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, 1995, 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, which is in paper form only, or a paper copy of this prospectus, if
you have received it electronically, 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 September 30, 1995
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Summary of Fund Expenses.......................................................1
Financial Highlights...........................................................2
General Information............................................................4
Investment Information.........................................................4
Investment Objective.........................................................4
Investment Policies..........................................................4
More About the Municipal Fund................................................8
Investment Limitations......................................................10
Regulatory Compliance.......................................................10
Cash Trust Series, Inc. Information...........................................11
Management of Cash Trust
Series, Inc..............................................................11
Distribution of Shares......................................................12
Administration of the Company...............................................12
Net Asset Value...............................................................13
How to Purchase Shares........................................................14
Purchasing Shares Through a
Financial Institution....................................................14
Purchasing Shares by Wire...................................................14
Purchasing Shares by Mail...................................................14
Special Purchase Features...................................................14
Systematic Investment Program...............................................14
How to Redeem Shares..........................................................15
Redeeming Through a Financial
Institution..............................................................15
Redeeming Shares by Telephone...............................................15
Redeeming Shares by Mail....................................................15
Special Redemption Features.................................................16
Check Writing...............................................................16
Debit Card..................................................................16
Systematic Withdrawal Program...............................................16
Account and Share Information.................................................17
Dividends...................................................................17
Capital Gains...............................................................17
Certificates and Confirmations..............................................17
Accounts with Low Balances....................................................17
Voting Rights...............................................................17
Tax Information...............................................................18
Federal Income Tax..........................................................18
Performance Information.......................................................19
Addresses.....................................................................20
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES
CASH TRUST SERIES, INC.
<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
purchase price or redemption proceeds, as
applicable).................................................... None
Redemption Fee (as a percentage of amount redeemed, if
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
Management Fee
(after waiver) (1)........................... 0.42%
0.45% 0.30%
<S> <C> <C> <C>
<C> <C> <C> <C>
12b-1 Fee (2).................................. 0.10%
0.10% 0.10%
Total Other Expenses........................... 0.47%
0.44% 0.59%
Shareholder Services Fee.................. 0.25% 0.25%
0.25% 0.25%
Total Fund Operating Expenses (3).... 0.99%
0.99% 0.99%
<CAPTION>
(As a
Management Fee
(after waiver) (1)........................... 0.42%
<S> <C>
12b-1 Fee (2).................................. 0.10%
Total Other Expenses........................... 0.47%
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 1.07%, 1.04%, 1.19%, and
1.07% 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 14, 1995, on the Fund's financial
statements for the year ended May 31, 1995, 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>
PRIME CASH SERIES
<S> <C> <C> <C>
<C> <C> <C>
YEAR ENDED MAY 31,
<CAPTION>
1995 1994
1993 1992 1991 1990(A)
<S> <C> <C> <C>
<C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $
1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------
Net investment income 0.05 0.02
0.03 0.04 0.07 0.06
- ---------------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------------
Distributions from net investment income (0.05) (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 $ 1.00
- --------------------------------------------------- --------- --------- -----
- ---- --------- --------- -----------
TOTAL RETURN (B) 4.60% 2.48%
2.61% 4.37% 6.99% 6.56%
- ---------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------
Expenses 0.99% 0.99%
0.99% 0.98% 0.94% 0.73%(c)
- ---------------------------------------------------
Net investment income 4.57% 2.45%
2.58% 4.21% 6.50% 7.82%(c)
- ---------------------------------------------------
Expense waiver/reimbursement (d) 0.20% 0.18%
0.15% 0.22% 0.44% 0.46%(c)
- ---------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------
Net assets, end of period (000 omitted) $1,027,083 $791,147
$796,832 $750,016 $562,465 $189,254
- ---------------------------------------------------
</TABLE>
(a) Reflects operations for the period from August 18, 1989 (date of initial
public investment) to May 31, 1990.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
<TABLE>
<CAPTION>
TREASURY CASH SERIES
<S> <C> <C> <C>
<C> <C> <C>
YEAR ENDED MAY 31,
<CAPTION>
1995 1994
1993 1992 1991 1990(A)
<S> <C> <C> <C>
<C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $
1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------
Net investment income 0.04 0.02
0.02 0.04 0.07 0.02
- ---------------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------------
Distributions from net investment income (0.04) (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 $ 1.00
- --------------------------------------------------- --------- --------- -----
- ---- --------- --------- -----------
TOTAL RETURN (B) 4.34% 2.37%
2.47% 4.24% 6.83% 2.42%
- ---------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------
Expenses 0.99% 0.99%
0.99% 0.98% 0.88% 0.60%(c)
- ---------------------------------------------------
Net investment income 4.26% 2.33%
2.46% 4.18% 6.39% 7.75%(c)
- ---------------------------------------------------
Expense waiver/reimbursement (d) 0.08% 0.10%
0.04% 0.04% 0.22% 0.44%(c)
- ---------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------
Net assets, end of period (000 omitted) $424,091 $427,005
$532,334 $638,761 $713,430 $127,800
- ---------------------------------------------------
</TABLE>
(a) Reflects operations for the period from February 7, 1990 (date of initial
public investment) to May 31, 1990.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
Further information about the Fund's performance is contained in the Fund's
Annual Report dated May 31, 1995, which can be obtained free of charge.
