds (including bonds having serial maturities and pre-
refunded bonds) and leases;
. participation, trust, and partnership interests in any of the
foregoing obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at
par. The interest rate may float or be adjusted at regular intervals
(ranging from daily to annually), and is normally based on a published
interest rate or interest rate index. Most variable rate demand notes
allow the Fund to demand the repurchase of the security on not more than
seven days prior notice. Other notes only permit the Fund to tender the
security at the time of each interest rate adjustment or at other fixed
intervals. See "Demand Features." The Fund treats variable rate demand
notes as maturing on the later of the date of the next interest rate
adjustment or the date on which the Fund may next tender the security for
repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in Municipal
Securities from financial institutions such as commercial and investment
banks, savings and loan associations, and insurance companies. These
interests may take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from
federal income tax. The Fund invests in these participation interests in
order to obtain credit enhancement or demand features that would not be
available through direct ownership of the underlying Municipal Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities. They may take the form of a lease, an installment purchase
contract, a conditional sales contract, or a participation interest in any
of the above.
RATINGS. The municipal securities in which the Fund invests must be rated in
one of the two highest short-term rating categories by one or more nationally
recognized statistical rating organizations ("NRSROs") or be of comparable
quality to securities having such ratings. An NRSRO's two highest rating
categories are determined without regard for sub-categories and gradations.
For example, securities rated SP-1+, SP-1, or SP-2 by Standard & Poor's
Corporation ("S&P"), MIG-1 or MIG-2 by Moody's Investors Service, Inc.
("Moody's"), or FIN-1+, FIN-1, and FIN-2 by Fitch Investors Service, Inc.
("Fitch") are all considered rated in one of the two highest short-term rating
categories. The Fund will follow applicable regulations in determining whether
a security rated by more than one NRSRO can be treated as being in one of the
two highest short-term rating categories; currently, such securities must be
rated by two NRSROs in one of their two highest rating categories. See
"Regulatory Compliance."
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be credit
enhanced by a guaranty, letter of credit, or insurance. The Fund typically
evaluates the credit quality and ratings of credit enhanced securities based
upon the financial condition and ratings of the party providing the credit
enhancement (the "credit enhancer"), rather than the issuer. However, credit
enhanced securities will not be treated as having been issued by the credit
enhancer for diversification purposes, unless the Fund has invested more than
10% of its assets in securities issued, guaranteed or otherwise credit
enhanced by the credit enhancer, in which case the securities will be treated
as having been issued by both the issuer and the credit enhancer. The
bankruptcy, receivership, or default of the credit enhancer will adversely
affect the quality and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to puts and
standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period
(usually seven days) following a demand by the Fund. The demand feature may be
issued by the issuer of the underlying securities, a dealer in the securities,
or by another third party, and may not be transferred separately from the
underlying security. The Fund uses these arrangements to provide the Fund with
liquidity and not to protect against changes in the market value of the
underlying securities. The bankruptcy, receivership, or default by the issuer
of the demand feature, or a default on the underlying security or other event
that terminates the demand feature before its exercise, will adversely affect
the liquidity of the underlying security. Demand features that are exercisable
even after a payment default on the underlying security may be treated as a
form of credit enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions are
arrangements in which the Fund purchases securities with payment and delivery
scheduled for a future time. The seller's failure to complete these
transactions may cause the Fund 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 Fund may pay more/less than the
market value of the securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser deems
it appropriate to do so. In addition, the Fund may enter in 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 Fund may realize short-term profits or losses upon the sale
of such commitments.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
invest pursuant to its investment objective and policies but which are subject
to restrictions on resale under federal securities laws. Under criteria
established by the Directors, certain restricted securities are determined to be
liquid. To the extent that restricted securities are not determined to be
liquid, the Fund will limit their purchase, together with other illiquid
securities, to 10% of its net assets.
TEMPORARY INVESTMENTS. From time to time, when the investment adviser determines
that market conditions call for a temporary defensive posture, the Fund may
invest in tax-exempt or taxable securities such as: obligations issued by or on
behalf of municipal or corporate issuers having the same quality characteristics
as described above; obligations issued or guaranteed by the U.S. government, its
agencies, or instrumentalities; instruments issued by a U.S. branch of a
domestic bank or other deposit institution having capital, surplus, and
undivided profits in excess of $100,000,000 at the time of investment; and
repurchase agreements (arrangements in which the organization selling the Fund a
temporary investment agrees at the time of sale to repurchase it at a mutually
agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments, there is
no current intention to do so. However, the interest from certain Municipal
Securities is subject to the federal alternative minimum tax.
MUNICIPAL SECURITIES
Municipal Securities are generally issued to finance public works, such as
airports, bridges, highways, housing, hospitals, mass transportation projects,
schools, streets, and water and sewer works. They are also issued to repay
outstanding obligations, to raise funds for general operating expenses, and to
make loans to other public institutions and facilities.
Municipal Securities include industrial development bonds issued by or on
behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations.
The availability of this financing encourages these corporations to locate
within the sponsoring communities and thereby increases local employment.
The two principal classifications of Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment
of principal and interest. Interest on and principal of revenue bonds, however,
are payable only from the revenue generated by the facility financed by the
bond or other specified sources of revenue. Revenue bonds do not represent a
pledge of credit or create any debt of or charge against the general revenues
of a municipality or public authority. Industrial development bonds are
typically classified as revenue bonds.
INVESTMENT RISKS
Yields on Municipal Securities depend on a variety of factors, including: the
general conditions of the short-term municipal note market and of the municipal
bond market; the size of the particular offering; the maturity of the
obligations; and the rating of the issue. The ability of the Fund to achieve
its investment objective also depends on the continuing ability of the issuers
of Municipal Securities and participation interests, or the credit enhancers of
either, to meet their obligations for the payment of interest and principal
when due. In addition, from time to time, the supply of Municipal Securities
acceptable for purchase by the Fund could become limited.
The Fund may invest in Municipal Securities which are repayable out of revenue
streams generated from economically related projects or facilities and/or whose
issuers are located in the same state. Sizable investments in these Municipal
Securities could involve an increased risk to the Fund should any of these
related projects or facilities experience financial difficulties.
Obligations of issuers of Municipal Securities are subject to the provisions of
bankruptcy, insolvency, and other laws affecting the rights and remedies of
creditors. In addition, the obligations of such issuers may become subject to
laws enacted in the future by Congress, state legislators, or referenda
extending the time for payment of principal and/or interest, or imposing other
constraints upon enforcement of such obligations or upon the ability of states
or municipalities to levy taxes. There is also the possibility that, as a result
of litigation or other conditions, the power or ability of any issuer to pay,
when due, the principal of and interest on its municipal securities may be
materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater fluctuation
in the total market value of the Fund's portfolio. Any economic, political, or
regulatory developments affecting the value of the securities in the Fund's
portfolio will have a greater impact on the total value of the portfolio than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal Revenue
Code. This undertaking requires that, at the end of each quarter of each
taxable year, with regard to at least 50% of the Fund's total assets, no more
than 5% of its total assets are invested in the securities of a single issuer
and that with respect to the remainder of the Fund's total assets, no more than
25% of its total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through reverse repurchase
agreements (arrangements in which the Fund sells a money market instrument for
a percentage of its cash value with an agreement to buy it back on a set date)
or pledge securities except, under certain circumstances, the Fund may borrow
up to one-third of the value of its total assets and pledge assets to secure
such borrowings. This investment limitation cannot be changed without
shareholder approval.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in this
prospectus and its Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940, as amended. In particular, the Fund
will comply with the various requirements of Rule 2a-7, which regulates money
market mutual funds. The Fund will determine the effective maturity of its
investments, as well as its ability to consider a security as having received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The Fund
may change these operational policies to reflect changes in the laws and
regulations without the approval of its shareholders.
CASH TRUST SERIES, INC., INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF CASH TRUST SERIES, INC.
BOARD OF DIRECTORS. The Company is managed by a Board of Directors. The
Directors are responsible for managing the Fund's business affairs and for
exercising all the Company's powers except those reserved for the shareholders.
The Executive Committee of the Board of Directors handles the Board's
responsibilities between meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Advisers, the Fund's investment adviser, subject to direction by the Directors.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee
equal to .50 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund 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 Fund, but reserves the right to terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. The Fund's investment adviser is Federated Advisers.
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.
Federated Advisers 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
Fund. It is a Pennsylvania corporation organized on November 14, 1969, and is
the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
the Fund may pay to the distributor an amount, computed at an annual rate of .35
of 1% of the average daily net asset value of the Fund to finance any activity
which is principally intended to result in the sale of shares subject to the
Distribution Plan. The distributor may select Financial Institutions such as
banks, fiduciaries, custodians for public funds, investment advisers, and
broker/dealers to provide sales support services as agents for their clients or
customers. In addition, the Fund has adopted a Shareholder Services Plan (the
"Services Plan") under which it will pay Financial Institutions an amount not
exceeding .25 of 1% of the average daily net asset value of the Fund to provide
administrative support services to their customers who own shares of the Fund.
From time to time and for such periods as deemed appropriate, the amounts stated
above may be reduced voluntarily. Activities and services under these
arrangements may include, but are not limited to, providing advertising and
marketing materials to prospective shareholders, providing personal services to
shareholders, and maintaining shareholder accounts.
Financial Institutions will receive fees based upon shares owned by their
clients or customers. The schedules of such fees and the basis upon which such
fees will be paid will be determined from time to time by the Fund or the
distributor, as appropriate.
The Distribution Plan is a compensation-type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund
does not pay for unreimbursed expenses of the distributor, including amounts
expended by the distributor in excess of amounts received by it from the Fund,
interest, carrying or other financing charges in connection with excess
amounts expended, or the distributor's overhead expenses. However, the
distributor may be able to recover such amounts or may earn a profit from
future payments made by the Fund under the Distribution Plan.
ADMINISTRATION OF THE COMPANY
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 Fund.
Federated Administrative Services provides these at an annual rate as
specified below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
----------- ----------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
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, Boston, MA is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, PA is transfer agent for the shares of, and dividend disbursing
agent for, the Fund.
LEGAL COUNSEL. Legal counsel is provided by Dickstein, Shapiro & Morin, L.L.P.,
Washington, D.C. and Houston, Houston and Donnelly, Pittsburgh, PA.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Deloitte &
Touche LLP, Pittsburgh, PA.
NET ASSET VALUE
- -------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of its shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per share is determined by subtracting total liabilities from total assets
and dividing the remainder by the number of shares outstanding. The Fund 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 expect on: (i) days on which there are
not sufficient changes in the value of the Fund's portfolio securities that
its net asset value might be materially affected; (ii) days during which no
shares are tendered for redemption and no orders to purchase shares are
received; or (iii) the following holidays: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
INVESTING IN THE FUND
- -------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold at their net asset value, 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 as described below.
Accounts may be opened through a Financial Institution (such as a bank or
broker/dealer) or by completing, signing, and returning the new account form
available from the Fund. In connection with any sale, Federated Securities
Corp. may from time to time offer certain items of nominal value to any
shareholder or investor. The Fund reserves the right to reject any purchase
request.
THROUGH A FINANCIAL INSTITUTION. Investors may call their Financial Institutions
to place an order. Orders through a Financial Institution are considered
received when the Fund receives payment by wire or converts payment by check
from the Financial Institution into federal funds. It is the Financial
Institution's responsibility to transmit orders promptly. Financial Institutions
may charge additional fees for their services.
BY WIRE. To purchase by wire, call the Fund before 3:00 p.m. (Eastern time) to
place an order. All information needed will be taken over the telephone, and the
order is considered received immediately. Payment by federal funds must be
received before 3 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: Municipal Cash Series; Fund Number (this
number can be found on the account statement or by contacting the Fund); 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 Municipal Cash Series
to: Municipal Cash Series, 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.
SYSTEMATIC INVESTMENT PROGRAM. Under this program, funds in a minimum of $500
are automatically withdrawn periodically from the shareholder's checking account
and invested in Fund shares.
Shareholders should contact their Financial Institution and/or the Fund to
participate in this program.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment is $10,000. Minimum subsequent investments must
be $500. For investments by retirement plans these amounts are $1,000 and $500
respectively. Minimum investments will be calculated by combining all accounts
maintained with the Fund. The Fund may from time to time waive the minimum
investment requirements.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless
requested by contacting the Fund 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 Fund unless cash
payments are requested by writing to the Fund. 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 Fund 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 Fund 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 Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Redemption requests must be received in
proper form and can be made as described below.
THROUGH A FINANCIAL INSTITUTION
Shares may be redeemed by calling the shareholder's Financial Institution.
Shares will be redeemed at the net asset value next determined after Federated
Services Company receives the redemption request from the Financial
Institution. The Financial Institution is responsible for promptly submitting
redemption requests and providing proper written redemption instructions. The
Financial Institution may charge customary fees and commissions for this
service.
An authorization form permitting redemption requests by telephone must first be
completed. Authorization forms and information on this service are available
from Federated Securities Corp. Telephone redemption instructions may be
recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions. In
the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If this occurs, another method of
redemption, such as "By Mail", should be considered.
RECEIVING PAYMENT. Pursuant to instructions from the Financial Institution,
redemptions will be made by check or by wire.
BY WIRE. Proceeds for redemption requests received before 12:00 noon,
(Eastern time) will be wired the same day but will not be entitled to that
day's dividend. Redemption requests received after 12:00 noon, (Eastern
time) will receive that day's dividends and will be wired the following
business day.
BY CHECK. 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
redemption request. Dividends are paid up to and including the day that a
redemption request is processed.
BY MAIL
Shares may be redeemed by sending a written request to: Municipal Cash Series,
P.O. Box 8604, Boston, MA 02266-8604. The written request should state:
Municipal Cash Series; 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 Fund 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 Fund, or a
redemption payable other than to the shareholder of record must have their
signatures guaranteed by:
. a trust company or commercial bank whose deposits are insured by the
Bank Insurance Fund which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
. a member firm of the New York, American, Boston, Midwest, or Pacific
Stock Exchanges;
. a savings bank or savings and loan association whose deposits are
insured by the Savings Association Insurance Fund, which is
administered by the FDIC; or
. any other "eligible guarantor institution," as defined in the
Securities Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and the transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of the
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day, but in
no event more than seven days, after receipt of a proper written redemption
request. Dividends are paid up to and including the day that a redemption
request is processed.
