CASH TRUST SERIES, INC.
PRIME CASH SERIES
TREASURY CASH SERIES
GOVERNMENT CASH SERIES
MUNICIPAL CASH SERIES
COMBINED PROSPECTUS
This combined prospectus offers shares in Prime Cash Series (the "Prime Fund"),
Treasury Cash Series (the "Treasury Fund"), Government Cash Series (the
"Government Fund"), and Municipal Cash Series (the "Municipal Fund"). Each of
these Funds is a separate money-market portfolio of Cash Trust Series, Inc. (the
"Company"). Except for the Municipal Fund, each Fund is diversified and seeks
current income consistent with stability of principal and liquidity. The
Municipal Fund is non-diversified and seeks current income exempt from federal
regular income tax consistent with stability of principal.
THE SHARES OFFERED BY THIS COMBINED 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. EACH FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT A FUND WILL BE ABLE TO DO SO.
This combined prospectus contains the information you should read and know
before you invest in any of the Funds. Keep this prospectus for future
reference.
Each Fund has also filed a Statement of Additional Information dated September
30, 1994, with the Securities and Exchange Commission. The information contained
in each Statement of Additional Information is incorporated by reference into
this prospectus. You may request a copy of a Statement of Additional Information
free of charge by calling 1-800-235-4669. To obtain other information, or to
make inquiries about a 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 December 31, 1994
TABLE OF CONTENTS
Summary of Fund Expenses.......................................................1
Financial Highlights...........................................................2
General Information............................................................4
Investment Information.........................................................4
Investment Objective.........................................................4
Investment Policies..........................................................4
Acceptable Investments.......................................................5
More About the Municipal Fund................................................8
Investment Limitations......................................................10
Regulatory Compliance.......................................................10
Trust Information.............................................................11
Management of Cash Trust
Series, Inc..............................................................11
Distribution of Shares......................................................11
Administration of the Company...............................................12
Net Asset Value...............................................................13
How to Purchase Shares........................................................13
Purchasing Shares Through
a Financial Institution..................................................13
Purchasing Shares by Wire...................................................13
Purchasing Shares by Check..................................................14
Special Purchase Features...................................................14
Systematic Investment Program...............................................14
How to Redeem Shares..........................................................14
Redeeming Through a
Financial Institution....................................................14
Redeeming Shares by Telephone...............................................14
Redeeming Shares by Mail....................................................15
Special Redemption Features.................................................15
Check Writing...............................................................15
Debit Card..................................................................15
Systematic Withdrawal Program...............................................15
Account and Share Information.................................................16
Dividends...................................................................16
Capital Gains...............................................................16
Certificates and Confirmation...............................................16
Accounts With Low Balances..................................................16
Voting Rights...............................................................16
Tax Information...............................................................17
Federal Income Tax..........................................................17
Performance Information.......................................................18
Addresses.....................................................................19
SUMMARY OF FUND EXPENSES
CASH TRUST SERIES, INC.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)...................................................................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)...................................................................... None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable).................................................... None
Exchange Fee............................................................................................... None
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
TREASURY
GOVERNMENT MUNICIPAL PRIME CASH
CASH SERIES CASH SERIES CASH SERIES SERIES
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fee
(after waiver) (1)........................... 0.41% 0.44% 0.32%
12b-1 Fee (2).................................. 0.10% 0.10% 0.10%
Total Other Expenses........................... 0.48% 0.45% 0.57%
Shareholder Services Fee.................. 0.25% 0.25% 0.25% 0.25%
Total Fund Operating Expenses (3).... 0.99% 0.99% 0.99%
<CAPTION>
<S> <C>
Management Fee
(after waiver) (1)........................... 0.40%
12b-1 Fee (2).................................. 0.10%
Total Other Expenses........................... 0.49%
Shareholder Services Fee..................
Total Fund Operating Expenses (3).... 0.99%
</TABLE>
(1) The management fees have been reduced to reflect the voluntary waivers of a
portion of the management fees. The adviser can terminate these voluntary
waivers at any time at its sole discretion. The maximum management fees are
0.50%
(2) The maximum 12b-1 fees are 0.35%.
(3) The Total Fund Operating Expenses would have been 1.08%, 1.05%, 1.17%, and
1.09% absent the voluntary waivers of a portion of the management fees for
Government Cash Series, Municipal Cash Series, Prime Cash Series, and
Treasury Cash Series Funds, respectively.
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.