- --------------------------------------------------------------------------------
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 14, 1995, on the Fund's financial
statements for the year ended May 31, 1995, and on the following table for 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>
GOVERNMENT CASH SERIES
<S> <C> <C> <C>
<C> <C> <C>
YEAR ENDED MAY 31,
<CAPTION>
1995 1994
1993 1992 1991 1990(A)
<S> <C> <C> <C>
<C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $
1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------
Net investment income 0.04 0.02
0.03 0.04 0.07 0.06
- ---------------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------------
Distributions from net investment income (0.04) (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 $ 1.00
- --------------------------------------------------- --------- --------- -----
- ---- --------- --------- -----------
TOTAL RETURN (B) 4.43% 2.45%
2.54% 4.33% 6.80% 6.53%
- ---------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------
Expenses 0.99% 0.99%
0.99% 0.98% 0.94% 0.73%(c)
- ---------------------------------------------------
Net investment income 4.35% 2.41%
2.53% 4.25% 6.48% 7.74%(c)
- ---------------------------------------------------
Expense waiver/reimbursement (d) 0.08% 0.09%
0.06% 0.06% 0.13% 0.32%(c)
- ---------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------
Net assets, end of period (000 omitted) $453,096 $401,334
$400,231 $550,675 $631,718 $493,995
- ---------------------------------------------------
</TABLE>
(a) Reflects operations for the period from August 23, 1989, (date of initial
public investment) to May 31, 1990.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
<TABLE>
<CAPTION>
MUNICIPAL CASH SERIES
<S> <C> <C> <C>
<C> <C> <C>
YEAR ENDED MAY 31,
<CAPTION>
1995 1994
1993 1992 1991 1990(A)
<S> <C> <C> <C>
<C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $
1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------
Net investment income 0.03 0.02
0.03 0.04 0.05 0.04
- ----------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------
Distribution from net investment income (0.03) (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 $ 1.00
- ---------------------------------------------------- --------- --------- ----
- ----- --------- --------- -----------
TOTAL RETURN (B) 2.84% 1.83%
2.11% 3.53% 5.24% 4.68%
- ----------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------
Expenses 0.99% 0.99%
0.99% 0.98% 0.94% 0.73%(c)
- ----------------------------------------------------
Net investment income 2.76% 1.81%
2.10% 3.42% 5.02% 5.76%(c)
- ----------------------------------------------------
Expense waiver/reimbursement (d) 0.05% 0.06%
0.03% 0.03% 0.17% 0.45%(c)
- ----------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------
Net assets, end of period (000 omitted) $445,164 $574,801
$456,205 $516,814 $403,151 $195,897
- ----------------------------------------------------
</TABLE>
(a) Reflects operations for the period from August 25, 1989 (date of initial
public investment) to May 30, 1990.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
Further information about the Fund's performance is contained in the Fund's
Annual Report dated May 31, 1995, which can be obtained free of charge.
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 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;
discount notes of U.S. government agencies or instrumentalities such as Farm
Credit Loan Banks; Federal Home Loan Mortgage Corporation; Federal National
Mortgage Association; Government National Mortgage Association; Financing Bank;
The Student Loan Marketing Association; National Credit Union Administration;
and Tennessee Valley Authority. 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.
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."
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.
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 a 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.
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 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. With over $72 billion invested across more than 260 funds
under management and/or administration by its subsidiaries, as of December 31,
1994, Federated Investors is one of the largest mutual fund investment managers
in the United States. With more than 1,750 employees, Federated continues to be
led by the management who founded the company in 1955. Federated funds are
presently at work in and through 4,000 financial institutions nationwide. More
than 100,000 investment professionals have selected Federated funds for their
clients.
Both the Company and the adviser have adopted strict codes of ethics governing
the conduct of all employees who manage the Funds and their portfolio
securities. These codes recognize that such persons owe a fiduciary duty to the
Funds' shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Funds; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Directors, and could
result in severe penalties.
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
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 services or
distribution-related support as agents for their clients or customers.
The Distribution Plan is a compensation-type plan. As such, no Fund makes no
payments to the distributor except as described above. Therefore, a Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from a 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.
In addition, each Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
a Fund may make payments up to .25 of 1% of the average daily net asset value of
a Fund to obtain personal services for shareholders and for the maintenance of
shareholder accounts. Under the Shareholder Services Agreement, Federated
Shareholders Services will either perform shareholder services directly or will
select financial institutions to perform shareholder services. From time to time
and for such periods as deemed appropriate, the amounts stated above may be
reduced voluntarily. 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 each
Fund, the distributor, or Federated Shareholder Services, as appropriate.
SUPPLEMENTAL PAYMENTS TO
FINANCIAL INSTITUTIONS
The distributor may also pay financial institutions a fee for providing certain
services to shareholders or as financial assistance for providing substantial
marketing and sales support. The support may include sponsoring sales,
educational, and training seminars for employees of the financial institution,
providing sales literature, and engineering computer software programs that
emphasize the attributes of the Funds. Such financial assistance will be
predicated upon the amount of shares of the Funds the financial institution
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the financial institution. Any payments made in addition to the
amounts paid under the Plan(s) may be reimbursed by the adviser or its
affiliates, and not the Funds.
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 Company, Boston, MA is custodian for the securities
and cash of each Fund.
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
Federated Services Company, Boston, MA is transfer agent for the shares of, and
dividend disbursing agent for, each Fund.
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) and as of the close of trading (normally 4:00 p.m., Eastern time)
on the New York Stock Exchange, Monday through Friday except on New Year's Day,
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 load, 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 a 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: Federated
Services Company, c/o 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 MAIL
Shares may be purchased by sending a check made payable to the name of the
appropriate Fund to: Federated Services Company P.O. Box 8600, Boston, MA
02266-8600. 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 a Fund's 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 an ACH member
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, Federated Services Company, P.O. Box
8600, Boston, MA 02266-8600.
The written request should state: 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. 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.
If share certificates have been issued, they should be sent by insured mail with
the written request to: Federated Services Company, 500 Victory Road-2nd Floor,
North Quincy, MA 02171.
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 a Fund to redeem shares, and a check may not be written to close an
account. Canceled 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. As of September 8,
1995, McDonald & Co. Securities, Inc., Cincinnati, Ohio, may for certain
purposes be deemed to control the Municipal Fund because it is owner of record,
in nominee name accounts for the benefit of their customers, of certain shares
of the Municipal Fund.
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 Municipal 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.
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.
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 refer to ratings, rankings, and other
information in certain financial publications and/or compare the Funds'
performance to certain indices.
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 Company
P.O. Box 8600
Boston, MA 02266-8600
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
Federated Services Company
P.O. Box 8600
Boston, MA 02266-8600
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
September 30, 1995
[LOGO] FEDERATED SECURITIES CORP.