BY WRITING A CHECK. At the shareholder's request, State Street Bank will
establish a checking account for redeeming shares. For further information,
contact the Fund.
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 Fund. 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 to
redeem shares. Cancelled checks are sent to the shareholder each month.
BY VISA CARD. At the shareholder's request, State Street Bank will establish a
VISA account. This account allows a shareholder to redeem shares by using a VISA
card. A fee, determined by State Street Bank, will be charged to the account for
this service. For further information, contact the Fund.
BY A SYSTEMATIC WITHDRAWAL PROGRAM
If a shareholder's account has a value of at least $10,000, a systematic
withdrawal program may be established whereby automatic redemptions are made
from the account and transferred electronically to any commercial bank, savings
bank, or credit union that is an ACH member. Shareholders may apply for
participation in this program through their Financial Institution.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account, except accounts maintained by retirement plans,
and pay the proceeds to the shareholder if the account balance falls below a
required minimum value of $10,000 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 Company gives the shareholder one vote in Director elections
and other matters submitted to shareholders for vote. All shares of all classes
of each portfolio in the Company have equal voting rights, except that in
matters affecting only a particular portfolio or class, only shares of that
portfolio or class are entitled to vote. As a Maryland corporation, the Company
is not required to hold annual shareholder meetings. Shareholder approval will
be sought only for certain changes in the Company's or the Fund's operation and
for the election of Directors under certain circumstances. As of September 6,
1994, McDonald & Co. Securities, Inc., Cincinnati, Ohio, acting in various
capacities for numerous accounts, was the owner of record of 190,070,784 shares
(34.0%) of the Fund, and therefor, may, for certain purposes, be deemed to
control the Fund and be able to affect the outcome of certain matters presented
for a vote of shareholders.
Directors may be removed by the Directors or by shareholders at a special
meeting. A special meeting of the shareholders for this purpose shall be called
by the Directors upon the written request of shareholders owning at least 10%
of the outstanding shares of the Company.
TAX INFORMATION
- -------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Company's other portfolios will not be combined for tax purposes with those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds issued
after August 7, 1986, may be included in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for
corporations. The Fund may purchase all types of municipal bonds, including
private activity bonds.
The alternative minimum tax applies when it exceeds the regular tax for the
taxable year. Alternative minimum taxable income is equal to the regular
taxable income of the taxpayer increased by certain "tax preference" items not
included in regular taxable income and reduced by only a portion of the
deductions allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some
temporary investments and any realized net short-term gains are taxed as
ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares.
PERFORMANCE INFORMATION
- -------------------------------------------------------------------------------
From time to time the Fund advertises its yield, effective yield, and tax-
equivalent 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. The tax-equivalent yield is calculated similarly to the
yield, but is adjusted to reflect the taxable yield that would have to be
earned to equal the Fund's tax exempt yield, assuming a specific tax rate.
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 Fund after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed
as a percentage.
From time to time, the Fund may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
ADDRESSES
- --------------------------------------------------------------------------------
Cash Trust Series, Inc. Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- --------------------------------------------------------------------------------
Distributor
Federated Securities Corporation Federated Investors Tower
Pittsburgh, PA 15222
- --------------------------------------------------------------------------------
Investment Adviser
Federated Advisers Federated Investors Tower
Pittsburgh, PA 15222
- --------------------------------------------------------------------------------
Custodian
State Street Bank and Trust-Boston 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
Dickstein, Shapiro & Morin, L.L.P. 2101 L Street, N.W.
Washington, D.C. 20037
- --------------------------------------------------------------------------------
Legal Counsel
Houston, Houston and Donnelly 2510 Centre City Tower
Pittsburgh, PA 15222
- --------------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche LLP One PPG Place Pittsburgh, PA
15222
- --------------------------------------------------------------------------------
MUNICIPAL CASH SERIES
PROSPECTUS
A Non-Diversified Portfolio of Cash Trust
Series, Inc.
an Open-End Management Investment Company
September 30, 1994
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
147551303
9080102A (9/94)
MUNICIPAL CASH SERIES
(A PORTFOLIO OF CASH TRUST SERIES, INC.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus of
Municipal Cash Series (the "Fund") dated September 30, 1994. This Statement is
not a prospectus. To receive a copy of a prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated September 30, 1994
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- --------------------------------------
INVESTMENT POLICIES 1
- --------------------------------------
Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
When-Issued and Delayed Delivery
Transactions 1
Repurchase Agreements 1
Reverse Repurchase Agreements 2
INVESTMENT LIMITATIONS 2
- --------------------------------------
Selling Short and Buying on Margin 2
Issuing Senior Securities and
Borrowing Money 2
Pledging Assets 2
Lending Cash or Securities 2
Investing in Commodities 2
Investing in Real Estate 2
Underwriting 2
Concentration of Investments 2
Diversification of Investments 3
Investing in Restricted Securities 3
Investing in Illiquid Securities 3
Investing in Securities of Other
Investment Companies 3
Investing in New Issuers 3
Investing for Control 3
Investing in Issuers Whose
Securities Are Owned by Officers
of the Trust 3
Investing in Options 3
Investing in Minerals 3
BROKERAGE TRANSACTIONS 4
- --------------------------------------
CASH TRUST SERIES, INC. MANAGEMENT 4
- --------------------------------------
THE FUNDS 6
- --------------------------------------
Share Ownership 7
Fund Ownership 7
Director Liability 7
INVESTMENT ADVISORY SERVICES 7
- --------------------------------------
Investment Adviser 7
Advisory Fees 7
FUND ADMINISTRATION 8
- --------------------------------------
DISTRIBUTION AND SHAREHOLDER SERVICES
PLANS 8
- --------------------------------------
DETERMINING NET ASSET VALUE 8
- --------------------------------------
Redemption in Kind 9
The Fund's Tax Status 9
PERFORMANCE INFORMATION 9
- --------------------------------------
Yield 9
Effective Yield 9
Tax-Equivalent Yield 9
Tax-Equivalency Table 9
Total Return 10
Performance Comparisons 10
Financial Statements 10
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund is a portfolio of Cash Trust Series, Inc. (the "Company"). The Fund
was established as a portfolio of Cash Trust Series, a Massachusetts business
trust, on May 16, 1989, and on June 15, 1993, reorganized as a portfolio of a
corporation organized under the laws of the State of Maryland. It is qualified
to do business as a foreign corporation in Pennsylvania.
INVESTMENT POLICIES
- --------------------------------------------------------------------------------
Unless indicated otherwise, the policies described below may be changed by the
Directors without shareholder approval. Shareholders will be notified before
any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
When determining whether a municipal security presents minimal credit risks,
the investment adviser will consider the creditworthiness of: the issuer of a
municipal security, the issuer of a demand feature if the Fund has the
unconditional right to demand payment for the municipal security, or any
guarantor of payment by either of those issuers.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Fund the right to
demand payment of the principal amounts of the participation interests plus
accrued interest on short notice (usually within seven days). The municipal
securities subject to the participation interests are not limited to the Fund's
maximum maturity requirements so long as the participation interests include
the right to demand payment from the issuers of those interests. By purchasing
participation interests having a seven day demand feature, the Fund is buying a
security meeting the maturity and quality requirements of the Fund and also is
receiving the tax-free benefits of the underlying securities.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease payments
by a governmental or nonprofit entity. The lease payments and other rights
under the lease provide for and secure payments on the certificates. Lease
obligations may be limited by municipal charter or the nature of the
appropriation for the lease. Furthermore, a lease may provide that the
participants cannot accelerate lease obligations upon default. The participants
would only be able to enforce lease payments as they became due. In the event
of a default or failure of appropriation, unless the participation interests
are credit enhanced, it is unlikely that the participants would be able to
obtain an acceptable substitute source of payment.
In determining the liquidity of municipal lease securities, the investment
adviser, under the authority delegated by the Board of Directors, will base its
determination on the following factors: whether the lease can be terminated by
the lessee; the potential recovery, if any, from a sale of the leased property
upon termination of the lease; the lessee's general credit strength (e.g., its
debt, administrative, economic and financial characteristics and prospects);
the likelihood that the lessee will discontinue appropriating funding for the
leased property because the property is no longer deemed essential to its
operations (e.g., the potential for an "event of non-appropriation"); and any
credit enhancement or legal recourse provided upon an event of non-
appropriation or other termination of the lease.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the Fund's
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund 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
Certain securities in which the Fund invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
brokers/dealers, and other recognized financial institutions sell securities to
the Fund 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 Fund, the Fund could receive less than the repurchase price
on any sale of such securities. The Fund 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 Fund
might be delayed pending court action.
The Fund believes that under the regular procedures normally in effect for
custody of the Fund's portfolio securities subject to repurchase agreements, a
court of competent jurisdiction would rule in favor of the Fund and allow
retention or disposition of such securities. The Fund will only enter into
repurchase agreements with banks and other recognized financial institutions,
such as broker/dealers, which are deemed by the Fund's adviser to be
creditworthy pursuant to guidelines established by the Directors.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
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 Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but does
not ensure this result. When effecting reverse repurchase agreements, liquid
assets of the Fund, in a dollar amount sufficient to make payment for the
obligations to be purchased, are: segregated on the Company'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 Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as are necessary for clearance of
transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow money
directly or through reverse repurchase agreements in amounts up to one-third of
the value of its total assets, including the amounts borrowed.
The Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary, or emergency
measure or to facilitate management of the portfolio by enabling the Fund to
meet redemption requests when the liquidation of portfolio securities is deemed
to be inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings in excess of 5% of the value of its total assets
are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except as
necessary to secure permitted borrowings. In these 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 borrowing.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except that it may purchase or hold
portfolio securities permitted by its investment objective, policies,
limitations, or Articles of Incorporation.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited partnership
interests, although it may invest in securities of issuers whose business
involves the purchase or sale of real estate or in securities which are secured
by real estate or interests in real estate.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection with
the sale of securities in accordance with its investment objective, policies,
and limitations.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets in any one
industry, or in industrial development bonds or other securities the interest
upon which is paid from revenues of similar types of projects, except that the
Fund may invest 25% or more of the value of its total assets in cash, cash
items, or securities issued or guaranteed by the government of the United States
or its agencies, or instrumentalities and repurchase agreement collateralized by
such U.S. government securities.
DIVERSIFICATION OF INVESTMENTS
With respect to securities comprising 75% of the value of its total assets, the
Fund will not invest more than 10% of its total assets in the securities of any
one issuer.
Under this limitation, each governmental subdivision, including states and the
District of Columbia, territories, possessions of the United States, or their
political subdivisions, agencies, authorities, instrumentalities, or similar
entities, will be considered a separate issuer if its assets and revenues are
separate from those of the governmental body creating it and the security is
backed only by its own assets and revenues.
Industrial development bonds backed only by the assets and revenues of a
nongovernmental user, are considered to be issued solely by that user. If in
the case of an industrial development bond or governmental-issued security, a
governmental or some other entity guarantees the security, such guarantee would
be considered a separate security issued by the guarantor as well as the other
issuer, subject to limited exclusions allowed by the Investment Company Act of
1940.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of its total assets in securities
subject to restrictions on resale under federal securities law, except for
restricted securities determined to be liquid under criteria established by the
Directors.
The above limitations cannot be changed without shareholder approval. The
following investment limitations, however, may be changed by the Directors
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies, except as
part of a merger, consolidation, or other acquisition.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers (including companies responsible for paying principal and
interest on industrial development bonds) which have records of less than three
years of continuous operations, including the operation of any predecessor.
INVESTING FOR CONTROL
The Fund 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 Fund 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 Fund will not invest in puts, calls, straddles, spreads, or any combination
of them.
INVESTING IN MINERALS
The Fund 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.
For purposes of the above limitations, the Fund considers instruments issued by
a U.S. branch of a domestic bank or savings and loan having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of investment to be
"cash items". Except with respect to borrowing money, if a percentage
limitation is adhered to at the time of investment, a later increase or
decrease in percentage resulting from any change in value or net assets will
not result in a violation of such limitation.
The Fund did not borrow money or pledge securities in excess of 5% of the value
of its net assets during the last fiscal year and has no present intent to do
so during the coming fiscal year.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
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 Directors. The adviser may select
brokers and dealers who offer brokerage and research services. These services
may be furnished directly to the Fund or to the adviser and may include: advice
as to the advisability of investing in securities; security analysis and
reports; economic studies; industry studies; receipt of quotations for
portfolio evaluations; and similar services. Research services provided by
brokers and dealers may be used by the adviser or its affiliates in advising
the Company and other accounts. To the extent that receipt of these services
may supplant services for which the adviser or its affiliates might otherwise
have paid, it would tend to reduce their expenses. The adviser and its
affiliates exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are reasonable
in relationship to the value of the brokerage and research services provided.
Although investment decisions for the Fund are made independently from those of
the other accounts managed by the adviser, investments of the type the Fund may
make may also be made by those other accounts. When the Fund 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 Fund or the size of the position obtained or disposed of by the Fund. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
CASH TRUST SERIES, INC. MANAGEMENT
- --------------------------------------------------------------------------------
Officers and Directors are listed with their addresses, principal occupations,
and present positions.
- --------------------------------------------------------------------------------
John F. Donahue+*
Federated Investors Tower
Pittsburgh, PA
Chairman and Director
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director, ^tna 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 and Director of the Corporation.
- --------------------------------------------------------------------------------
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Director
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.
- --------------------------------------------------------------------------------
William J. Copeland
One PNC Plaza--23rd Floor
Pittsburgh, PA
Director
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.
- --------------------------------------------------------------------------------
J. Christopher Donahue*
Federated Investors Tower
Pittsburgh, PA
Vice President and Director
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 Director of the Corporation.
- --------------------------------------------------------------------------------
James E. Dowd
571 Hayward Mill Road
Concord, MA
Director
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
Director
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
Director
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
Director
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.