<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 on any Fund in
the Cash Trust Series, Inc., assuming (1) a 5% annual return and (2)
redemption 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.
FINANCIAL HIGHLIGHTS
CASH TRUST SERIES, INC.
- --------------------------------------------------------------------------------
(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 free of
charge from the Fund.
<TABLE>
<CAPTION>
GOVERNMENT CASH SERIES
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 OPERATIONS
- ---------------------------------------------------------------
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>
<TABLE>
<CAPTION>
MUNICIPAL CASH SERIES
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 OPERATIONS
- ---------------------------------------------------------------
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 23, 1989 (date of initial
public investment) to May 31, 1990.
** 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.
FINANCIAL HIGHLIGHTS
CASH TRUST SERIES, INC.
- --------------------------------------------------------------------------------
(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 free of
charge from the Fund.
<TABLE>
<CAPTION>
PRIME CASH SERIES
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 OPERATIONS
- ---------------------------------------------------------------
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>
<TABLE>
<CAPTION>
TREASURY CASH SERIES
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 OPERATIONS
- ---------------------------------------------------------------
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 August 18, 1989 (date of initial
public investment) to May 31, 1990.
** 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.
GENERAL INFORMATION
The Company is an open-end management investment company which 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. Each 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 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.
(The Municipal Fund may not be a suitable investment for retirement plans
because it invests primarily in municipal securities.) Subsequent investments
must be in amounts of at least $500.
Each 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
Except for the Municipal Fund, the investment objective of each Fund is current
income consistent with stability of principal and liquidity. The investment
objective of the Municipal Fund is current income exempt from federal regular
income tax consistent with stability of principal. An investment objective
cannot be changed without shareholder approval. While there is no assurance that
a Fund will achieve its investment objective, each endeavors to do so by
following the investment policies described in this prospectus.
INVESTMENT POLICIES
Each Fund pursues its investment objective by investing only in money market
securities maturing in 13 months or less. All securities must be denominated and
payable in U.S. dollars. The average maturity of the securities in each Fund's
portfolio, computed on a dollar-weighted basis, will be 90 days or less. The
Municipal Fund has a fundamental policy that at least 80% of its 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
alternative minimum tax for corporations.) Unless indicated as fundamental,
investment policies may be changed by the Company's Board of Directors (the
"Directors") without shareholder approval, but shareholders would be notified
before any material change was made.
The Treasury Fund will limit its investments to those which, if owned directly,
pay interest exempt from state personal income tax. Therefore, dividends paid by
the Treasury Fund may be exempt from state personal income tax.
ACCEPTABLE INVESTMENTS
The Prime 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; and other money market instruments.
The Treasury Fund invests only in U.S. Treasury bills, notes, and bonds, which
are fully guaranteed as to principal and interest by the United States.
The Government Fund invests only in U.S. government securities. These
instruments are either issued or guaranteed by the U.S. government, its agencies
or instrumentalities, and include: U.S. Treasury bills, notes, and bonds; and
notes, bonds, and discount notes of U.S. government agencies or
instrumentalities, such as the Farmers Home Administration, Federal Farm Credit
Banks, Farm Credit System, Federal Home Loan Bank, National Bank for
Cooperatives, Federal Home Loan Mortgage Corporation, Federal National Mortgage
Association, Government National Mortgage Association, and the Student Loan
Marketing Association. Some government agency securities are backed by the full
faith and credit of the U.S. Treasury, while others are supported by: the
agency's right to borrow an amount limited to a specific line of credit from the
U.S. Treasury; the discretionary authority of the U.S. government to purchase
certain of the agency's obligations; or the agency's credit.
The Municipal Fund invests primarily in municipal securities 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. These securities must be rated
in one of the two highest short-term rating categories by one or more NRSRO's or
be of comparable quality to securities having such ratings. Examples of
municipal securities include, but are not limited to: tax and revenue
anticipation notes issued to finance working capital needs in anticipation of
receiving taxes or other revenues; bond anticipation notes 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; and 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 Prime Fund or the Municipal 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 Prime Fund and the Municipal Fund to demand
the repurchase of the security on not more than seven days prior notice. Other
notes only permit these Funds to tender the security at the time of each
interest rate adjustment or at other fixed intervals. See "Demand Features." The
Prime Fund and the Municipal Fund treat 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 Prime 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 Prime Fund will treat securities credit enhanced with a
bank's letter of credit as Bank Instruments.