DISTRIBUTOR
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Cusip 147551105
Cusip 147551402
Cusip 147551204
Cusip 147551303
G00861-01 (9/95)
<PAGE>
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 short-term 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, 1995, 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, which is in paper form only, or a paper copy of this
prospectus, if you have received your prospectus electronically, 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, 1995
<PAGE>
TABLE OF CONTENTS
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INVESTING IN THE FUND 8
------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------
Share Purchases 8
Through a Financial Institution 8
FINANCIAL HIGHLIGHTS-- GOVERNMENT
CASH SERIES 2
- ------------------------------------ By Wire 8
By Mail 8
Systematic Investment Program 8
GENERAL INFORMATION 3
- ------------------------------------
Minimum Investment Required 9
Certificates and Confirmations 9
INVESTMENT INFORMATION 3
- ------------------------------------
Dividends 9
Capital Gains 9
Investment Objective 3
Investment Policies 3 REDEEMING SHARES 9
------------------------------------
Acceptable Investments 3
Repurchase Agreements 4
When-Issued and Delayed Delivery Through a Financial Institution 9
Transactions 4
Lending of Portfolio Securities 4 Receiving Payment 10
By Wire 10
Investment Limitations 4 By Mail 10
Regulatory Compliance 5 By Writing a Check 10
By VISA Card 11
FUND INFORMATION 5
- ------------------------------------ Telephone Redemption 11
By a Systematic Withdrawal
Program 11
Management of the Fund 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 6 TAX INFORMATION 12
------------------------------------
Supplemental Payments to
Financial Institutions 7
Administration of the Fund 7 Federal Income Tax 12
Administrative Services 7 Pennsylvania Corporate and
Personal Property Taxes 12
Custodian 7
Transfer Agent and Dividend Other State and Local Taxes 12
Disbursing Agent 7
Independent Auditors 7
PERFORMANCE INFORMATION 12
------------------------------------
NET ASSET VALUE 8
- ------------------------------------
ADDRESSES 13
------------------------------------
<PAGE>
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).................................. 0.42%
12b-1 Fee (after waiver) (2)....................................... 0.10%
Total Other Expenses............................................... 0.47%
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 Fund operating expenses would have been 1.07% 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.
<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.
<PAGE>
GOVERNMENT 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 14, 1995, on the Fund's
financial statements for the year ended May 31, 1995, and on the following
table for 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,
-----------------------------------------------------
1995 1994 1993 1992 1991 1990(A)
- ----------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------
INCOME FROM INVESTMENT
OPERATIONS
- -----------------------
Net investment income 0.04 0.02 0.03 0.04 0.07 0.06
- -----------------------
LESS DISTRIBUTIONS
- -----------------------
Distributions from net
investment income (0.04) (0.02) (0.03) (0.04) (0.07) (0.06)
- ----------------------- ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
PERIOD ------ ------ ------ ------ ------ ------
- -----------------------
TOTAL RETURN (B) 4.43% 2.45% 2.54% 4.33% 6.80% 6.53%
- -----------------------
RATIOS TO AVERAGE NET
ASSETS
- -----------------------
Expenses 0.99% 0.99% 0.99% 0.98% 0.94%
0.73%(c)
- -----------------------
Net investment income 4.35% 2.41% 2.53% 4.25% 6.48%
7.74%(c)
- -----------------------
Expense
waiver/reimbursement
(d) 0.08% 0.09% 0.06% 0.06% 0.13%
0.32%(c)
- -----------------------
SUPPLEMENTAL DATA
- -----------------------
<CAPTION>
Net assets, end of
period (000 omitted)
- ----------------------- $453,096 $401,334 $400,231 $550,675 $631,718 $493,995
</TABLE>
(a) Reflects operations for the period from August 23, 1989, (date of initial
public investment) to May 31, 1990.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
Further information about the Fund's performance is contained in the Fund's
Annual Report dated May 31, 1995, which can be obtained free of charge.
<PAGE>
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, diversified portfolio investing only
in short-term U.S. government securities. A minimum initial investment of
$10,000 is required, except for 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
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 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 the: Farm Credit System, including the
National Bank for Cooperatives, Farm Credit Banks, and Banks for
Cooperatives; Farmers Home Administration; Federal Home Loan Banks;
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
<PAGE>
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, broker/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.
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 or 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 into transactions to
sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at
later dates. The 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. There is the risk that when lending portfolio securities,
the securities may not be available to the 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.
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.
<PAGE>
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. An 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. Federated Advisers, a Delaware business trust,
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors. All of the Class A (voting) shares of Federated Investors are
owned by a trust, the trustees of which are John F. Donahue, Chairman and
Trustee of Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son,
J. Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated 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
<PAGE>
administrative services to a number of investment companies. With over $72
billion invested across more than 260 funds under management and/or
administration by its subsidiaries, as of December 31, 1994, Federated
Investors is one of the largest mutual fund investment managers in the
United States. With more than 1,750 employees, Federated continues to be
led by the management who founded the company in 1955. Federated funds are
presently at work in and through 4,000 financial institutions nationwide.
More than 100,000 investment professionals have selected Federated funds
for their clients.
Both the Company and the adviser have adopted strict codes of ethics governing
the conduct of all employees who manage the Fund and its portfolio securities.
These codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance
and periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial
public offerings; and prohibit taking profits on securities held for less than
sixty days. Violations of the codes are subject to review by the Directors,
and could result in severe penalties.
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.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
DISTRIBUTION AND SHAREHOLDER SERVICES. 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 services or distribution-related support
as agents for their clients or customers.
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.
In addition the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under
which the Fund may make payments up to .25 of 1% of the average daily net
asset value of the Fund to obtain personal services for shareholders and for
the maintenance of shareholder accounts. Under the Shareholder Services
Agreement, Federated
<PAGE>
Shareholders Services will either perform shareholder services directly or
will select financial institutions to perform shareholder services. From time
to time and for such periods as deemed appropriate, the amounts stated above
may be reduced voluntarily. 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, the distributor, or Federated Shareholder Services, as
appropriate.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. The distributor may also pay
financial institutions a fee for providing certain services to shareholders or
as financial assistance for providing substantial marketing and sales support.