- --------------------------------------------------------------------------------
Gregor F. Meyer
5916 Penn Mall
Pittsburgh, PA
Director
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
Director
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
Director
Public relations/marketing consultant; Director, Trustee, or Managing General
Partner of the Funds.
- --------------------------------------------------------------------------------
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
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/Director is deemed to be an "interested person" of the
Trust/Fund as defined in the Investment Company Act of 1940, as amended.
+ Member of the Trust/Fund's Executive Committee. The Executive Committee of
the Board of Trustee/Director handles the responsibilities of the Board of
Trustees/Directors between meetings of the Board
THE FUNDS
- --------------------------------------------------------------------------------
As referred to in the list of Directors 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 U.S. Government Money Market Trust; Liberty Term
Trust, Inc.--1999; Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series
Trust; Mark Twain Funds; The Medalist Funds: Money Market Management, Inc.;
Money Market Obligations Trust; Money Market Trust; Municipal Securities Income
Trust; New York Municipal Cash Trust; 111 Corcoran Funds; Peachtree Funds; The
Planters Funds; Portage Funds; RIMCO Monument Funds; The Shawmut Funds;
Short-Term Municipal Trust; Star Funds; The Starburst Funds; The Starburst Funds
II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; Trademark Funds; Trust for Financial Institutions; Trust For
Government Cash Reserves; Trust for Short- Term U.S. Government Securities;
Trust for U.S. Treasury Obligations; World Investment Series, Inc.
SHARE OWNERSHIP
Officers and Directors own less than 1% of the Company's outstanding shares.
FUND OWNERSHIP
As of September 6, 1994, the following companies held 5% or more of the
outstanding shares of Municipal Cash Series in nominee name accounts for the
benefit of their customers: McDonald & Co. Securities, Inc., Cincinnati, Ohio,
owned approximately 190,070,784 shares (33.97%); Bank IV Wichita, Wichita,
Kansas, owned approximately 50,905,387 shares (9.10%).
DIRECTOR LIABILITY
The Articles of Incorporation provide that the Directors will not be liable for
errors of judgment or mistakes of fact or law. However, they are not protected
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Municipal Cash Series's investment adviser is Federated Advisers. 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 Company, the Fund, or any shareholder of
the Fund 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 Company.
ADVISORY FEES
For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus.
For the fiscal years ended May 31, 1994, 1993, and 1992, the adviser earned
$2,737,684, $2,573,092, and $2,564,375, respectively, of which $315,012,
$132,140, and $348,308, 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 Fund'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
Fund for its expenses over the limitation.
If the Fund'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.
FUND ADMINISTRATION
- --------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund 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 Fund's
administrator. (For purposes of this Statement of Additional Information,
Federated Administrative Services and Federated Administrative Services, Inc.,
may hereinafter collectively be referred to as, the "Administrators".) For the
fiscal year ended May 31, 1994, the Administrators collectively earned
$441,902. For the fiscal years ended May 31, 1993, and 1992, Federated
Administrative Services, Inc., earned $389,931, and $398,198, respectively. Dr.
Henry J. Gailliot, an officer of Federated Advisers, the adviser to the Fund,
holds approximately 20% of the outstanding common stock and serves as director
of Commercial Data Services, Inc., a company which provides computer processing
services to Federated Administrative Services.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS
- --------------------------------------------------------------------------------
These arrangements permit the payment of fees to Financial Institutions to
stimulate distribution activities and services to shareholders provided by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to,
marketing efforts; 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 Distribution Plan, the Board of Directors expects that the Fund
will be able to achieve a more predictable flow of cash for investment purposes
and to meet redemptions. This will facilitate more efficient portfolio
management and assist the Fund in pursuing its investment objectives. By
identifying potential investors whose needs are served by the Fund's
objectives, and properly servicing these accounts, it may be possible to curb
sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may include:
(1) providing personal services to shareholders; (2) investing shareholder
assets with a minimum of delay and administrative detail; and (3) enhancing
shareholder recordkeeping systems; and (4) responding promptly to shareholders'
requests and inquiries concerning their accounts.
For the fiscal period ended May 31, 1994, payments in the amount of $1,542,256
were made pursuant to the Distribution Plan. Payments in the amount of $374,123
were made pursuant to the Shareholder Services Plan.
CUSTODIAN AND PORTFOLIO RECORDKEEPER. State Street Bank and Trust-Boston,
Boston, MA is custodian for the securities and cash of the Fund. It also
provides certain accounting and recordkeeping services with respect to the
Fund'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 Directors have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
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
Fund computed by dividing the annualized daily income on the Fund's portfolio
by the net asset value computed as above may tend to be higher than a similar
computation made by using a method of valuation based upon market prices and
estimates. In periods of rising interest rates, the opposite may be true.
The Fund'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 Directors must establish procedures
reasonably designed to stabilize the net asset value per share, as computed for
purposes of distribution and redemption, at $1.00 per share, taking into
account current market conditions and the Fund's investment objective. 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 Directors will decide what, if any, steps should be taken if
there is a difference of more than 0.5 of 1% between the two values. The
Directors will take any steps they consider appropriate (such as redemption in
kind or shortening the average portfolio maturity) to minimize any material
dilution or other unfair results arising from differences between the two
methods of determining net asset value.
REDEMPTION IN KIND
The Fund is obligated to redeem shares solely in cash up to $250,000 or 1% of
the Fund's net asset value, whichever is less, for any one shareholder within a
90-day period. Any redemption beyond this amount will also be in cash unless
the Directors determine that further payments should be in kind. In such cases,
the Fund will pay all or a portion of the remainder of the redemption in
portfolio instruments valued in the same way as the Fund determines net asset
value. The portfolio instruments will be selected in a manner that the
Directors deem fair and equitable. Redemption in kind is not as liquid as a
cash redemption. If redemption is made in kind, shareholders who sell these
securities could receive less than the redemption value and could incur certain
transaction costs.
THE FUND'S TAX STATUS
To qualify for the special tax treatment afforded to regulated investment
companies, the Fund must, among other requirements: derive at least 90% of its
gross income from dividends, interest, and gains from the sale of securities;
derive less than 30% of its gross income from the sale of securities held less
than three months; invest in securities within certain statutory limits; and
distribute to its shareholders at least 90% of its net income earned during the
year.
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 Fund, the performance will be reduced for those shareholders
paying those fees.
YIELD
The Fund 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 Fund's yield for the seven-day period ended May 31, 1994, was 2.15%.
EFFECTIVE YIELD
The Fund 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 Fund's effective yield for the seven-day period ended May 31, 1994, was
2.17%.
TAX-EQUIVALENT YIELD
The Fund's tax-equivalent yield for the seven-day period ended May 31, 1994,
was 3.56%.
TAX-EQUIVALENCY TABLE
A tax-equivalency table may be used in advertising and sales literature. The
interest earned by the municipal securities in the Fund's portfolio generally
remains free from federal regular income tax,* and is often free from state and
local taxes as well. As the table below indicates, a "tax-free" investment can
be an attractive choice for investors, particularly in times of narrow spreads
between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1994 MULTISTATE MUNICIPAL FUND
<TABLE>
<CAPTION>
FEDERAL INCOME TAX BRACKET:
---------------------------
<S> <C> <C> <C> <C> <C>
15.00% 28.00% 31.00% 36.00% 39.60%
------ ------ ------ ------ ------
JOINT RETURN: $1-38,000 $38,001-91,850 $91,851-140,000 $140,001-250,000 OVER $250,000
SINGLE RETURN: $1-22,750 $22,751-55,100 $55,101-115,000 $115,001-250,000 OVER $250,000
------------------------------------------------------------------------------------------
TAX-EXEMPT YIELD TAXABLE YIELD EQUIVALENT
---------------- -----------------------------------------------------------------------
1.00% 1.18% 1.39% 1.45% 1.56% 1.66%
1.50 1.76 2.08 2.17 2.34 2.48
2.00 2.35 2.78 2.90 3.13 3.31
2.50 2.94 3.47 3.62 3.91 4.14
3.00 3.53 4.17 4.35 4.69 4.97
3.50 4.12 4.86 5.07 5.47 5.79
4.00 4.71 5.56 5.80 6.25 6.62
4.50 5.29 6.25 6.52 7.03 7.45
5.00 5.88 6.94 7.25 7.81 8.28
5.50 6.47 7.64 7.97 8.59 9.11
6.00 7.06 8.33 8.70 9.38 9.93
6.50 7.65 9.03 9.42 10.16 10.76
7.00 8.24 9.72 10.14 10.94 11.59
7.50 8.82 10.42 10.87 11.72 12.42
8.00 9.41 11.11 11.59 12.50 13.25
</TABLE>
The chart above is for illustrative purposes only. It is not an indicator of
past or future performance of the Fund.
*Some portion of the Fund's income may be subject to the federal alternative
minimum tax and state and local taxes.
TOTAL RETURN
Average annual total return is the average compounded rate of return for a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is compounded
by multiplying the number of shares owned at the end of the period by the net
asset value per share at the end of the period. The number of shares owned at
the end of the period is based on the number of shares purchased at the
beginnning of the period with $1,000, adjusted over the period by any
additional shares, assuming the monthly reinvestment of all dividends and
distributions.
The Fund's average annual total returns for the one year period ended May 31,
1994, and for the period from August 15, 1989 (start of performance) through
May 31, 1994 were 1.83%, and 3.62%, respectively.
PERFORMANCE COMPARISONS
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:
. 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.
FINANCIAL STATEMENTS
The financial statements for Municipal Cash Series for the fiscal year ended
May 31, 1994 are incorporated herein by reference to the Annual Report to
Shareholders of the Municipal Cash Series dated May 31, 1994.
9080102B (9/94)
PRIME CASH SERIES
(A PORTFOLIO OF CASH TRUST SERIES, INC.)
PROSPECTUS
The shares of Prime Cash Series (the "Fund") offered by this prospectus
represent interests in a diversified portfolio of Cash Trust Series, Inc. (the
"Company"), an open-end management investment company (a mutual fund). The Fund
invests in money market securities to achieve current income consistent with
stability of principal and liquidity.
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 FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated 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 Fund, contact your financial
institution.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Prospectus dated September 30, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1 Custodian 9
- ------------------------------------- Transfer Agent and Dividend
Disbursing Agent 9
FINANCIAL HIGHLIGHTS--PRIME CASH Legal Counsel 9
SERIES 2 Independent Auditors 9
- -------------------------------------
GENERAL INFORMATION 3 NET ASSET VALUE 9
- ------------------------------------- -------------------------------------
INVESTMENT INFORMATION 3 INVESTING IN THE TRUST 10
- ------------------------------------- -------------------------------------
Share Purchases 10
Investment Objective 3 Through a Financial Institution 10
Investment Policies 3 By Wire 10
Acceptable Investments 3 By Mail 10
Variable Rate Demand Notes 4 Systematic Investment Program 10
Bank Instruments 4 Minimum Investment Required 10
Asset Backed Securities 4 Certificates and Confirmations 11
Short Term Credit Facilities 4 Dividends 11
Ratings 4 Capital Gains 11
Repurchase Agreements 5 Retirement Plans 11
Credit Enhancement 5
Demand Features 5 REDEEMING SHARES 11
When-Issued and Delayed Delivery -------------------------------------
Transactions 5
Lending of Portfolio Securities 6 Through a Financial Institution 11
Restricted and Illiquid Receiving Payment 12
Securities 6 By Wire 12
Concentration of Investments 6 By Check 12
Investment Risks 7 By Mail 12
Investment Limitations 7 By Writing a Check 12
Regulatory Compliance 7 By Visa Card 13
By a Systematic Withdrawal
CASH TRUST SERIES, INC., Program 13
INFORMATION 7 Accounts with Low Balances 13
- -------------------------------------
SHAREHOLDER INFORMATION 13
Management of Cash Trust Series, -------------------------------------
Inc. 7
Board of Directors 7 Voting Rights 13
Investment Adviser 8
Advisory Fees 8 TAX INFORMATION 13
Adviser's Background 8 -------------------------------------
Distribution of Shares 8
Distribution and Shareholder Federal Income Tax 13
Services Plans 8 Other State and Local Taxes 14
Administration of the Company 9
Administrative Services 9 PERFORMANCE INFORMATION 14
-------------------------------------
ADDRESSES 15
SUMMARY OF FUND EXPENSES
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)............................... None
Contingent Deferred Sales Charge (as a percentage of original pur-
chase price or redemption proceeds, as applicable)................. None
Redemption Fee (as a percentage of amount redeemed, if applicable). None
Exchange Fee....................................................... None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fee (after waiver) (1).................................. 0.32%
12b-1 Fee (2)...................................................... 0.10%
Total Other Expenses............................................... 0.57%
Shareholder Services Fee......................................... 0.25%
Total Fund Operating Expenses (3).............................. 0.99%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum management fee is
0.50%.
(2) The maximum 12b-1 fee is 0.35%.
(3) The Total Fund Operating Expenses would have been 1.17% absent the
voluntary waiver of a portion of the management fee.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS
AND EXPENSES, SEE "CASH TRUST SERIES, INC., INFORMATION." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted under the rules of the National
Association of Securities Dealers, Inc. ("NASD"). However, in order for a Fund
investor to exceed the NASD's maximum front-end sales charge of 6.25%, a
continuous investment in the Fund for 62.5 years would be required.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment
assuming (1) 5% annual return and (2) redemp-
tion at the end of each time period............ $10 $32 $55 $121
</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.
PRIME CASH SERIES
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report, dated July 8, 1994, on the Fund's financial
statements for the year ended May 31, 1994, and on the following table for each
of the periods presented, is included in the Annual Report, which is
incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.
<TABLE>
<CAPTION>
Year Ended May 31,
--------------------------------------------
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 OPERA-
TIONS
- ------------------------------
Net investment income 0.02 0.03 0.04 0.07 0.06
- ------------------------------
LESS DISTRIBUTIONS
- ------------------------------
Dividends to shareholders
from net investment income (0.02) (0.03) (0.04) (0.07) (0.06)
- ------------------------------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------ ------ ------ ------ ------ ------
TOTAL RETURN** 2.48% 2.61% 4.37% 6.99% 6.56%
- ------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------
Expenses 0.99% 0.99% 0.98% 0.94% 0.73%(b)
- ------------------------------
Net investment income 2.45% 2.58% 4.21% 6.50% 7.82%(b)
- ------------------------------
Expense waiver/reimbursement
(a) 0.18% 0.15% 0.22% 0.44% 0.46%(b)
- ------------------------------
SUPPLEMENTAL DATA
- ------------------------------
NET ASSETS, END OF PERIOD
(000 OMITTED) $791,147 $796,832 $750,016 $562,465 $189,254
- ------------------------------
</TABLE>
* Reflects operations for the period from August 18, 1989 (date of initial
public investment), to May 31, 1990.