ECDs, ETDs, Yankee CDs, Canadian Commercial Paper and Europaper are subject to
different risks than domestic obligations of domestic banks or corporations.
Examples of these risks include international economic and political
developments, foreign governmental restrictions that may adversely affect the
payment of principal or interest, foreign withholding or other taxes on interest
income, difficulties in obtaining or enforcing a judgment against the issuing
entity, and the possible impact of interruptions in the flow of international
currency transactions. Risks may also exist for ECDs, ETDs, and Yankee CDs
because the banks issuing these instruments, or their domestic or foreign
branches, are not necessarily subject to the same regulatory requirements that
apply to domestic banks, such as reserve requirements, loan limitations,
examinations, accounting, auditing, recordkeeping, and the public availability
of information. These factors will be carefully considered by the Prime Fund's
adviser in selecting investments for the Fund.
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 Prime 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 Prime 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, A-2, SP-1+, SP-1, or SP-2 by Standard & Poor's Ratings Group ("S&P"),
Prime-1, Prime-2, MIG-1, or MIG-2 by Moody's Investors Service, Inc.
("Moody's"), or F-1 (+ or -) , F-2 (+ or -), FIN-1+, FIN-1, or Fin-2 by Fitch
Investors Service, Inc. ("Fitch") are all considered rated in one of the two
highest short-term rating categories. The Prime 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 Prime and Municipal Funds 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 Funds invest may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell securities to
the Funds 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 a Fund, the Fund could receive less than the repurchase price on
any sale of such securities.
CREDIT ENHANCEMENT
Certain of the Prime Fund's and the Municipal Fund's acceptable investments may
be credit enhanced by a guaranty, letter of credit, or insurance. The Funds
typically evaluate 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
Funds 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 Funds 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 Prime Fund and the Municipal 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 Funds. 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 Funds use these arrangements to provide the Funds 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
Each of the Funds may purchase securities on a when-issued or delayed delivery
basis. These transactions are arrangements in which a 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, a Fund may pay more or
less than the market value of the securities on the settlement date. A Fund may
dispose of a commitment prior to settlement if the adviser deems it appropriate
to do so. In addition, a Fund may enter into transactions to sell its purchase
commitments to third parties at current market values and simultaneously acquire
other commitments to purchase similar securities at later dates. A Fund may
realize short-term profits or losses upon the sale of such commitments.
LENDING OF PORTFOLIO SECURITIES
As a matter of fundamental policy, in order to generate additional income, the
Prime Fund and the Government Fund may lend their portfolio securities on a
short-term or long-term basis, or both, to broker/dealers, banks, or other
institutional borrowers of securities. The Funds 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 Funds'
Directors and will receive collateral at all times equal to at least 100% of the
value of the securities loaned.
There is the risk that when lending portfolio securities, the securities may not
be available to a Fund on a timely basis and the Fund may, therefore, lose the
opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.
CONCENTRATION OF INVESTMENTS
As a matter of fundamental policy, the Prime Fund may invest 25% or more of its
total assets in commercial paper issued by finance companies. The finance
companies in which the Prime 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 Prime 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.
MORE ABOUT THE MUNICIPAL FUND
PARTICIPATION INTERESTS
The Municipal 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 Municipal 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.
TEMPORARY INVESTMENTS
From time to time, when the investment adviser determines that market conditions
call for a temporary defensive posture, the Municipal 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. 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.
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 Municipal 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 Municipal 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 Municipal 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
Each Fund may borrow money directly or through reverse repurchase agreements
(arrangements in which a Fund sells a security for a percentage of its cash
value with an agreement to buy it back on a set date) in amounts of up to
one-third of the value of its total assets, and may pledge up to 10% of its
total assets to secure such borrowings.
The Prime Fund and the Municipal Fund may invest in restricted securities.
However, neither Fund may invest more than 10% of its total assets in these
securities, except for Section 4(2) commercial paper in the case of the Prime
Fund, and except for restricted securities determined to be liquid under
criteria established by the Directors in the case of the Municipal Fund.
The above investment limitations cannot be changed without shareholder approval.
The following limitation, however, may be changed by the Directors without
shareholder approval. Shareholders would be notified before any material change
was made.
None of the Funds will 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
Each Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in this
prospectus and each 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, each 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 Prime 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. A Fund will
invest more than 5% of its assets in any one issuer only under the circumstances
permitted by Rule 2a-7. Also, each Fund will determine the effective maturity of
its investments, and the Prime and Municipal Funds will determine their ability
to consider a security as having received the requisite short-term ratings by
NRSROs, according to Rule 2a-7. Each Fund may change these operational policies
to reflect changes in the laws and regulations without the approval of its
shareholders.