The support may include sponsoring sales, educational, and training seminars
for employees of the financial institution, providing sales literature, and
engineering computer software programs that emphasize the attributes of the
Fund. Such financial assistance will be predicated upon the amount of shares
of the Fund the financial institution sells or may sell and/or upon the type
and nature of sales or marketing support furnished by the financial
institution. Any payments made in addition to the amounts paid under the
Plan(s) may be reimbursed by the adviser or its affiliates, and not the Fund.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting 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 Company, Boston, MA, is custodian for
the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Boston, MA, is transfer agent for the shares of, and dividend disbursing agent
for, the Fund.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Deloitte &
Touche LLP, Pittsburgh, PA.
<PAGE>
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. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, 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, 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. 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 3:00 p.m. (Eastern time) that same day. Federal funds should
be wired as follows: Federated Services Company, c/o State Street Bank and
Trust Company, Boston, MA; 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: Federated Services Company, Government Cash Series, P.O. Box 8600,
Boston, MA 02266-8600. 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 at any Automated Clearing House member institution and invested in
Fund shares.
<PAGE>
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. The minimum initial investment for
retirement plans is $1,000. Minimum subsequent investments must be $500.
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.
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.
<PAGE>
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 MAIL
Shares may be redeemed by sending a written request to: Government Cash
Series, P.O. Box 8600, Boston, MA 02266-8600. 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 should be sent by insured mail
with the written request to: Federated Services Company, 500 Victory Road-2nd
Floor, North Quincy, MA 02171.
Shareholders requesting 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 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, a checking account for
redeeming shares will be established. For further information, contact State
Street Bank and Trust Company.
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 Company to redeem shares. Cancelled checks are sent to
the shareholder each month.
<PAGE>
BY VISA CARD. At the shareholder's request, State Street Bank and Trust
Company 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 and
Trust Company, will be charged to the account for this service. For further
information, contact the Fund.
TELEPHONE REDEMPTION
Shares may be redeemed by telephoning the Fund. Telephone instructions may be
recorded and if reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions. An
authorization form permitting the Fund to accept telephone requests must first
be completed. Authorization forms and information on this service are
available from Federated Securities Corp.
If the redemption request is received before 12:00 noon (Eastern time), the
proceeds will be wired the same day to the shareholder's account at a domestic
commercial bank which is a member of the Federal Reserve System, and those
shares redeemed will not be entitled to that day's dividend. A daily dividend
will be paid on shares redeemed if the redemption request is received after
12:00 noon (Eastern time). However, the proceeds are not wired until 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 12:00 noon (Eastern time).
In the event of drastic economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If such a case should occur,
another method of redemption, such as "By Mail," should be considered. If at
any time the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders would be promptly notified.
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 Automated Clearing House 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 Fund gives the shareholder one vote in Director elections
and other matters submitted to shareholders for vote. All shares of each
portfolio in the Company have equal voting
<PAGE>
rights, except that in matters affecting only a particular portfolio, only
shares of that portfolio 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.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
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, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
<PAGE>
ADDRESSES
- --------------------------------------------------------------------------------
Cash Trust Series, Inc. Federated Investors Tower
Pittsburgh, PA 15222-3779
- --------------------------------------------------------------------------------
Distributor
Federated Securities Corporation Federated Investors Tower
Pittsburgh, PA 15222-3779
- --------------------------------------------------------------------------------
Investment Adviser
Federated Advisers Federated Investors Tower
Pittsburgh, PA 15222-3779
- --------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company
P.O. Box 8600 Boston, MA
02266-8600
- --------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company
P.O. Box 8600 Boston, MA
02266-8600
- --------------------------------------------------------------------------------
Independent Public Accountants
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, PA 15222
- --------------------------------------------------------------------------------
<PAGE>
GOVERNMENT CASH SERIES
PROSPECTUS
A Diversified Portfolio of
Cash Trust Series, Inc., an Open-End
Management Investment Company
September 30, 1995
[LOGO] FEDERATED SECURITIES CORP.
DISTRIBUTOR
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Cusip 147551204
9080103A (9/95)
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"), a portfolio of Cash Trust Series,
Inc. (the "Company") dated September 30, 1995. This Statement is not a
prospectus. To receive a copy of a prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Statement dated September 30, 1995
Federated Securities Corp.
Distributor
A subsidiary of Federated Investors
TABLE OF CONTENTS
FUND HISTORY 1 BROKERAGE TRANSACTIONS 3
INVESTMENT POLICIES 1 CASH TRUST SERIES, INC.
ACCEPTABLE INVESTMENTS 1 MANAGEMENT 4
WHEN-ISSUED AND DELAYED THE FUNDS 7
DELIVERY TRANSACTIONS 1 SHARE OWNERSHIP 8
REPURCHASE AGREEMENTS 1 DIRECTORS COMPENSATION 8
REVERSE REPURCHASE AGREEMENTS 1 DIRECTOR LIABILITY 9
LENDING OF PORTFOLIO SECURITIES1
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 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 AND
DIRECTORS 3
INVESTING IN OPTIONS 3
INVESTING IN MINERALS 3
INVESTMENT ADVISORY SERVICES 9
INVESTMENT ADVISER 9
ADVISORY FEES 9
STATE EXPENSE LIMITATIONS 9
FUND ADMINISTRATION 9
DISTRIBUTION PLAN AND
SHAREHOLDER SERVICES AGREEMENT 9
DETERMINING NET ASSET VALUE 10
REDEMPTION IN KIND 10
THE FUND'S TAX STATUS 10
PERFORMANCE INFORMATION 11
YIELD 11
EFFECTIVE YIELD 11
TOTAL RETURN 11
PERFORMANCE COMPARISONS 11
ABOUT FEDERATED INVESTORS 12
MUTUAL FUND MARKET 12
INSTITUTIONAL 12
TRUST ORGANIZATIONS 12
BROKER/DEALERS 12
FINANCIAL STATEMENTS 13
FUND HISTORY
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 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.
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.
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. The U.S. government is not considered to be an industry.
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, or if it would
own more than 10% of the outstanding voting securities of that issuer.