** 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.
(b) Computed on an annualized basis.
Further information about the Fund's performance is contained in the Fund's
Annual Report, datedMay 31, 1994, which can be obtained free of charge.
GENERAL INFORMATION
- -------------------------------------------------------------------------------
The Company was established as a Maryland corporation under Articles of
Incorporation dated February 1, 1993. The Articles of Incorporation permit the
Company to offer separate series of shares of beneficial interest representing
interests in separate portfolios of securities. The Fund is designed for
customers of financial institutions such as banks, fiduciaries, custodians of
public funds, investment advisers, and broker/dealers as a convenient means of
accumulating an interest in a professionally managed, diversified portfolio
investing only in short-term money market securities. A minimum initial
investment of $10,000 is required, except for qualified retirement plans which
have a minimum initial investment of $1,000. Subsequent investments must be in
amounts of at least $500.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income consistent with
stability of principal and liquidity. This investment objective cannot be
changed without shareholder approval. While there is no assurance that the
Fund will achieve its investment objective, it endeavors to do so by following
the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing only in a portfolio of
money market securities maturing in 13 months or less. The average maturity of
the securities in the Fund'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 Directors (the "Directors") without shareholder
approval. Shareholders will be notified before any material change in these
policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests in high quality money market
instruments that are either rated in one of the two highest short-term rating
categories by one or more nationally recognized statistical rating
organizations ("NRSROs") or are of comparable quality to securities having
such ratings. Examples of these instruments include, but are not limited to:
. domestic issues of corporate debt obligations, including variable rate
demand notes;
. commercial paper (including Canadian Commercial Paper and Europaper);
. certificates of deposit, demand and time deposits, bankers'
acceptances and other instruments of domestic and foreign banks and
other deposit institutions ("Bank Instruments");
. short-term credit facilities;
. asset-backed securities;
. obligations issued or guaranteed as to payment of principal and
interest by the U.S. government or one of its agencies or
instrumentalities ("Government Securities"); and
. other money market instruments.
The Fund invests only in instruments denominated and payable in U.S. dollars.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at
par. The interest rate may float or be adjusted at regular intervals
(ranging from daily to annually), and is normally based on a published
interest rate or interest rate index. Most variable rate demand notes
allow the Fund to demand the repurchase of the security on not more than
seven days prior notice. Other notes only permit the Fund to tender the
security at the time of each interest rate adjustment or at other fixed
intervals. See "Demand Features." The Fund treats variable rate demand
notes as maturing on the later of the date of the next interest rate
adjustment or the date on which the Fund may next tender the security for
repurchase.
BANK INSTRUMENTS. The Fund only invests in Bank Instruments either issued by
an institution having capital, surplus and undivided profits over $100
million, or insured by the Bank Insurance Fund ("BIF") or the Savings
Association Insurance Fund ("SAIF"). Bank Instruments may include Eurodollar
Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit ("Yankee
CDs") and Eurodollar Time Deposits ("ETDs"). The Fund will treat securities
credit enhanced with a bank's letter of credit as Bank Instruments.
ASSET-BACKED SECURITIES. Asset-backed securities are securities issued by
special purpose entities whose primary assets consist of a pool of loans
or accounts receivable. The securities may take the form of beneficial
interests in special purpose trusts, limited partnership interests, or
commercial paper or other debt securities issued by a special purpose
corporation. Although the securities often have some form of credit or
liquidity enhancement, payments on the securities depend predominantly
upon collections of the loans and receivables held by the issuer.
SHORT-TERM CREDIT FACILITIES. The Fund may enter into, or acquire
participations in, short-term borrowing arrangements with corporations,
consisting of either a short-term revolving credit facility or a master
note agreement payable upon demand. Under these arrangements, the borrower
may reborrow funds during the term of the facility. The Fund treats any
commitments to provide such advances as a standby commitment to purchase
the borrower's notes.
RATINGS. An NRSRO's two highest rating categories are determined without regard
for sub-categories and gradations. For example, securities rated A-1+, A-1, or
A-2 by Standard & Poor's Corporation ("S&P"), Prime-1 or Prime-2 by Moody's
Investors Service, Inc. ("Moody's"), or F-1 (+ or -) or F-2 (+ or -) by Fitch
Investors Service, Inc. ("Fitch") are all considered rated in one of the two
highest short-term rating categories. The Fund will limit its investments in
securities rated in the second highest short-term rating category e.g., A-2 by
S&P, Prime-2 by Moody's, or F-2 (+ or -) by Fitch, to not more than 5% of its
total assets, with not more than 1% invested in the securities of any one
issuer. The Fund will follow applicable regulations in determining whether a
security rated by more than one NRSRO can be treated as being in one of the two
highest short-term rating categories; currently, such securities must be rated
by two NRSROs in one of their two highest rating categories. See "Regulatory
Compliance."
REPURCHASE AGREEMENTS. Certain securities in which the Fund invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, brokers/dealers, and other recognized financial
institutions sell securities to the Fund 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 Fund, the Fund could
receive less than the repurchase price on any sale of such securities. In the
event that such a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending court
action. The Fund believes that under the regular procedures normally in effect
for custody of the Fund's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the Fund
and allow retention or disposition of such securities. The Fund will only
enter into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are deemed by the Fund's adviser
to be creditworthy pursuant to guidelines established by the Directors.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be credit
enhanced by a guaranty, letter of credit, or insurance. The Fund typically
evaluates the credit quality and ratings of credit enhanced securities based
upon the financial condition and ratings of the party providing the credit
enhancement (the "credit enhancer'), rather than the issuer. Generally, the
Fund will not treat credit enhanced securities as having been issued by the
credit enhancer for diversification purposes. However, under certain
circumstances applicable regulations may require the Fund to treat the
securities as having been issued by both the issuer and the credit enhancer.
The bankruptcy, receivership, or default of the credit enhancer will adversely
affect the quality and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to puts and
standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period
(usually seven days) following a demand by the Fund. The demand feature may be
issued by the issuer of the underlying securities, a dealer in the securities,
or by another third party, and may not be transferred separately from the
underlying security. The Fund uses these arrangements to provide the Fund with
liquidity and not to protect against changes in the market value of the
underlying securities. The bankruptcy, receivership, or default by the issuer
of the demand feature, or a default on the underlying security or other event
that terminates the demand feature before its exercise, will adversely affect
the liquidity of the underlying security. Demand features that are exercisable
even after a payment default on the underlying security may be treated as a
form of credit enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions are
arrangements in which the Fund purchases securities with payment and delivery
scheduled for a future time. The seller's failure to complete these
transactions may cause the Fund 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 Fund may pay more/less than the
market value of the securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser deems
it appropriate to do so. In addition, the Fund may enter in 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 Fund may realize short-term profits or losses upon the sale
of such commitments.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities on a short-term or long-term basis, or
both, to broker/dealers, banks, or other institutional borrowers of
securities. The Fund will only enter into loan arrangements with
broker/dealers, banks, or other institutions which the adviser has determined
are creditworthy under guidelines established by the Fund's Directors and will
receive collateral at all times equal to at least 100% of the value of the
securities loaned.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
otherwise invest pursuant to its investment objective and policies but which are
subject to restrictions on resale under federal securities law. However, the
Fund will limit investments in illiquid securities, including certain restricted
securities not determined by the Directors to be liquid, non- negotiable time
deposits, and repurchase agreements providing for settlement in more than seven
days after notice, to 10% of its net assets.
The Fund may invest in commercial paper issued in reliance on the exemption
from registration afforded by Section 4(2) of the Securities Act of 1933.
Section 4(2) commercial paper is restricted as to disposition under federal
securities law, and is generally sold to institutional investors, such as the
Fund, who agree that they are purchasing the paper for investment purposes and
not with a view to public distribution. Any resale by the purchaser must be in
an exempt transaction. Section 4(2) commercial paper is normally resold to
other institutional investors like the Fund through or with the assistance of
the issuer or investment dealers who make a market in Section 4(2) commercial
paper, thus providing liquidity. The Fund believes that Section 4(2)
commercial paper and possibly certain other restricted securities which meet
the criteria for liquidity established by the Directors of the Fund are quite
liquid. The Fund intends, therefore, to treat the restricted securities which
meet the criteria for liquidity established by the Directors, including
Section 4(2) commercial paper, as determined by the Fund's investment adviser,
as liquid and not subject to the investment limitation applicable to illiquid
securities. In addition, because Section 4(2) commercial paper is liquid, the
Fund intends to not subject such paper to the limitation applicable to
restricted securities.
CONCENTRATION OF INVESTMENTS. The Fund will invest 25% or more of its total
assets in commercial paper issued by finance companies. The finance companies in
which the Fund intends to invest can be divided into two categories, commercial
finance companies and consumer finance companies. Commercial finance companies
are principally engaged in lending to corporations or other businesses. Consumer
finance companies are primarily engaged in lending to individuals. Captive
finance companies or finance subsidiaries which exist to facilitate the
marketing and financial activities of their parent will, for purposes of
industry concentration, be classified in the industry of their parent's
corporation.
In addition, the Fund may invest 25% or more of the value of its total assets
in instruments issued by a U.S. branch of a domestic bank or savings and loan
having capital, surplus, and undivided profits in excess of $100,000,000 at
the time of investment.
INVESTMENT RISKS
ECDs, ETDs, Yankee CDs, CCPs and Europaper are subject to different risks than
domestic obligations of domestic banks or corporations. Examples of these risks
include international economic and political developments, foreign governmental
restrictions that may adversely affect the payment of principal or interest,
foreign withholding or other taxes on interest income, difficulties in obtaining
or enforcing a judgment against the issuing entity, and the possible impact of
interruptions in the flow of international currency transactions. Risks may also
exist for ECDs, ETDs, and Yankee CDs because the banks issuing these
instruments, or their domestic or foreign branches, are not necessarily subject
to the same regulatory requirements that apply to domestic banks, such as
reserve requirements, loan limitations, examinations, accounting, auditing,
recordkeeping, and the public availability of information. These factors will be
carefully considered by the Fund's adviser in selecting investments for the
Fund.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through reverse repurchase
agreements (arrangements in which the Fund sells a money market instrument for
a percentage of its cash value with an agreement to buy it back on a set date)
or pledge securities except, under certain circumstances, the Fund may borrow
up to one-third of the value of its total assets and pledge up to 10% of its
total assets to secure such borrowings. This investment limitation cannot be
changed without shareholder approval.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in this
prospectus and its Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940, as amended. In particular, the Fund
will comply with the various requirements of Rule 2a-7 which regulates money
market mutual funds. For example, with limited exceptions, Rule 2a-7 prohibits
the investment of more than 5% of the Fund's total assets in the securities of
any one issuer, although the Fund's investment limitation only requires such 5%
diversification with respect to 75% of its assets. The Fund will invest more
than 5% of its assets in any one issuer only under the circumstances permitted
by Rule 2a-7. The Fund will also determine the effective maturity of its
investments, as well as its ability to consider a security as having received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The Fund may
change these operational policies to reflect changes in the laws and regulations
without the approval of its shareholders.
CASH TRUST SERIES, INC., INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF CASH TRUST SERIES, INC.
BOARD OF DIRECTORS. The Company is managed by a Board of Directors. The
Directors are responsible for managing the Fund's business affairs and for
exercising all the Company's powers except those reserved for the shareholders.
The Executive Committee of the Board of Directors handles the Board's
responsibilities between meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Advisers, the Fund's investment adviser, subject to direction by the Directors.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee
equal to .50 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund 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 Fund, but reserves the right to terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. The Fund's investment adviser is Federated Advisers.
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.
Federated Advisers 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
Fund. It is a Pennsylvania corporation organized on November 14, 1969, and is
the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
the Fund may pay to the distributor an amount, computed at an annual rate of .35
of 1% of the average daily net asset value of the Fund to finance any activity
which is principally intended to result in the sale of shares subject to the
Distribution Plan. The distributor may select Financial Institutions such as
banks, fiduciaries, custodians for public funds, investment advisers, and
broker/dealers to provide sales support services as agents for their clients or
customers. In addition, the Fund has adopted a Shareholder Services Plan (the
"Services Plan") under which it will pay Financial Institutions an amount not
exceeding .25 of 1% of the average daily net asset value of the Fund to provide
administrative support services to their customers who own shares of the Fund.
From time to time and for such periods as deemed appropriate, the amounts stated
above may be reduced voluntarily. Activities and services under these
arrangements may include, but are not limited to, providing advertising and
marketing materials to prospective shareholders, providing personal services to
shareholders, and maintaining shareholder accounts.
Financial Institutions will receive fees based upon shares owned by their
clients or customers. The schedules of such fees and the basis upon which such
fees will be paid will be determined from time to time by the Fund or the
distributor, as appropriate.
The Distribution Plan is a compensation-type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund
does not pay for unreimbursed expenses of the distributor, including amounts
expended by the distributor in excess of amounts received by it from the Fund,
interest, carrying or other financing charges in connection with excess
amounts expended, or the distributor's overhead expenses. However, the
distributor may be able to recover such amounts or may earn a profit from
future payments made by the Fund under the Distribution Plan.
ADMINISTRATION OF THE COMPANY
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 Fund. Federated
Administrative Services provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
----------- ----------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
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, Boston, MA is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, PA is transfer agent for the shares of, and dividend disbursing
agent for, the Fund.
LEGAL COUNSEL. Legal counsel is provided by Dickstein, Shapiro & Morin,
L.L.P., Washington, D.C. and Houston, Houston and Donnelly, Pittsburgh, PA.