TRUST 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 each 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 each Fund are made by Federated Advisers, the
investment adviser, subject to direction by the Directors. The adviser
continually conducts investment research and supervision for each 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
each Fund's average daily net assets. The adviser has undertaken to reimburse
each 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 a Fund, but
reserves the right to terminate such waiver or reimbursement at any time at its
sole discretion.
ADVISER'S BACKGROUND
Federated Advisers 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, who is
President and Trustee of Federated Investors.
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 each 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"), each 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, each 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 a Fund or the
distributor, as appropriate.
The Distribution Plan is a compensation-type plan. As such, no Fund makes
payments to the distributor except as described above. Therefore, no Fund pays
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 a 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 Funds. Federated Administrative Services
provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
<C> <S>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of
$750 million
</TABLE>
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 each Fund.
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
Federated Services Company, Pittsburgh, PA is transfer agent for the shares of,
and dividend disbursing agent for, each 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 each Fund are Deloitte & Touche LLP, Pittsburgh,
PA.
NET ASSET VALUE
Each Fund attempts to stabilize the net asset value of its shares at $1.00 by
valuing its 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 Funds cannot
guarantee that their net asset values will always remain at $1.00 per share. The
net asset value is determined at 12:00 noon, 3:00 p.m., and 4:00 p.m. (Eastern
time) Monday through Friday except on: (i) days on which there are not
sufficient changes in the value of a 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.
HOW TO PURCHASE SHARES
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange and the Federal Reserve Wire System are open for business. Shares may
be purchased as described below either through a financial institution (such as
a bank or broker/dealer) or by wire or by check directly to the Funds, with a
minimum initial investment of $10,000 or more and additional investments of as
little as $500. The minimum initial investment for retirement plans is only
$1,000. (Financial institutions may impose different minimum investment
requirements on their customers.)
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 Funds
reserve the right to reject any purchase request. An account must be established
at a financial institution or by completing, signing, and returning the new
account form available from the Funds before shares can be purchased.
PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION
Investors may purchase shares through a financial institution which has a sales
agreement with the distributor. Orders 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.
PURCHASING SHARES BY WIRE
Shares may be purchased by wire by calling the appropriate Fund before 3:00 p.m.
(Eastern time). The order is considered received immediately. Payment by federal
funds must be received before 3:00 p.m. (Eastern time) in order to begin earning
dividends that same day. Federal funds should be wired as follows: State Street
Bank and Trust Company, Boston, MA; Attention; EDGEWIRE; For Credit to: (Fund
Name); (Fund Number) (this number can be found on the account statement or by
contacting the Funds) Group Number or Order Number; Nominee or Institution Name;
and ABA Number 011000028. Shares cannot be purchased by wire on holidays when
wire transfers are restricted.
PURCHASING SHARES BY CHECK
Shares may be purchased by sending a check made payable to the name of the
appropriate Fund to: (Fund Name) P.O. Box 8604, Boston, MA 02266-8604. Orders by
mail are considered received when payment by check is converted into federal
funds (normally the business day after the check is received) and shares begin
earning dividends the next day.
SPECIAL PURCHASE FEATURES
SYSTEMATIC INVESTMENT PROGRAM
A minimum of $500 can be automatically withdrawn periodically from the
shareholder's checking account at an Automated Clearing House ("ACH") member and
invested in Fund shares. Shareholders should contact their financial institution
or the Funds to participate in this program.
HOW TO REDEEM SHARES
Shares are redeemed at their net asset value next determined after a Fund
receives the redemption request. Redemptions will be made on days on which the
Funds compute their net asset values. Redemption requests must be received in
proper form and can be made as described below.
REDEEMING THROUGH A FINANCIAL INSTITUTION
Shares may be redeemed by contacting the shareholder's financial institution.
Shares will be redeemed at the net asset value next determined after Federated
Services Company receives the redemption request. According to the shareholder's
instructions, redemption proceeds can be sent to the financial institution or to
the shareholder by check or by wire. The financial institution is responsible
for promptly submitting redemption requests and providing proper written
redemption instructions. Customary fees and commissions may be charged by the
financial institution for this service.