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 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 AND DIRECTORS
The Fund will not purchase or retain the securities of any issuer if the
Officers and Directors of the Company 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 certificates of
deposit and demand and time deposits 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 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 Fund 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, present positions with
Cash Trust Series, Inc., and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
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.; Chief Executive Officer and Director,
Trustee, or Managing General Partner of the Funds. Mr. Donahue is the father of
J. Christopher Donahue, Executive Vice President and Director of the Company.
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Director
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's Hospital of
Pittsburgh; Director, Trustee, or Managing General Partner of the Funds;
formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
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
Birthdate: July 4, 1918
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
Birthdate: April 11, 1949
Executive 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 Executive 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 Company.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Director
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Director
Professor of Medicine and Member, Board of Trustees, University of Pittsburgh;
Medical Director, University of Pittsburgh Medical Center -- Downtown; Member,
Board of Directors, University of Pittsburgh Medical Center; formerly,
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore Hospitals;
Director, Trustee, or Managing General Partner of the Funds.
Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center -- Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Director
Attorney-at-law; Shareholder, Henny, Kochuba, 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
70 Westcliff Road
Westin, MA
Birthdate: March 16, 1942
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.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center -- Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Director
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Director
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Director
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director, Trustee, or Managing General Partner of the Funds; President Emeritus,
University of Pittsburgh; founding Chairman, National Advisory Council for
Environmental Policy and Technology and Federal Emergency Management Advisory
Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Director
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
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
Birthdate: October 22, 1930
Executive Vice President
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;
Executive Vice President of the Funds.
David M. Taylor *
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President, Controller, and Trustee, Federated Investors; Controller,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., and Passport Research, Ltd.; Senior Vice President, Federated
Shareholder Services; Senior Vice President, Federated Administrative Services;
Treasurer of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive 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.; Executive Vice President and
Secretary of the Funds.
* This Director is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the Board
of Directors handles the responsibilities of the Board of Directors
between meetings of the Board.
THE FUNDS
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; 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
Institutional Trust; Federated Master Trust; Federated Municipal Trust;
Federated Short-Term Municipal Trust; Federated Short-Term U.S. Government
Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated Total Return
Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S. Government
Securities Fund: 1-3 Years; Federated U.S, Government Securities Fund: 3-5
Years; 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; 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; Money Market
Management, Inc.; Money Market Obligations Trust; Money Market Trust; Municipal
Securities Income Trust; Newpoint Funds; 111 Corcoran Funds; Peachtree Funds;
The Planters Funds; RIMCO Monument Funds; The Shawmut Funds; Star Funds; The
Starburst Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; Trademark Funds;
Trust for Financial Institutions; Trust For Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations; The
Virtus Funds; World Investment Series, Inc.
SHARE OWNERSHIP
Officers and Directors as a group own less than 1% of the Fund's outstanding
shares.
As of September 18, 1995,, the following shareholder(s) of record owned, in
nominee name accounts for the benefit of their customers, 5% or more of the
outstanding shares of the Government Cash Series: BHC Securities Inc.,
Philadelphia, PA, owned approximately 75,183,562.75 shares (14.64%) and Voyageur
Fund Managers, Minneapolis, MN, owned approximately 26,736,190.49 shares
(5.20%).
DIRECTORS COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
CORPORATION CORPORATION*# FROM FUND COMPLEX +
John F. Donahue, $0 $0 for the Fund and
Chairman and Director 68 other investment companies in the Fund Complex
Thomas G. Bigley, $2,395 $20,688 for the Fund and
Director 49 other investment companies in the Fund Complex
John T. Conroy, $3,515 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
William J. Copeland, $3,515 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
James E. Dowd, $3,515 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D., $3,225 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
Edward L. Flaherty, Jr., $3,515 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
Peter E. Madden, $2,749 $90,563 for the Fund and
Director 64 other investment companies in the Fund Complex
Gregor F. Meyer, $3,225 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
John E. Murray, Jr., $1,600 $0 for the Fund and
Director 64 other investment companies in the Fund Complex
Wesley W. Posvar, $3,225 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
Marjorie P. Smuts, $3,225 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
*Information is furnished for the fiscal year ended May 31, 1995.
#The aggregate compensation is provided for the Corporation which is comprised
of 4 portfolios.
+The information is provided for the last calendar year.
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 Fund'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,
1995, 1994, and 1993, the adviser earned $2,041,481, $2,214,398, and
$2,620,146, respectively, of which $311,977, $401,216, and $337,190,
respectively, were 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 years ended May 31, 1995, 1994, and 1993, the Administrators earned
$309,080, $400,965, and $429,715, 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 a director of Commercial Data
Services, Inc., a company which provides computer processing services to
Federated Administrative Services.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES AGREEMENT
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services, to stimulate distribution
activities and to cause services to be provided to shareholders ^ by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to,
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 Directors expect 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 ending May 31, 1995, payments in the amount of $408,296
were made pursuant to the Distribution Plan, all of which was paid to financial
institutions. In addition, for this period, the Fund paid Shareholder Services
fees ^ in the amount of $1,020,741. ^
Custodian and Portfolio Recordkeeper. State Street Bank and Trust Company ,
Boston, MA, is custodian for the securities and cash of the Fund. Federated
Services Company, Pittsburgh, PA, 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 yield is calculated based upon the seven days ending on the day of the
calculation, called the "base period." This yield is computed by: determining
the net change in the value of a hypothetical account with a balance of one
share at the beginning of the base period, with the net change excluding capital
changes but including the value of any additional shares purchased with
dividends earned from the original one share and all dividends declared on the
original and any purchased shares; dividing the net change in the account's
value by the value of the account at the beginning of the base period to
determine the base period return; and multiplying the base period return by
365/7.
The Fund's yield for the seven-day period ended May 31, 1995, was 5.16%.
EFFECTIVE YIELD
The effective yield is calculated by compounding the unannualized base period
return by: adding 1 to the base period return; raising the sum to the 365/7th
power; and subtracting 1 from the result.
The Fund's effective yield for the seven-day period ended May 31, 1995, was
5.29%.