INDEPENDENT AUDITORS. The independent Auditors for the Fund are Deloitte &
Touche LLP, Pittsburgh, PA.
NET ASSET VALUE
- -------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of its shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net
asset value per share is determined by subtracting total liabilities from
total assets and dividing the remainder by the number of shares outstanding.
The Fund 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 expect on: (i) days on which there are
not sufficient changes in the value of the Fund's portfolio securities that
its net asset value might be materially affected; (ii) days during which no
shares are tendered for redemption and no orders to purchase shares are
received; or (iii) the following holidays: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
INVESTING IN THE TRUST
- -------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold at their net asset value, 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 as described below.
Accounts may be opened through a Financial Institution (such as a bank or
broker/dealer) or by completing, signing, and returning the new account form
available from the Fund. In connection with any sale, Federated Securities
Corp. may from time to time offer certain items of nominal value to any
shareholder or investor. The Fund reserves the right to reject any purchase
request.
THROUGH A FINANCIAL INSTITUTION. Investors may call their Financial
Institutions to place an order. Orders through a Financial Institution are
considered received when the Fund receives payment by wire or converts payment
by check from the Financial Institution into federal funds. It is the
Financial Institution's responsibility to transmit orders promptly. Financial
Institutions may charge additional fees for their services.
BY WIRE. To purchase by wire, call the Fund before 3:00 p.m. (Eastern time) to
place an order. All information needed will be taken over the telephone, and the
order is considered received immediately. Payment by federal funds must be
received before 3 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: Prime Cash Series; Fund Number (this number
can be found on the account statement or by contacting the Fund); 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 Prime Cash Series to:
Prime Cash Series, 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.
SYSTEMATIC INVESTMENT PROGRAM. Under this program, funds in a minimum of $500
are automatically withdrawn periodically from the shareholder's checking account
and invested in Fund shares.
Shareholders should contact their Financial Institution and/or the Fund to
participate in this program.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment is $10,000. Minimum subsequent investments must
be $500. For investments by retirement plans these amounts are $1,000 and $500
respectively. Minimum investments will be calculated by combining all accounts
maintained with the Fund. The Fund may from time to time waive the minimum
investment requirements.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless
requested by contacting the Fund 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 Fund unless cash
payments are requested by writing to the Fund. 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 Fund 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 Fund will distribute in cash or additional shares any realized
net long-term capital gains at least once every 12 months.
RETIREMENT PLANS. Shares of the Fund can be purchased as an investment for
retirement plans or IRA accounts. For further details contact the Fund or
Federated Securities Corporation and consult a tax adviser.
REDEEMING SHARES
- --------------------------------------------------------------------------------
Shares are redeemed at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Redemption requests must be received in
proper form and can be made as described below.
THROUGH A FINANCIAL INSTITUTION
Shares may be redeemed by calling the shareholder's Financial Institution.
Shares will be redeemed at the net asset value next determined after Federated
Services Company receives the redemption request from the Financial
Institution. The Financial Institution is responsible for promptly submitting
redemption requests and providing proper written redemption instructions. The
Financial Institution may charge customary fees and commissions for this
service.
An authorization form permitting redemption requests by telephone must first be
completed. Authorization forms and information on this service are available
from Federated Securities Corp. Telephone redemption instructions may be
recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions. In
the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If this occurs, another method of
redemption, such as "By Mail", should be considered.
RECEIVING PAYMENT. Pursuant to instructions from the Financial Institution,
redemptions will be made by check or by wire.
BY WIRE. Proceeds for redemption requests received before 12:00 noon,
(Eastern time) will be wired the same day but will not be entitled to that
day's dividend. Redemption requests received after 12:00 noon, (Eastern
time) will receive that day's dividends and will be wired the following
business day.
BY CHECK. 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
redemption request. Dividends are paid up to and including the day that a
redemption request is processed.
BY MAIL
Shares may be redeemed by sending a written request to: Prime Cash Series,
P.O. Box 8604, Boston, MA 02266-8604. The written request should state: Prime
Cash Series; 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 Fund 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 Fund, or a
redemption payable other than to the shareholder of record must have their
signatures guaranteed by:
. a trust company or commercial bank whose deposits are insured by the
Bank Insurance Fund which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
. a member firm of the New York, American, Boston, Midwest, or Pacific
Stock Exchanges;
. a savings bank or savings and loan association whose deposits are
insured by the Savings Association Insurance Fund, which is
administered by the FDIC; or
. any other "eligible guarantor institution," as defined in the
Securities Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and the transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of the
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day, but in
no event more than seven days, after receipt of a proper written redemption
request. Dividends are paid up to and including the day that a redemption
request is processed.
BY WRITING A CHECK. At the shareholder's request, State Street Bank will
establish a checking account for redeeming shares. For further information,
contact the Fund.
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 Fund. 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 to redeem shares. Cancelled checks are sent to the shareholder each month.
BY VISA CARD. At the shareholder's request, State Street Bank will establish a
VISA account. This account allows a shareholder to redeem shares by using a VISA
card. A fee, determined by State Street Bank, will be charged to the account for
this service. For further information, contact the Fund.
BY A SYSTEMATIC WITHDRAWAL PROGRAM
If a shareholder's account has a value of at least $10,000, a systematic
withdrawal program may be established whereby automatic redemptions are made
from the account and transferred electronically to any commercial bank, savings
bank, or credit union that is an ACH member. Shareholders may apply for
participation in this program through their Financial Institution.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account, except accounts maintained by retirement plans,
and pay the proceeds to the shareholder if the account balance falls below a
required minimum value of $10,000 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 Company gives the shareholder one vote in Director elections
and other matters submitted to shareholders for vote. All shares of all classes
of each portfolio in the Company have equal voting rights, except that in
matters affecting only a particular portfolio or class, only shares of that
portfolio or class are entitled to vote. As a Maryland corporation, the Company
is not required to hold annual shareholder meetings. Shareholder approval will
be sought only for certain changes in the Company's or the Fund's operation and
for the election of Directors under certain circumstances.
Directors may be removed by the Directors or by shareholders at a special
meeting. A special meeting of the shareholders for this purpose shall be called
by the Directors upon the written request of shareholders owning at least 10%
of the outstanding shares of the Company.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and
to receive the special tax treatment afforded to such companies. The Fund will
be treated as a single, separate entity for federal income tax purposes so that
income (including capital gains) and losses realized by the Company's other
portfolios will not be combined for tax purposes with those realized by the
Fund.
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. In the opinion
of Houston, Houston, & Donnelly, counsel to the Fund:
. the Fund is subject to Pennsylvania corporate franchise tax; and
. Fund shares are exempt from personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania.
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 Fund 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 Fund after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed
as a percentage.
From time to time, the Fund may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
ADDRESSES
- --------------------------------------------------------------------------------
Cash Trust Series, Inc. Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- --------------------------------------------------------------------------------
Distributor
Federated Securities Corporation Federated Investors Tower
Pittsburgh, PA 15222
- --------------------------------------------------------------------------------
Investment Adviser
Federated Advisers Federated Investors Tower
Pittsburgh, PA 15222
- --------------------------------------------------------------------------------
Custodian
State Street Bank and Trust 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
Dickstein, Shapiro & Morin, L.L.P. 2101 L Street, N.W.
Washington, D.C. 20037
- --------------------------------------------------------------------------------
Legal Counsel
Houston, Houston and Donnelly 2510 Centre City Tower
Pittsburgh, PA 15222
- --------------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche LLP One PPG Place Pittsburgh, PA
15222
- --------------------------------------------------------------------------------
PRIME CASH SERIES
PROSPECTUS
A Diversified Portfolio of Cash Trust
Series, Inc. an Open-End Management
Investment Company
September 30, 1994
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
147551105
9080101A (9/94)
PRIME CASH SERIES
A PORTFOLIO OF CASH TRUST SERIES, INC.
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus of
Prime Cash Series (the "Fund") dated September 30, 1994. This Statement is not
a prospectus. To receive a copy of a prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated September 30, 1994
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- --------------------------------------
INVESTMENT POLICIES 1
- --------------------------------------
Bank Instruments 1
When-Issued and Delayed Delivery
Transactions 1
Repurchase Agreements 1
Reverse Repurchase Agreements 1
Lending of Portfolio Securities 1
INVESTMENT LIMITATIONS 2
- --------------------------------------
Selling Short and Buying on Margin 2
Issuing Senior Securities and
Borrowing Money 2
Pledging Assets 2
Lending Cash or Securities 2
Investing in Commodities 2
Investing in Real Estate 2
Underwriting 2
Concentration of Investments 2
Diversification of Investments 2
Investing in Restricted Securities 2
Investing in Illiquid Securities 3
Investing in Securities of Other
Investment Companies 3
Investing in New Issuers 3
Investing for Control 3
Investing in Issuers Whose
Securities Are Owned by Officers
of the Trust 3
Investing in Options 3
Investing in Minerals 3
BROKERAGE TRANSACTIONS 3
- --------------------------------------
CASH TRUST SERIES, INC. MANAGEMENT 4
- --------------------------------------
The Funds 6
Share Ownership 6
Fund Ownership 6
Director Liability 6
INVESTMENT ADVISORY SERVICES 7
- --------------------------------------
Investment Adviser 7
Advisory Fees 7
FUND ADMINISTRATION 7
- --------------------------------------
DISTRIBUTION AND SHAREHOLDER SERVICES
PLANS 7
- --------------------------------------
DETERMINING NET ASSET VALUE 8
- --------------------------------------
Redemption in Kind 8
The Fund's Tax Status 8
PERFORMANCE INFORMATION 8
- --------------------------------------
Yield 8
Effective Yield 9
Total Return 9
Performance Comparisons 9
Financial Statements 9
APPENDIX 10
- --------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund is a portfolio of Cash Trust Series, Inc. (the "Company"). The Fund
was established as a portfolio of Cash Trust Series, a Massachusetts business
trust, on May 16, 1989, and on June 15, 1993, reorganized as a portfolio of a
corporation organized under the laws of the State of Maryland. It is qualified
to do business as a foreign corporationin Pennsylvania.
INVESTMENT POLICIES
- --------------------------------------------------------------------------------
Unless indicated otherwise, the policies described below may be changed by the
Directors without shareholder approval. Shareholders will be notified before
any material change in these policies becomes effective.
BANK INSTRUMENTS
The instruments of banks and savings and loans whose deposits are insured by
the Bank Insurance Fund ("BIF") or the Savings Association Insurance Fund
("SAIF"), such as certificates of deposit, demand and time deposits, savings
shares, and bankers' acceptances, are not necessarily guaranteed by those
organizations. In addition to domestic bank instruments, the Fund may invest
in: Eurodollar Certificates of Deposit issued by foreign branches of U.S. or
foreign banks; Eurodollar Time Deposits, which are U.S. dollar-denominated
deposits in foreign branches of U.S. or foreign banks; Canadian Time Deposits,
which are U.S. dollar-denominated deposits issued by branches of major Canadian
banks located in the United States; and Yankee Certificates of Deposit, which
are U.S. dollar-denominated certificates of deposit issued by U.S. branches of
foreign banks and held in the United States.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the Fund's
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund 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 Fund 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 Fund might be delayed pending court
action. The Fund believes that under the regular procedures normally in effect
for custody of the Fund's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the Fund
and allow retention or disposition of such securities. The Fund will only enter
into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are deemed by the Fund's adviser to
be creditworthy pursuant to guidelines established by the Directors.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
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 Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but does
not ensure this result. When effecting reverse repurchase agreements, liquid
assets of the Fund, in a dollar amount sufficient to make payment for the
obligations to be purchased, are: segregated on the Fund's records at the trade
date; marked to market daily; and maintained until the transaction is settled.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the
option of the Fund or the borrower. The Fund may pay reasonable administrative
and custodial fees in connection with a loan and may pay a negotiated portion
of the interest earned on the cash or equivalent collateral to the borrower or
placing broker.
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as are necessary for clearance of
transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow money
directly or through reverse repurchase agreements in amounts up to one-third of
the value of its total assets, including the amounts borrowed.
The Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary, or emergency
measure or to facilitate management of the portfolio by enabling the Fund to
meet redemption requests when the liquidation of portfolio securities is deemed
to be inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings in excess of 5% of the value of its total assets
are outstanding. During the period any reverse repurchase agreements are
outstanding, the Fund will restrict the purchase of the portfolio securities to
money market instruments maturing on or before the expiration date of the
reverse repurchase agreements, but only to the extent necessary to assure
completion of the reverse repurchase agreements.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except as
necessary to secure permitted borrowings. In these 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 borrowing.
LENDING CASH OR SECURITIES
The Fund will not lend any assets, except portfolio securities. This shall not
prevent the Fund from engaging in transactions permitted by its investment
objective, policies, limitations, or Articles of Incorporation.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, although it may invest in
securities of issuers whose business involves the purchase or sale of real
estate or in securities which are secured by real estate or interests in real
estate.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection with
the sale of securities in accordance with its investment objective, policies,
and limitations.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets in any
one industry, except that it may invest 25% or more of the value of its total
assets in the commercial paper issued by finance companies.
The Fund may invest 25% or more of the value of its total assets in cash, cash
items, securities issued or guaranteed by the government of the United States,
its agencies, or instruments secured by these money market instruments, such as
repurchase agreements.
DIVERSIFICATION OF INVESTMENTS
With respect to securities comprising 75% of the value of its total assets, the
Fund will not purchase securities of any one issuer (other than cash, cash
items, or securities issued or guaranteed by the government of the United
States or its agencies or instrumentalities and repurchase agreements
collateralized by such U.S. government securities) if as a result more than 5%
of the value of its total assets would be invested in the securities of that
issuer.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of its total assets in securities
subject to restrictions on resale under federal securities law, except for
Section 4(2) commercial paper.
The above limitations cannot be changed without shareholder approval. The
following investment limitations, however, may be changed by the Directors
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies, except as
part of a merger, consolidation, or other acquisition.
INVESTING IN NEW ISSUERS
The Fund 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 Fund 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 Fund 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 Fund will not invest in puts, calls, straddles, spreads, or any combination
of them.
INVESTING IN MINERALS
The Fund 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.