REDEEMING SHARES BY TELEPHONE
Redemptions in any amount may be made by calling the Funds provided the Funds
have a properly completed authorization form. These forms can be obtained from
Federated Securities Corp. Proceeds from redemption requests received before
12:00 noon (Eastern time) will be wired the same day to the shareholder's
account at a domestic commercial bank which is a member of the Federal Reserve
System, but will not include that day's dividend. Proceeds from redemption
requests received after that time will include that day's dividends but will be
wired the following business day. Under limited circumstances, arrangements may
be made with the distributor for same-day payment of proceeds, without that
day's dividend, for redemption requests received before 2:00 p.m. (Eastern
time). Proceeds from redeemed shares purchased by check or through ACH will not
be wired until that method of payment has cleared.
Telephone instructions will be recorded and if reasonable procedures are not
followed by the Funds, they may be liable for losses due to unauthorized or
fraudulent telephone instructions. In the event of drastic economic or market
changes, a shareholder may experience difficulty in redeeming by telephone. If
this occurs, "Redeeming Shares By Mail" should be considered. If at any time the
Funds shall determine it necessary to terminate or modify the telephone
redemption privilege, shareholders would be promptly notified.
REDEEMING SHARES BY MAIL
Shares may be redeemed in any amount by mailing a written request together with
certificates, if issued, to:
Fund Name
P.O. Box 8604
Boston, MA 02266-8604
The written request should state: the Fund Name; the account name as registered
with the Fund; the account number; and the number of shares to be redeemed or
the dollar amount requested. All owners of the account must sign the request
exactly as the shares are registered. Any share certificates should be sent by
registered or certified mail with the written request. 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.
Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Funds, or a redemption payable other than to
the shareholder of record must have their signatures guaranteed by: a commercial
or savings bank, trust company or savings and loan association whose deposits
are insured by an organization which is administered by the Federal Deposit
Insurance Corporation; a member firm of a domestic stock exchange; or any other
"eligible guarantor institution," as defined in the Securities Exchange Act of
1934. The Funds do not accept signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING
Upon request, a checking account will be established to allow shareholders to
redeem their Fund shares. A fee will be charged for this service. The check
writing service allows the shareholder to receive the daily dividend declared on
the shares to be redeemed until the check is presented to State Street Bank for
payment. However, checks should never be made payable or sent to State Street
Bank or the Funds to redeem shares, and a check may not be written to close an
account. Cancelled checks are sent to the shareholder each month.
DEBIT CARD
Upon request, a debit account will be established. This account allows
shareholders to redeem shares by using a debit card. A fee will be charged to
the account for this service.
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 or the Funds.
ACCOUNT AND SHARE INFORMATION
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are automatically
reinvested on payment dates in additional shares of the Funds unless cash
payments are requested by writing to the Funds.
CAPITAL GAINS
The Funds do 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 Funds will distribute in cash or additional shares any realized
net long-term capital gains at least once every 12 months.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Funds, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Funds 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.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, if an account
balance falls below $10,000 due to shareholder redemptions, the Funds may redeem
all of the remaining shares in that account (except accounts maintained by
retirement plans) and pay the proceeds to the shareholder. Before shares are
redeemed to close an account, the shareholder will be notified in writing and
allowed 30 days to purchase additional shares to meet the minimum requirement.
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 a 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 Funds will pay no federal income tax because they expect to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
Each Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by one
Fund will not be combined for tax purposes with those realized by any other
Fund.
Except for shareholders of the Municipal Fund, shareholders not otherwise exempt
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.
Shareholders of the Municipal Fund 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 Municipal 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.
In the opinion of Houston, Houston & Donnelly, counsel to the Funds, the Funds
are subject to Pennsylvania corporate franchise taxes, but 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 Funds advertise their yield and effective yield, and the
Municipal Fund also advertises its 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
it is adjusted to reflect the taxable yield that would have to be earned to
equal the Municipal Fund's tax exempt yield, assuming a specified 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 a 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 Funds may advertise their performance using certain
financial publications and/or compare their performance to certain indices.
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ADDRESSES
Cash Trust Series, Inc.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222
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
P.O. Box 8604
Boston, MA 02266-8604
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
CASH TRUST SERIES, INC.
PRIME CASH SERIES
TREASURY CASH SERIES
GOVERNMENT CASH SERIES
MUNICIPAL CASH SERIES
COMBINED PROSPECTUS
Portfolios of Cash Trust Series, Inc.
An Open-End Management
Investment Company
December 31, 1994
FEDERATED SECURITIES CORP.
---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
147551105
G00861-01 (12/94)
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