TOTAL RETURN
Average annual total return is the average compounded rate of return for a given
period that would equate a $1,000 initial investment to the ending redeemable
value of that investment. The ending redeemable value is computed by multiplying
the number of shares owned at the end of the period by the net asset value per
share at the end of the period. The number of shares owned at the end of the
period is based on the number of shares purchased at the beginning of the period
with $1,000, adjusted over the period by any additional shares, assuming the
monthly reinvestment of all dividends and distributions.
The Fund's average annual total returns for the one-year period and five-year
period ended May 31, 1995, and from August 15, 1989 (start of performance)
through May 31, 1995, were 4.43%, 4.10%, and 4.66%, 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 offering price. 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.
ABOUT FEDERATED INVESTORS
Federated is dedicated to meeting investor needs which is reflected in its
investment decision making--structured, straightforward, and consistent. This
has resulted in a history of competitive performance with a range of competitive
investment products that have gained the confidence of thousands of clients and
their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts, and
traders dedicated to specific market sectors.
In the money market sector, Federated gained prominence in the mutual fund
industry in 1974 with the creation of the first institutional money market fund.
Simultaneously, the company pioneered the use of the amortized cost method of
accounting for valuing shares of money market funds, a principal means used by
money managers today to value money market fund shares. Other innovations
include the first institutional tax-free money market fund. As of December 31,
1994, Federated managed more than $31 billion in assets across approximately 43
money market funds, including 17 government, 8 prime and 18 municipal with
assets approximating $17 billion, $7.4 billion and $6.6 billion, respectively.
J. Thomas Madden, Executive Vice President, oversees Federated's equity and high
yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federated's domestic fixed income management. Henry A.
Frantzen, Executive Vice President, oversees the management of Federated's
international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $2 trillion to the more than 5,500 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL
Federated meets the needs of more than 4,000 institutional clients nationwide by
managing and servicing separate accounts and mutual funds for a variety of
applications, including defined benefit and defined contribution programs, cash
management, and asset/liability management. Institutional clients include
corporations, pension funds, tax-exempt entities, foundations/endowments,
insurance companies, and investment and financial advisors. The marketing
effort to these institutional clients is headed by John B. Fisher, President,
Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios.
The marketing effort to trust clients is headed by Mark R. Gensheimer, Executive
Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated mutual funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.
*source: Investment Company Institute
FINANCIAL STATEMENTS
The financial statements for Government Cash Series for the fiscal year ended
May 31, 1995 are incorporated herein by reference to the Annual Report to
Shareholders of Government Cash Series dated May 31, 1995.
9080103B-GCS(9/95)
<PAGE>
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 short-term 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, 1995, 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, which is in paper form only, or a paper copy of this
prospectus, if you have received your prospectus electronically, 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, 1995
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1 Custodian 10
- -------------------------------------
Transfer Agent and Dividend
Disbursing Agent 10
FINANCIAL HIGHLIGHTS-- MUNICIPAL Independent Auditors 10
CASH SERIES 2
- -------------------------------------
NET ASSET VALUE 10
-------------------------------------
GENERAL INFORMATION 3
- -------------------------------------
INVESTING IN THE FUND 10
-------------------------------------
INVESTMENT INFORMATION 3
- -------------------------------------
Share Purchases 10
Through a Financial Institution 11
Investment Objective 3
Investment Policies 3
By Wire 11
Acceptable Investments 3
By Mail 11
Variable Rate Demand Notes 4
Systematic Investment Program 11
Participation Interests 4
Municipal Leases 4
Minimum Investment Required 11
Ratings 4
Certificates and Confirmations 11
Credit Enhancement 4
Demand Features 5 Dividends 11
When-Issued and Delayed Capital Gains 12
Delivery
Transactions 5 REDEEMING SHARES 12
-------------------------------------
Restricted and Illiquid
Securities 5
Through a Financial Institution 12
Temporary Investments 5
Municipal Securities 6
Receiving Payment 12
Investment Risks 6
By Wire 12
Non-Diversification 7
By Mail 12
Investment Limitations 7
By Writing a Check 13
Regulatory Compliance 7
By VISA Card 13
FUND INFORMATION 7 Telephone Redemption 13
- -------------------------------------
By a Systematic Withdrawal
Program 14
Management of the Fund 7 Accounts with Low Balances 14
Board of Directors 7
SHAREHOLDER INFORMATION 14
Investment Adviser 8 -------------------------------------
Advisory Fees 8
Adviser's Background 8
Voting Rights 14
Distribution of Shares 8
Distribution and Shareholder
Services 9 TAX INFORMATION 14
-------------------------------------
Supplemental Payments to Financial
Institutions 9
Administration of the Fund 9 Federal Income Tax 14
Administrative Services 9 Pennsylvania Corporate and
Personal Property Taxes 15
Other State and Local Taxes 15
PERFORMANCE INFORMATION 15
-------------------------------------
ADDRESSES 16
-------------------------------------
<PAGE>
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).................................. 0.45%
12b-1 Fee (after waiver) (2)....................................... 0.10%
Total Other Expenses............................................... 0.44%
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 1.04% 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.
<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.
<PAGE>
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 14, 1995, on the Fund's
financial statements for the year ended May 31, 1995, and on the following
table for 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,
-----------------------------------------------------
1995 1994 1993 1992 1991 1990(A)
- ----------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------
INCOME FROM INVESTMENT
OPERATIONS
- -----------------------
Net investment income 0.03 0.02 0.03 0.04 0.05 0.04
- -----------------------
LESS DISTRIBUTIONS
- -----------------------
Distribution from net
investment income (0.03) (0.02) (0.03) (0.04) (0.05) (0.04)
- ----------------------- ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
PERIOD ------ ------ ------ ------ ------ ------
- -----------------------
TOTAL RETURN (B) 2.84% 1.83% 2.11% 3.53% 5.24% 4.68%
- -----------------------
RATIOS TO AVERAGE NET
ASSETS
- -----------------------
Expenses 0.99% 0.99% 0.99% 0.98% 0.94%
0.73%(c)
- -----------------------
Net investment income 2.76% 1.81% 2.10% 3.42% 5.02%
5.76%(c)
- -----------------------
Expense waiver/
reimbursement (d) 0.05% 0.06% 0.03% 0.03% 0.17%
0.45%(c)
- -----------------------
SUPPLEMENTAL DATA
- -----------------------
<CAPTION>
Net assets, end of pe-
riod
(000 omitted)
- ----------------------- $445,164 $574,801 $456,205 $516,814 $403,151 $195,897
</TABLE>
(a) Reflects operations for the period from August 25, 1989 (date of initial
public investment) to May 30, 1990.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
Further information about the Fund's performance is contained in the Fund's
Annual Report dated May 31, 1995, which can be obtained free of charge.