For purposes of the above limitations, the Fund considers instruments issued by
a U.S. branch of a domestic bank or savings and loan having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of investment to be
"cash items". Except with respect to borrowing money, if a percentage
limitation is adhered to at the time of investment, a later increase or
decrease in percentage resulting from any change in value or net assets will
not result in a violation of such limitation.
The Fund did not borrow money or pledge securities in excess of 5% of the value
of its net assets during the last fiscal year and has no present intent to do
so during the coming fiscal year.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
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 Directors. The adviser may select
brokers and dealers who offer brokerage and research services. These services
may be furnished directly to the Fund or to the adviser and may include: advice
as to the advisability of investing in securities; security analysis and
reports; economic studies; industry studies; receipt of quotations for
portfolio evaluations; and similar services. Research services provided by
brokers and dealers may be used by the adviser or its affiliates in advising
the Company and other accounts. To the extent that receipt of these services
may supplant services for which the adviser or its affiliates might otherwise
have paid, it would tend to reduce their expenses. The adviser and its
affiliates exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are reasonable
in relationship to the value of the brokerage and research services provided.
Although investment decisions for the Fund are made independently from those of
the other accounts managed by the adviser, investments of the type the Fund may
make may also be made by those other accounts. When the Fund 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 Fund or the size of the position obtained or disposed of by the Fund. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
CASH TRUST SERIES, INC. MANAGEMENT
- --------------------------------------------------------------------------------
Officers and Directors are listed with their addresses, principal occupations,
and present positions.
- --------------------------------------------------------------------------------
John F. Donahue+*
Federated Investors Tower
Pittsburgh, PA
Chairman and Director
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director, ^tna 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 and Director of the Corporation.
- --------------------------------------------------------------------------------
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Director
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.
- --------------------------------------------------------------------------------
William J. Copeland
One PNC Plaza--23rd
Floor Pittsburgh, PA
Director
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.
- --------------------------------------------------------------------------------
J. Christopher Donahue*
Federated Investors Tower
Pittsburgh, PA
Vice President and Director
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 Director of the Corporation.
- --------------------------------------------------------------------------------
James E. Dowd
571 Hayward Mill Road
Concord, MA
Director
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
Director
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
Director
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
Director
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.
- --------------------------------------------------------------------------------
Gregor F. Meyer
5916 Penn Mall
Pittsburgh, PA
Director
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
Director
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
Director
Public relations/marketing consultant; Director, Trustee, or Managing General
Partner of the Funds.
- --------------------------------------------------------------------------------
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
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.
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*This Trustee/Director is deemed to be an "interested person" of the Trust/Fund
as defined in the Investment Company Act of 1940, as amended.
+Member of the Trust/Fund's Executive Committee. The Executive Committee of the
Board of Trustee/Director handles the responsibilities of the Board of
Trustees/Directors between meetings of the Board
THE FUNDS
As referred to in the list of Directors 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 U.S. Government Money Market Trust; Liberty Term
Trust, Inc.--1999; Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series
Trust; Mark Twain Funds; The Medalist Funds: Money Market Management, Inc.;
Money Market Obligations Trust; Money Market Trust; Municipal Securities Income
Trust; New York Municipal Cash Trust; 111 Corcoran Funds; Peachtree Funds; The
Planters Funds; Portage Funds; RIMCO Monument Funds; The Shawmut Funds;
Short-Term Municipal Trust; Star Funds; The Starburst Funds; The Starburst Funds
II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; Trademark Funds; Trust for Financial Institutions; Trust For
Government Cash Reserves; Trust for Short-Term U.S. Government Securities; Trust
for U.S. Treasury Obligations; World Investment Series, Inc.
SHARE OWNERSHIP
Officers and Directors own less than 1% of the Company's outstanding shares.
FUND OWNERSHIP
As of September 6, 1994, the following companies held 5% or more of the
outstanding shares of Prime Cash Series in nominee name accounts for the
benefit of their customers: Stephens, Inc., Little Rock, Arkansas, owned
approximately 41,331,794 shares (5.13%); BHC Securities, Inc., Philadelphia,
Pennsylvania, owned approximately 106,503,038 shares (13.21%); Primevest
Financial Services, St. Cloud, Minnesota, owned approximately 66,710,924 shares
(8.27%); Stern Agee & Leach, Birmingham, Alabama, owned approximately
42,660,527 shares (5.29%)
DIRECTOR LIABILITY
The Articles of Incorporation provide that the Directors will not be liable for
errors of judgment or mistakes of fact or law. However, they are not protected
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
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INVESTMENT ADVISER
The Prime Cash Series's investment adviser is Federated Advisers. 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 Company, the Fund, or any shareholder of
the Fund 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 Company.
ADVISORY FEES
For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus.
For the fiscal years ended May 31, 1994, 1993, and 1992, the adviser earned
$4,069,739, $3,977,466, and $3,625,646, respectively, of which $1,478,163,
$1,193,205, and $1,589,531, 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 Fund'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
Fund for its expenses over the limitation.
If the Fund'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.
FUND ADMINISTRATION
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Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund 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 Fund's
administrator. (For purposes of this Statement of Additional Information,
Federated Administrative Services and Federated Administrative Services, Inc.,
may hereinafter collectively be referred to as, the "Administrators"). For the
fiscal year ended May 31, 1994, the Administrators collectively earned
$621,911. For the fiscal years ended May 31, 1993, and 1992, Federated
Administrative Services, Inc., earned $600,408, and $548,974, respectively. Dr.
Henry J. Gailliot, an officer of Federated Advisers, the adviser to the Fund,
holds approximately 20% of the outstanding common stock and serves as director
of Commercial Data Services, Inc., a company which provides computer processing
services to Federated Administrative Services.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS
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These arrangements permit the payment of fees to Financial Institutions to
stimulate distribution activities and services to shareholders provided by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to,
marketing efforts; 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 Distribution Plan, the Board of Directors expects that the Fund
will be able to achieve a more predictable flow of cash for investment purposes
and to meet redemptions. This will facilitate more efficient portfolio
management and assist the Fund in pursuing its investment objectives. By
identifying potential investors whose needs are served by the Fund's
objectives, and properly servicing these accounts, it may be possible to curb
sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may include: (1)
providing personal services to shareholders; (2) investing shareholder assets
with a minimum of delay and administrative detail; and (3) enhancing shareholder
recordkeeping systems; and (4) responding promptly to shareholders' requests and
inquiries concerning their accounts.
For the fiscal period ended May 31, 1994, payments in the amount of $2,332,300
were made pursuant to the Distribution Plan. Payments in the amount of $512,116
were made pursuant to the Shareholder Services Plan.
CUSTODIAN AND PORTFOLIO RECORDKEEPER. State Street Bank and Trust, Boston, MA is
custodian for the securities and cash of the Fund. It also provides certain
accounting and recordkeeping services with respect to the Fund's portfolio
investments.
TRANSFER AGENT. As transfer agent, Federated Services Company maintains all
necessary shareholder records. For its services, the transfer agent receives a
fee based on the number of shareholder accounts.
DETERMINING NET ASSET VALUE
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The Directors have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
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
Fund computed by dividing the annualized daily income on the Fund's portfolio
by the net asset value computed as above may tend to be higher than a similar
computation made by using a method of valuation based upon market prices and
estimates. In periods of rising interest rates, the opposite may be true.
The Fund'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 Directors must establish procedures
reasonably designed to stabilize the net asset value per share, as computed for
purposes of distribution and redemption, at $1.00 per share, taking into
account current market conditions and the Fund's investment objective. 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 Directors will decide what, if any, steps should be taken if
there is a difference of more than 0.5 of 1% between the two values. The
Directors will take any steps they consider appropriate (such as redemption in
kind or shortening the average portfolio maturity) to minimize any material
dilution or other unfair results arising from differences between the two
methods of determining net asset value.
REDEMPTION IN KIND
The Fund is obligated to redeem shares solely in cash up to $250,000 or 1% of
the Fund's net asset value, whichever is less, for any one shareholder within a
90-day period. Any redemption beyond this amount will also be in cash unless
the Directors determine that further payments should be in kind. In such cases,
the Fund will pay all or a portion of the remainder of the redemption in
portfolio instruments valued in the same way as the Fund determines net asset
value. The portfolio instruments will be selected in a manner that the
Directors deem fair and equitable. Redemption in kind is not as liquid as a
cash redemption. If redemption is made in kind, shareholders who sell these
securities could receive less than the redemption value and could incur certain
transaction costs.
THE FUND'S TAX STATUS
To qualify for the special tax treatment afforded to regulated investment
companies, the Fund must, among other requirements: derive at least 90% of its
gross income from dividends, interest, and gains from the sale of securities;
derive less than 30% of its gross income from the sale of securities held less
than three months; invest in securities within certain statutory limits; and
distribute to its shareholders at least 90% of its net income earned during the
year.
PERFORMANCE INFORMATION
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Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is invested;
changes in interest rates; changes in expenses; and the relative amount of cash
flow. To the extent that financial institutions and broker/dealers charge fees
in connection with services provided in conjunction with an investment in
shares of the Fund, the performance will be reduced for those shareholders
paying those fees.
YIELD
The Fund 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 Fund's yield for the seven-day period ended May 31, 1994, was 3.18%.
EFFECTIVE YIELD
The Fund 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 Fund's effective yield for the seven-day period ended May 31, 1994, was
3.23%.
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 Fund's average annual total returns for the one-year period ended May 31,
1994, and for the period from August 15, 1989 (start of performance) through
May 31, 1994 were 2.48%, and 4.79%, respectively.
PERFORMANCE COMPARISONS
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:
. 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.
FINANCIAL STATEMENTS
The financial statements for Prime Cash Series for the fiscal year ended May
31, 1994 are incorporated herein by reference to the Annual Report to
Shareholders of the Prime Cash Series dated May 31, 1994.
APPENDIX
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STANDARD AND POOR'S CORPORATION CORPORATE BOND RATING DEFINITIONS
AAA--Debt rated "AAA" has the highest rating assigned by Standard & Poor's
Corporation. Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effect of changes in
circumstances and economic conditions than debt in higher rated categories.
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATING DEFINITIONS
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues. Aa-Bonds which are
rated Aa are judged to be of high quality by all standards. Together with the
Aaa group, they comprise what are generally known as high grade bonds. They are
rated lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long-
term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
FITCH INVESTORS SERVICE, INC. INVESTMENT GRADE BOND RATING DEFINITIONS
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA." Because bonds rated in the
"AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated "F-
1+."
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered strong, but
may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
STANDARD & POOR'S CORPORATION COMMERCIAL PAPER RATING DEFINITIONS
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATING DEFINITIONS
PRIME-1--Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. PRIME-1
repayment capacity will normally be evidenced by the following characteristics:
--Leading market positions in well established industries.
--High rates of return on funds employed.
--Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
--Broad margins in earning coverage of fixed financial charges and high
internal cash generation.
--Well-established access to a range of financial markets and assured
sources of alternate liquidity
PRIME-2--Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
FITCH INVESTORS SERVICE, INC. SHORT-TERM DEBT RATING DEFINITIONS
F-1+--Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1--Very Strong Credit Quality. Issues assigned this rating reflect an
assurance for timely payment only slightly less in degree than issues rated F-
1+.
F-2--Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as for issues assigned F-1+ and F-1 ratings.
9080101B (9/94)
TREASURY CASH SERIES
(A PORTFOLIO OF CASH TRUST SERIES, INC.)
PROSPECTUS
The shares of Treasury Cash Series (the "Fund") offered by this prospectus
represent interests in a diversified portfolio of Cash Trust Series, Inc. (the
"Company"), an open-end management investment company (a mutual fund). The Fund
invests in U.S. treasury securities to achieve current income consistent with
stability of principal and liquidity.
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 FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated 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 Fund, contact your financial
institution.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Prospectus dated September 30, 1994
TABLE OF CONTENTS
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SUMMARY OF FUND EXPENSES 1 INVESTING IN THE FUND 7
- ------------------------------------- -------------------------------------
Share Purchases 7
FINANCIAL HIGHLIGHTS--TREASURY CASH Through a Financial Institution 7
SERIES 2 By Wire 7
- ------------------------------------- By Mail 7
Systematic Investment Program 8
GENERAL INFORMATION 3 Minimum Investment Required 8
- ------------------------------------- Certificates and Confirmations 8
Dividends 8
INVESTMENT INFORMATION 3 Capital Gains 8
- ------------------------------------- Retirement Plans 8
Investment Objective 3
Investment Policies 3 REDEEMING SHARES 8
Acceptable Investments 3 -------------------------------------
Repurchase Agreements 3
When-Issued and Delayed Delivery
Transactions 4 Through a Financial Institution 8
Investment Limitations 4 Receiving Payment 9
Regulatory Compliance 4 By Wire 9
By Check 9
CASH TRUST SERIES, INC., By Mail 9
INFORMATION 5 By Writing a Check 10
- ------------------------------------- By Visa Card 10
By a Systematic Withdrawal
Management of Cash Trust Series, Program 10
Inc. 5 Accounts with Low Balances 10
Board of Directors 5
Investment Adviser 5 SHAREHOLDER INFORMATION 10
Advisory Fees 5 -------------------------------------
Adviser's Background 5
Distribution of Shares 5 Voting Rights 10
Distribution and Shareholder
Services Plans 5 TAX INFORMATION 11
Administration of the Company 6 -------------------------------------
Administrative Services 6 Federal Income Tax 11
Custodian 6 Other State and Local Taxes 11
Transfer Agent and Dividend
Disbursing Agent 6 PERFORMANCE INFORMATION 11
Legal Counsel 6 -------------------------------------
Independent Auditors 6 ADDRESSES 12
-------------------------------------
NET ASSET VALUE 7
- -------------------------------------
SUMMARY OF FUND EXPENSES
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<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)............................... None
Contingent Deferred Sales Charge (as a percentage of original pur-
chase price or redemption proceeds, as applicable)................. None
Redemption Fee (as a percentage of amount redeemed, if applicable). None
Exchange Fee....................................................... None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fee (after waiver) (1).................................. 0.40%
12b-1 Fee (2)...................................................... 0.10%
Total Other Expenses............................................... 0.49%
Shareholder Services Fee......................................... 0.25%
Total Fund Operating Expenses (3).............................. 0.99%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate their voluntary
waiver at any time at its sole discretion. The maximum management fee is
0.50%.
(2) The maximum 12b-1 fee is 0.35%.
(3) The Total Fund Operating Expenses would have been 1.09% absent the
voluntary waiver of a portion of the management fee.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS
AND EXPENSES, SEE "CASH TRUST SERIES, INC., INFORMATION." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted under the rules of the National
Association of Securities Dealers, Inc. ("NASD"). However, in order for a Fund
investor to exceed the NASD's maximum front-end sales charge of 6.25%, a
continuous investment in the Fund for 62.5 years would be required.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment assuming (1) 5% annual return
and (2) redemption at the end of each time pe-
riod........................................... $10 $32 $55 $121
</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.
TREASURY CASH SERIES
FINANCIAL HIGHLIGHTS
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(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report, dated July 8, 1994, on the Fund's financial
statements for the year ended May 31, 1994, and on the following table for each
of the periods presented, is included in the Annual Report, which is
incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.
<TABLE>
<CAPTION>
Year Ended May 31,
--------------------------------------------
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 OPERA-
TIONS
- ------------------------------
Net investment income 0.02 0.02 0.04 0.07 0.02
- ------------------------------
LESS DISTRIBUTIONS
- ------------------------------
Dividends to shareholders
from net
investment income (0.02) (0.02) (0.04) (0.07) (0.02)
- ------------------------------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------ ------ ------ ------ ------ ------
TOTAL RETURN** 2.37% 2.47% 4.24% 6.83% 2.42%
- ------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------
Expenses 0.99% 0.99% 0.98% 0.88% 0.60%(b)
- ------------------------------
Net investment income 2.33% 2.46% 4.18% 6.39% 7.75%(b)
- ------------------------------
Expense waiver/reimbursement
(a) 0.10% 0.04% 0.04% 0.22% 0.44%(b)
- ------------------------------
SUPPLEMENTAL DATA
- ------------------------------
Net assets, end of period
(000 omitted) $427,005 $532,334 $638,761 $713,430 $127,800
- ------------------------------
</TABLE>
* Reflects operations for the period from February 7, 1990 (date of initial
public investment), to May 31, 1990.
** 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.
(b) Computed on an annualized basis.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated May 31, 1994, which can be obtained free of charge.
GENERAL INFORMATION
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The Company was established as a Maryland corporation under Articles of
Incorporation dated February 1, 1993. The Articles of Incorporation permit the
Company to offer separate series of shares of beneficial interest representing
interests in separate portfolios of securities. The Fund is designed for
customers of financial institutions such as banks, fiduciaries, custodians of
public funds, investment advisers, and broker/dealers 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 $10,000 is required, except for qualified retirement plans which
have a minimum initial investment of $1,000. Subsequent investments must be in
amounts of at least $500.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income consistent with
stability of principal and liquidity. This investment objective cannot be
changed without shareholder approval. While there is no assurance that the
Fund will achieve its investment objective, it endeavors to do so by following
the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing only in U.S. treasury
securities maturing in 13 months or less. The average maturity of the
securities in the Fund'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 Directors without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
The Fund will limit its investments to investments which, if owned directly,
pay interest exempt from state personal income tax. Therefore, dividends paid
by the Fund may be exempt from state personal income tax.
ACCEPTABLE INVESTMENTS. The Fund invests only in U.S. Treasury securities,
which are fully guaranteed as to principal and interest by the United States.
REPURCHASE AGREEMENTS. Certain securities in which the Fund invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, brokers/dealers, and other recognized financial
institutions sell securities to the Fund 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 Fund, the Fund could receive
less than the repurchase price on any sale of such securities. In the event that
such a defaulting seller filed for bankruptcy or became insolvent, disposition
of such securities by the Fund might be delayed pending court action. The Fund
believes that under the regular procedures normally in effect for custody of the
Fund's portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions, such as
broker/dealers, which are deemed by the Fund's adviser to be creditworthy
pursuant to guidelines established by the Directors.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund 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 Fund may pay more/less than the market value of the securities
on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser deems
it appropriate to do so. In addition, the Fund may enter in 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 Fund may realize short-term profits or losses upon the sale of
such commitments.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through reverse repurchase
agreements (arrangements in which the Fund sells a money market instrument for
a percentage of its cash value with an agreement to buy it back on a set date)
or pledge securities except, under certain circumstances, the Fund may borrow
up to one-third of the value of its total assets and pledge up to 10% of the
value of those assets to secure such borrowings.
The above investment limitation cannot be changed without shareholder approval.
The following limitation, however, may be changed by the Directors without
shareholder approval. Shareholders will be notified before any material change
in this limitation becomes effective.
The Fund 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 Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in this
prospectus and its Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940, as amended. In particular, the Fund
will comply with the various requirements of Rule 2a-7, which regulates money
market mutual funds. The Fund will determine the effective maturity of its
investments according to Rule 2a-7. The Fund may change these operational
policies to reflect changes in the laws and regulations without the approval of
its shareholders.
CASH TRUST SERIES, INC., INFORMATION
- -------------------------------------------------------------------------------
MANAGEMENT OF CASH TRUST SERIES, INC.
BOARD OF DIRECTORS. The Company is managed by a Board of Directors. The
Directors are responsible for managing the Fund's business affairs and for
exercising all the Company's powers except those reserved for the shareholders.
The Executive Committee of the Board of Directors handles the Board's
responsibilities between meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Advisers, the Fund's investment adviser, subject to direction by the Directors.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee
equal to .50 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund 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 Fund, but reserves the right to terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. The Fund's investment adviser is Federated Advisers.
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.
Federated Advisers 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
Fund. It is a Pennsylvania corporation organized on November 14, 1969, and is
the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
the Fund may pay to the distributor an amount, computed at an annual rate of .35
of 1% of the average daily net asset value of the Fund to finance any activity
which is principally intended to result in the sale of shares subject to the
Distribution Plan. The distributor may select Financial Institutions such as
banks, fiduciaries, custodians for public funds, investment advisers, and
broker/dealers to provide sales support services as agents for their clients or
customers. In addition, the Fund has adopted a Shareholder Services Plan (the
"Services Plan") under which it will pay Financial Institutions an amount not
exceeding .25 of 1% of the average daily net asset value of the Fund to provide
administrative support services to their customers who own shares of the Fund.
From time to time and for such periods as deemed appropriate, the amounts stated
above may be reduced voluntarily. Activities and services under these
arrangements may include, but are not limited to, providing advertising and
marketing materials to prospective shareholders, providing personal services to
shareholders, and maintaining shareholder accounts.
Financial Institutions will receive fees based upon shares owned by their
clients or customers. The schedules of such fees and the basis upon which such
fees will be paid will be determined from time to time by the Fund or the
distributor, as appropriate.
The Distribution Plan is a compensation-type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund
does not pay for unreimbursed expenses of the distributor, including amounts
expended by the distributor in excess of amounts received by it from the Fund,
interest, carrying or other financing charges in connection with excess
amounts expended, or the distributor's overhead expenses. However, the
distributor may be able to recover such amounts or may earn a profit from
future payments made by the Fund under the Distribution Plan.
ADMINISTRATION OF THE COMPANY
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 Fund. Federated
Administrative Services provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
----------- -----------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
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, Boston, MA is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, PA is transfer agent for the shares of, and dividend disbursing
agent for, the Fund.
LEGAL COUNSEL. Legal counsel is provided by Dickstein, Shapiro & Morin, L.L.P.,
Washington, D.C. and Houston, Houston and Donnelly, Pittsburgh, PA.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Deloitte &
Touche LLP, Pittsburgh, PA.
NET ASSET VALUE
- -------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of its shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net
asset value per share is determined by subtracting total liabilities from
total assets and dividing the remainder by the number of shares outstanding.
The Fund 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 expect on: (i) days on which there are
not sufficient changes in the value of the Fund's portfolio securities that
its net asset value might be materially affected; (ii) days during which no
shares are tendered for redemption and no orders to purchase shares are
received; or (iii) the following holidays: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
INVESTING IN THE FUND
- -------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold at their net asset value, 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 as described below.
Accounts may be opened through a Financial Institution (such as a bank or
broker/dealer) or by completing, signing, and returning the new account form
available from the Fund. In connection with any sale, Federated Securities
Corp. may from time to time offer certain items of nominal value to any
shareholder or investor. The Fund reserves the right to reject any purchase
request.
THROUGH A FINANCIAL INSTITUTION. Investors may call their Financial Institutions
to place an order. Orders through a Financial Institution are considered
received when the Fund receives payment by wire or converts payment by check
from the Financial Institution into federal funds. It is the Financial
Institution's responsibility to transmit orders promptly. Financial Institutions
may charge additional fees for their services.
BY WIRE. To purchase by wire, call the Fund before 3:00 p.m. (Eastern time) to
place an order. All information needed will be taken over the telephone, and the
order is considered received immediately. Payment by federal funds must be
received before 3 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: Treasury Cash Series; Fund Number (this
number can be found on the account statement or by contacting the Fund); 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 Treasury Cash Series
to: Treasury Cash Series, 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.
SYSTEMATIC INVESTMENT PROGRAM. Under this program, funds in a minimum of $500
are automatically withdrawn periodically from the shareholder's checking account
and invested in Fund shares.
Shareholders should contact their Financial Institution and/or the Fund to
participate in this program.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment is $10,000. Minimum subsequent investments must
be $500. For investments by retirement plans these amounts are $1,000 and $500
respectively. Minimum investments will be calculated by combining all accounts
maintained with the Fund. The Fund may from time to time waive the minimum
investment requirements.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless
requested by contacting the Fund 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 Fund unless cash
payments are requested by writing to the Fund. 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 Fund 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 Fund will distribute in cash or additional shares any realized
net long-term capital gains at least once every 12 months.
RETIREMENT PLANS. Shares of the Fund can be purchased as an investment for
retirement plans or IRA accounts. For further details contact the Fund or
Federated Securities Corporation and consult a tax adviser.
REDEEMING SHARES
- --------------------------------------------------------------------------------
Shares are redeemed at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Redemption requests must be received in
proper form and can be made as described below.
THROUGH A FINANCIAL INSTITUTION
Shares may be redeemed by calling the shareholder's Financial Institution.
Shares will be redeemed at the net asset value next determined after Federated
Services Company receives the redemption request from the Financial Institution.
The Financial Institution is responsible for promptly submitting redemption
requests and providing proper written redemption instructions. The Financial
Institution may charge customary fees and commissions for this service.
An authorization form permitting redemption requests by telephone must first
be completed. Authorization forms and information on this service are
available from Federated Securities Corp. Telephone redemption instructions
may be recorded. If reasonable procedures are not followed by the Fund, it may
be liable for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If this occurs, another
method of redemption, such as "By Mail", should be considered.
RECEIVING PAYMENT. Pursuant to instructions from the Financial Institution,
redemptions will be made by check or by wire.
BY WIRE. Proceeds for redemption requests received before 12:00 noon, (Eastern
time) will be wired the same day but will not be entitled to that day's
dividend. Redemption requests received after 12:00 noon, (Eastern time) will
receive that day's dividends and will be wired the following business day.
BY CHECK. 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
redemption request. Dividends are paid up to and including the day that a
redemption request is processed.
BY MAIL
Shares may be redeemed by sending a written request to: Treasury Cash Series,
P.O. Box 8604, Boston, MA 02266-8604. The written request should state:
Treasury Cash Series; 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 Fund 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 Fund, or a
redemption payable other than to the shareholder of record must have their
signatures guaranteed by:
. a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund which is administered by the Federal Deposit Insurance
Corporation ("FDIC");
. a member firm of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges;
. a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund, which is administered by the
FDIC; or
. any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and the transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of the
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request. Dividends are paid up to and including the day that a redemption
request is processed.
BY WRITING A CHECK. At the shareholder's request, State Street Bank will
establish a checking account for redeeming shares. For further information,
contact the Fund.
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 Fund. 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 to redeem shares. Cancelled checks are sent to the
shareholder each month.
BY VISA CARD. At the shareholder's request, State Street Bank will establish a
VISA account. This account allows a shareholder to redeem shares by using a VISA
card. A fee, determined by State Street Bank, will be charged to the account for
this service. For further information, contact the Fund.
BY A SYSTEMATIC WITHDRAWAL PROGRAM
If a shareholder's account has a value of at least $10,000, a systematic
withdrawal program may be established whereby automatic redemptions are made
from the account and transferred electronically to any commercial bank, savings
bank, or credit union that is an ACH member. Shareholders may apply for
participation in this program through their Financial Institution.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account, except accounts maintained by retirement plans,
and pay the proceeds to the shareholder if the account balance falls below a
required minimum value of $10,000 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 Company gives the shareholder one vote in Director elections
and other matters submitted to shareholders for vote. All shares of all classes
of each portfolio in the Company have equal voting rights, except that in
matters affecting only a particular portfolio or class, only shares of that
portfolio or class are entitled to vote. As a Maryland corporation, the Company
is not required to hold annual shareholder meetings. Shareholder approval will
be sought only for certain changes in the Company's or the Fund's operation and
for the election of Directors under certain circumstances.
Directors may be removed by the Directors or by shareholders at a special
meeting. A special meeting of the shareholders for this purpose shall be called
by the Directors upon the written request of shareholders owning at least 10%
of the outstanding shares of the Company.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and
to receive the special tax treatment afforded to such companies. The Fund will
be treated as a single, separate entity for federal income tax purposes so that
income (including capital gains) and losses realized by the Company's other
portfolios will not be combined for tax purposes with those realized by the
Fund.
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.
In the opinion of Houston, Houston, & Donnelly, counsel to the Fund:
. the Fund is subject to Pennsylvania corporate franchise tax; and
. Fund shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.
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 Fund 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 Fund after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed
as a percentage.
From time to time, the Fund may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
ADDRESSES
- --------------------------------------------------------------------------------
Cash Trust Series, Inc. Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- --------------------------------------------------------------------------------
Distributor
Federated Securities Corporation Federated Investors Tower
Pittsburgh, PA 15222
- --------------------------------------------------------------------------------
Investment Adviser
Federated Advisers Federated Investors Tower
Pittsburgh, PA 15222
- --------------------------------------------------------------------------------
Custodian
State Street Bank and Trust 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
Dickstein, Shapiro & Morin, L.L.P. 2101 L Street, N.W.