<PAGE>
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. 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 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 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;
<PAGE>
. 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
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 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 Ratings Group
("S&P"), MIG-1 or MIG-2 by Moody's Investors Service, Inc. ("Moody's"), 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
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
<PAGE>
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 or 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 into transactions to
sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at
later dates. The 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
<PAGE>
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
<PAGE>
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 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. 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. An Executive Committee of the Board of Directors handles the
Board's responsibilities between meetings of the Board.
<PAGE>
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. Federated Advisers, a Delaware business trust,
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors. All of the Class A (voting) shares of Federated Investors are
owned by a trust, the trustees of which are John F. Donahue, Chairman and
Trustee of Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son,
J. Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated 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. With over $72 billion invested across
more than 260 funds under management and/or administration by its
subsidiaries, as of December 31, 1994, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,750 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.
Both the Company and the adviser have adopted strict codes of ethics governing
the conduct of all employees who manage the Fund and its portfolio securities.
These codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance
and periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial
public offerings; and prohibit taking profits on securities held for less than
sixty days. Violations of the codes are subject to review by the Directors,
and could result in severe penalties.
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.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
<PAGE>
DISTRIBUTION AND SHAREHOLDER SERVICES. 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 services or distribution-related support
as agents for their clients or customers.
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.
In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under
which the Fund may make payments up to .25 of 1% of the average daily net
asset value of the Fund to obtain personal services for shareholders and for
the maintenance of shareholder accounts. Under the Shareholder Services
Agreement, Federated Shareholders Services with either perform shareholder
services directly or will select financial institutions to perform shareholder
services. From time to time and for such periods as deemed appropriate, the
amounts stated above may be reduced voluntarily. 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, the distributor, or Federated
Shareholder Services, as appropriate.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. The distributor may also pay
financial institutions a fee for providing certain services to shareholders or
as financial assistance for providing substantial marketing and sales support.
The support may include sponsoring sales, educational, and training seminars
for employees of the financial institution, providing sales literature, and
engineering computer software programs that emphasize the attributes of the
Fund. Such financial assistance will be predicated upon the amount of shares
of the Fund the financial institution sells or may sell and/or upon the type
and nature of sales or marketing support furnished by the financial
institution. Any payments made in addition to the amounts paid under the
Plan(s) may be reimbursed by the adviser or its affiliates, and not the Fund.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate as
specified below:
<PAGE>
<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 Company, Boston, MA, is custodian for
the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Boston, MA, is transfer agent for the shares of, and dividend disbursing agent
for, the Fund.
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. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, 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, 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. 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.
<PAGE>
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 3:00 p.m. (Eastern time) that same day. Federal funds should
be wired as follows: Federated Services Company, c/o State Street Bank and
Trust Company, Boston, MA; 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: Federated Services Company, Municipal Cash Series, P.O. Box 8600,
Boston, MA 02266-8600. 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 at any Automated Clearing House member institution 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. 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.
[[1]]FINEDG:[14686P.TX]00012.PIP PAG: 19-SEP-1995 21:12 EDG: 00-000-
0000 00:00 BLK: 05-SEP-1995 00:01
[[1]]Federated MCS PRO R. R. Donnelley
(412) 321-0440 AOG 3.4.1,p04
<PAGE>
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.
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 MAIL
Shares may be redeemed by sending a written request to: Municipal Cash Series,
P.O. Box 8600, Boston, MA 02266-8600. 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 should be sent by insured mail
with the written request to: Federated Services Company, 500 Victory Road-2nd
Floor, North Quincy, MA 02171.
Shareholders requesting 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:
<PAGE>
. 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 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, a checking account for
redeeming shares will be established. For further information, contact State
Street Bank and Trust Company.
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 Company to redeem shares. Cancelled checks are sent to
the shareholder each month.
BY VISA CARD. At the shareholder's request, State Street Bank and Trust
Company 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 and
Trust Company, will be charged to the account for this service. For further
information, contact the Fund.
TELEPHONE REDEMPTION
Shares may be redeemed by telephoning the Fund. Telephone instructions may be
recorded and if reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions. An
authorization form permitting the Fund to accept telephone requests must first
be completed. Authorization forms and information on this service are
available from Federated Securities Corp.
If the redemption request is received before 12:00 noon (Eastern time), the
proceeds will be wired the same day to the shareholder's account at a domestic
commercial bank which is a member of the Federal Reserve System, and those
shares redeemed will not be entitled to that day's dividend. A daily dividend
will be paid on shares redeemed if the redemption request is received after
12:00 noon (Eastern time). However, the proceeds are not wired until the
following business day.
In the event of drastic economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If such a case should occur,
another method of redemption, such as "By
<PAGE>
Mail," should be considered. If at any time the Fund shall determine it
necessary to terminate or modify this method of redemption, shareholders would
be promptly notified.
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 Automated Clearing House 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 Fund gives the shareholder one vote in Director elections
and other matters submitted to shareholders for vote. All shares of each
portfolio in the Company have equal voting rights, except that in matters
affecting only a particular portfolio, only shares of that portfolio 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 8, 1995, McDonald &
Co. Securities, Inc., Cincinnati, Ohio, may for certain purposes be deemed to
control the Fund because it is owner of record, in nominee name accounts for
the benefit of their customers, of certain shares of the Fund.
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.
<PAGE>
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.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
Shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.