Washington, D.C. 20037
- --------------------------------------------------------------------------------
Legal Counsel
Houston, Houston and Donnelly 2510 Centre City Tower
Pittsburgh, PA 15222
- --------------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche LLP One PPG Place Pittsburgh, PA
15222
- --------------------------------------------------------------------------------
TREASURY CASH SERIES
PROSPECTUS
A Diversified Portfolio of
Cash Trust Series, Inc. an Open-End
Management Investment Company
September 30, 1994
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
147551402
0010801A (9/94)
TREASURY CASH SERIES
A PORTFOLIO OF CASH TRUST SERIES, INC.
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus of
Treasury Cash Series (the "Fund") dated September 30, 1994. This Statement is
not a prospectus. To receive a copy of a prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated September 30, 1994
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- --------------------------------------
INVESTMENT POLICIES 1
- --------------------------------------
When-Issued and Delayed Delivery
Transactions 1
Reverse Repurchase Agreements 1
INVESTMENT LIMITATIONS 1
- --------------------------------------
Selling Short and Buying on Margin 1
Issuing Senior Securities and
Borrowing Money 1
Pledging Assets 1
Lending Cash or Securities 1
Investing in Restricted Securities 2
Investing in Commodities 2
Investing in Real Estate 2
Underwriting 2
Concentration of Investments 2
Investing in Illiquid Securities 2
Investing in Securities of Other
Investment Companies 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
- --------------------------------------
CASH TRUST SERIES, INC. MANAGEMENT 3
- --------------------------------------
THE FUNDS 5
- --------------------------------------
Share Ownership 6
Fund Ownership 6
Director Liability 6
INVESTMENT ADVISORY SERVICES 6
- --------------------------------------
Investment Adviser 6
Advisory Fees 6
FUND ADMINISTRATION 7
- --------------------------------------
DISTRIBUTION AND SHAREHOLDER SERVICES
PLANS 7
- --------------------------------------
DETERMINING NET ASSET VALUE 7
- --------------------------------------
Redemption in Kind 8
The Fund's Tax Status 8
PERFORMANCE INFORMATION 8
- --------------------------------------
Yield 8
Effective Yield 8
Total Return 8
Performance Comparisons 8
Financial Statements 9
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund is a portfolio of Cash Trust Series, Inc. (the "Company"). The Fund
was established as a portfolio of Cash Trust Series, a Massachusetts business
trust, on May 16, 1989, and on June 15, 1993, reorganized as a portfolio of a
corporation organized under the laws of the State of Maryland. It is qualified
to do business as a foreign corporation in Pennsylvania.
INVESTMENT POLICIES
- --------------------------------------------------------------------------------
Unless indicated otherwise, the policies described below may be changed by the
Directors 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 Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the Fund's
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund 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.
REVERSE REPURCHASE AGREEMENTS
The Company may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase agreement,
the Company 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 Company 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 Company 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 Company, in a dollar amount
sufficient to make payment for the obligations to be purchased, are: segregated
on the Company'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 Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as are necessary for clearance of
transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow money
directly or through reverse repurchase agreements in amounts up to one-third of
the value of its total assets, including the amounts borrowed.
The Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary, or emergency
measure or to facilitate management of the portfolio by enabling the Fund to
meet redemption requests when the liquidation of portfolio securities is deemed
to be inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings in excess of 5% of the value of its total assets
are outstanding. During the period any reverse repurchase agreements are
outstanding, the Fund will restrict the purchase of the portfolio securities to
money market instruments maturing on or before the expiration date of the
reverse repurchase agreements, but only to the extent necessary to assure
completion of the reverse repurchase agreements.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except as
necessary to secure permitted borrowings. In these 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 borrowing.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except that it may purchase or hold
portfolio securities permitted by its investment objective, policies,
limitations, or Articles of Incorporation.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest in securities subject to restrictions on resale under
federal securities law.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited partnership
interests, although it may invest in securities of issuers whose business
involves the purchase or sale of real estate or in securities which are secured
by real estate or interests in real estate.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection with
the sale of securities in accordance with its investment objective, policies,
and limitations.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets in any
one industry, except that the Fund may invest 25% or more of the value of its
total assets in cash, cash items, or securities issued or guaranteed by the
government of the United States or its agencies, or instrumentalities and
repurchase agreement collateralized by such U.S. government securities.
The above limitations cannot be changed without shareholder approval. The
following investment limitations, however, may be changed by the Directors
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies, except as
part of a merger, consolidation, or other acquisition.
INVESTING FOR CONTROL
The Fund 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 Fund 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 Fund will not invest in puts, calls, straddles, spreads, or any combination
of them.
INVESTING IN MINERALS
The Fund 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.
For purposes of the above limitations, the Fund considers instruments issued by
a U.S. branch of a domestic bank or savings and loan having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of investment to be
"cash items". Except with respect to borrowing money, if a percentage
limitation is adhered to at the time of investment, a later increase or
decrease in percentage resulting from any change in value or net assets will
not result in a violation of such limitation.
The Fund did not borrow money or pledge securities in excess of 5% of the value
of its net assets during the last fiscal year and has no present intent to do
so during the coming fiscal year.
BROKERAGE TRANSACTIONS
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When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better
price and execution of the order can be obtained elsewhere. The adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
guidelines established by the Board of Directors. The adviser may select
brokers and dealers who offer brokerage and research services. These services
may be furnished directly to the Fund or to the adviser and may include: advice
as to the advisability of investing in securities; security analysis and
reports; economic studies; industry studies; receipt of quotations for
portfolio evaluations; and similar services. Research services provided by
brokers and dealers may be used by the adviser or its affiliates in advising
the Company and other accounts. To the extent that receipt of these services
may supplant services for which the adviser or its affiliates might otherwise
have paid, it would tend to reduce their expenses. The adviser and its
affiliates exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are reasonable
in relationship to the value of the brokerage and research services provided.
Although investment decisions for the Fund are made independently from those of
the other accounts managed by the adviser, investments of the type the Fund may
make may also be made by those other accounts. When the Fund 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 Fund or the size of the position obtained or disposed of by the Fund. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
CASH TRUST SERIES, INC. MANAGEMENT
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Officers and Directors are listed with their addresses, principal occupations,
and present positions.
- --------------------------------------------------------------------------------
John F. Donahue+*
Federated Investors Tower
Pittsburgh, PA
Chairman and Director
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director, ^tna 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 and Director of the Corporation.
- --------------------------------------------------------------------------------
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Director
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.
- --------------------------------------------------------------------------------
William J. Copeland
One PNC Plaza--23rd Floor
Pittsburgh, PA
Director
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.
- --------------------------------------------------------------------------------
J. Christopher Donahue*
Federated Investors Tower
Pittsburgh, PA
Vice President and Director
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 Director of the Corporation.
- --------------------------------------------------------------------------------
James E. Dowd
571 Hayward Mill Road
Concord, MA
Director
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
Director
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
Director
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
Director
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.
- --------------------------------------------------------------------------------
Gregor F. Meyer
5916 Penn Mall
Pittsburgh, PA
Director
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
Director
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
Director
Public relations/marketing consultant; Director, Trustee, or Managing General
Partner of the Funds.
- --------------------------------------------------------------------------------
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
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/Director is deemed to be an "interested person" of the
Trust/Fund as defined in the Investment Company Act of 1940, as amended.
+ Member of the Trust/Fund's Executive Committee. The Executive Committee of
the Board of Trustee/Director handles the responsibilities of the Board of
Trustees/Directors between meetings of the Board
THE FUNDS
- --------------------------------------------------------------------------------
As referred to in the list of Directors 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 U.S. Government Money Market Trust; Liberty Term
Trust, Inc.--1999; Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series
Trust; Mark Twain Funds; The Medalist Funds: Money Market Management, Inc.;
Money Market Obligations Trust; Money Market Trust; Municipal Securities Income
Trust; New York Municipal Cash Trust; 111 Corcoran Funds; Peachtree Funds; The
Planters Funds; Portage Funds; RIMCO Monument Funds; The Shawmut Funds;
Short-Term Municipal Trust; Star Funds; The Starburst Funds; The Starburst Funds
II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; Trademark Funds; Trust for Financial Institutions; Trust For
Government Cash Reserves; Trust for Short-Term U.S. Government Securities; Trust
for U.S. Treasury Obligations; World Investment Series, Inc.
SHARE OWNERSHIP
Officers and Directors own less than 1% of the Company's outstanding shares.
FUND OWNERSHIP
As of September 6, 1994, the following companies held 5% or more of the
outstanding shares of Treasury Cash Series in nominee name accounts for the
benefit of their customers: BHC Securities, Inc., Philadelphia, Pennsylvania,
owned approximately 44,895,403 shares (10.48%); Corptrust & Co., Chicago,
Illinois, owned approximately 42,673,040 shares (9.97%).
DIRECTOR LIABILITY
The Articles of Incorporation provide that the Directors will not be liable for
errors of judgment or mistakes of fact or law. However, they are not protected
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
The Treasury Cash Series's investment adviser is Federated Advisers. 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 Company, the Fund, or any shareholder of
the Fund 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 Company.
ADVISORY FEES
For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus.
For the fiscal years ended May 31, 1994, 1993, and 1992 the adviser earned
$2,413,838, $3,022,161, and $3,746,124 respectively, of which $475,263,
$242,785, and $299,941, 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 Fund'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
Fund for its expenses over the limitation.
If the Fund'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.
FUND ADMINISTRATION
- --------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund 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 Fund's
administrator. (For purposes of this Statement of Additional Information,
Federated Administrative Services and Federated Administrative Services, Inc.,
may hereinafter collectively be referred to as, the "Administrators"). For the
fiscal year ended May 31, 1994, the Administrators collectively earned
$441,499. For the fiscal years ended May 31, 1993, and 1992, Federated
Administrative Services, Inc., earned $469,245, and $486,100, respectively. Dr.
Henry J. Gailliot, an officer of Federated Advisers, the adviser to the Fund,
holds approximately 20% of the outstanding common stock and serves as director
of Commercial Data Services, Inc., a company which provides computer processing
services to Federated Administrative Services.
DISTRIBUTION AND SHAREHOLDER SERVICES PLAN
- --------------------------------------------------------------------------------
These arrangements permit the payment of fees to Financial Institutions to
stimulate distribution activities and services to shareholders provided by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to,
marketing efforts; 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 Distribution Plan, the Board of Directors expects that the Fund
will be able to achieve a more predictable flow of cash for investment purposes
and to meet redemptions. This will facilitate more efficient portfolio
management and assist the Fund in pursuing its investment objectives. By
identifying potential investors whose needs are served by the Fund's objectives,
and properly servicing these accounts, it may be possible to curb sharp
fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may include:
(1) providing personal services to shareholders; (2) investing shareholder
assets with a minimum of delay and administrative detail; and (3) enhancing
shareholder recordkeeping systems; and (4) responding promptly to shareholders'
requests and inquiries concerning their accounts.
For the fiscal period ended May 31, 1994, payments in the amount of $1,399,065
were made pursuant to the Distribution Plan. Payments in the amount of $289,832
were made pursuant to the Shareholder Services Plan.
CUSTODIAN AND PORTFOLIO RECORDKEEPER. State Street Bank and Trust, Boston, MA is
custodian for the securities and cash of the Fund. It also provides certain
accounting and recordkeeping services with respect to the Fund'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 Directors have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
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
Fund computed by dividing the annualized daily income on the Fund's portfolio
by the net asset value computed as above may tend to be higher than a similar
computation made by using a method of valuation based upon market prices and
estimates. In periods of rising interest rates, the opposite may be true.
The Fund'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 Directors must establish procedures
reasonably designed to stabilize the net asset value per share, as computed for
purposes of distribution and redemption, at $1.00 per share, taking into account
current market conditions and the Fund's investment objective. 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 Directors will decide what, if any, steps should be taken if there is
a difference of more than 0.5 of 1% between the two values. The Directors will
take any steps they consider appropriate (such as redemption in kind or
shortening the average portfolio maturity) to minimize any material dilution or
other unfair results arising from differences between the two methods of
determining net asset value.
REDEMPTION IN KIND
The Fund is obligated to redeem shares solely in cash up to $250,000 or 1% of
the Fund's net asset value, whichever is less, for any one shareholder within a
90-day period. Any redemption beyond this amount will also be in cash unless
the Directors determine that further payments should be in kind. In such cases,
the Fund will pay all or a portion of the remainder of the redemption in
portfolio instruments valued in the same way as the Fund determines net asset
value. The portfolio instruments will be selected in a manner that the
Directors deem fair and equitable. Redemption in kind is not as liquid as a
cash redemption. If redemption is made in kind, shareholders who sell these
securities could receive less than the redemption value and could incur certain
transaction costs.
THE FUND'S TAX STATUS
To qualify for the special tax treatment afforded to regulated investment
companies, the Fund must, among other requirements: derive at least 90% of its
gross income from dividends, interest, and gains from the sale of securities;
derive less than 30% of its gross income from the sale of securities held less
than three months; invest in securities within certain statutory limits; and
distribute to its shareholders at least 90% of its net income earned during the
year.
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 Fund, the performance will be reduced for those shareholders
paying those fees.
YIELD
The Fund 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 Fund's yield for the seven-day period ended May 31, 1994, was 3.14%.
EFFECTIVE YIELD
The Fund 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 Fund's effective yield for the seven-day period ended May 31, 1994, was
3.19%.
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 Fund's average annual total returns for the one-year period ended May 31,
1994, and for the period from February 7, 1990 (start of performance) through
May 31, 1994 were 2.37%, and 4.24%, respectively.
PERFORMANCE COMPARISONS
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:
. 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.
FINANCIAL STATEMENTS
The financial statements for Treasury Cash Series for the fiscal year ended May
31, 1994 are incorporated herein by reference to the Annual Report to
Shareholders of the Treasury Cash Series dated May 31, 1994.
0010801B (9/94)