OTHER STATE AND LOCAL TAXES. Because interest received by the Fund may not be
exempt from all state and local income taxes, shareholders may be required to
pay state and local taxes on dividends received from the Fund. 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, 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, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
<PAGE>
ADDRESSES
- --------------------------------------------------------------------------------
Cash Trust Series, Inc. Federated Investors Tower
Pittsburgh, PA 15222-3779
- --------------------------------------------------------------------------------
Distributor
Federated Securities Corporation Federated Investors Tower
Pittsburgh, PA 15222-3779
- --------------------------------------------------------------------------------
Investment Adviser
Federated Advisers Federated Investors Tower
Pittsburgh, PA 15222-3779
- --------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company
P.O. Box 8600 Boston, MA
02266-8600
- --------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company
P.O. Box 8600 Boston, MA
02266-8600
- --------------------------------------------------------------------------------
Independent Public Accountants
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, PA 15222
- --------------------------------------------------------------------------------
<PAGE>
MUNICIPAL CASH SERIES
PROSPECTUS
A Non-Diversified Portfolio of Cash Trust
Series, Inc.,
an Open-End Management Investment Company
Prospectus dated September 30, 1995
[LOGO] FEDERATED SECURITIES CORP.
DISTRIBUTOR
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
CUSIP 147551303
9080102A (9/95)
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"), a portfolio of Cash Trust Series,
Inc. (the "Company") dated September 30, 1995. This Statement is not a
prospectus. To receive a copy of a prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Statement dated September 30, 1995
Federated Securities Corp.
Distributor
A subsidiary of Federated Investors
TABLE OF CONTENTS
FUND HISTORY 1 DIRECTORS
INVESTMENT POLICIES 1 3
ACCEPTABLE INVESTMENTS 1 INVESTING IN OPTIONS 3
PARTICIPATION INTERESTS 1 INVESTING IN MINERALS 4
MUNICIPAL LEASES 1 BROKERAGE TRANSACTIONS 4
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 3
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 AND
CASH TRUST SERIES, INC.
MANAGEMENT 4
THE FUNDS 8
SHARE OWNERSHIP 8
DIRECTORS COMPENSATION 9
DIRECTOR LIABILITY 9
INVESTMENT ADVISORY SERVICES 10
INVESTMENT ADVISER 10
ADVISORY FEES 10
STATE EXPENSE LIMITATIONS 10
FUND ADMINISTRATION 10
DISTRIBUTION PLAN AND
SHAREHOLDER SERVICES
AGREEMENT 10
DETERMINING NET ASSET VALUE 11
REDEMPTION IN KIND 11
THE FUND'S TAX STATUS 11
PERFORMANCE INFORMATION 12
YIELD 12
EFFECTIVE YIELD 12
TOTAL RETURN 13
PERFORMANCE COMPARISONS 14
ABOUT FEDERATED INVESTORS 14
MUTUAL FUND MARKET 14
INSTITUTIONAL 14
TRUST ORGANIZATIONS 14
BROKER/DEALERS 15
FINANCIAL STATEMENTS 15
_FUND HISTORY
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
Board of Directors without shareholder approval. Shareholders will be notified
before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of the
security, the issuer of any demand feature applicable to the security, or any
guarantor of either the security or any demand feature.
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 these participation
interests, 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 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,
broker/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 Fund'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 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.
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 purchase securities if, as a result of such purchase, 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, However, the Fund may invest as temporary
investments 25% or more of the value of its assets in cash, cash items,
(including 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) securities issued or guaranteed by the government of the
United States or its agencies, or instrumentalities or instruments secured by
these money market instruments, such as repurchase agreements.
DIVERSIFICATION OF INVESTMENTS
With respect to securities comprising 75% of its assets, the Fund will not
invest more than 10% of its total assets in the securities of any one issuer.
Under this limitation, each government 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 limitation, 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 AND DIRECTORS
The Fund will not purchase or retain the securities of any issuer if the
Officers and Directors of the Company 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 certificates of
deposit and demand and time deposits 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 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 Fund 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, present positions with
Cash Trust Series, Inc., and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
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.; Chief Executive Officer and Director,
Trustee, or Managing General Partner of the Funds. Mr. Donahue is the father of
J. Christopher Donahue, Executive Vice President and Director of the Company.
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Director
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's Hospital of
Pittsburgh; Director, Trustee, or Managing General Partner of the Funds;
formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
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
Birthdate: July 4, 1918
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
Birthdate: April 11, 1949
Executive 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 Executive 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 Company.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Director
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Director
Professor of Medicine and Member, Board of Trustees, University of Pittsburgh;
Medical Director, University of Pittsburgh Medical Center -- Downtown; Member,
Board of Directors, University of Pittsburgh Medical Center; formerly,
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore Hospitals;
Director, Trustee, or Managing General Partner of the Funds.
Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center -- Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Director
Attorney-at-law; Shareholder, Henny, Kochuba, 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
70 Westcliff Road
Westin, MA
Birthdate: March 16, 1942
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.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center -- Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Director
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Director
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Director
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director, Trustee, or Managing General Partner of the Funds; President Emeritus,
University of Pittsburgh; founding Chairman, National Advisory Council for
Environmental Policy and Technology and Federal Emergency Management Advisory
Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Director
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
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
Birthdate: October 22, 1930
Executive Vice President
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;
Executive Vice President of the Funds.
David M. Taylor *
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President, Controller, and Trustee, Federated Investors; Controller,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., and Passport Research, Ltd.; Senior Vice President, Federated
Shareholder Services; Senior Vice President, Federated Administrative Services;
Treasurer of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive 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.; Executive Vice President and
Secretary of the Funds.
* This Director is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the Board
of Directors handles the responsibilities of the Board of Directors
between meetings of the Board.
THE FUNDS
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals, Inc.; 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
Institutional Trust; Federated Master Trust; Federated Municipal Trust;
Federated Short-Term Municipal Trust; Federated Short-Term U.S. Government
Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated Total Return
Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S. Government
Securities Fund: 1-3 Years; Federated U.S, Government Securities Fund: 3-5
Years; 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; 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; Money Market
Management, Inc.; Money Market Obligations Trust; Money Market Trust; Municipal
Securities Income Trust; Newpoint Funds; 111 Corcoran Funds; Peachtree Funds;
The Planters Funds; RIMCO Monument Funds; The Shawmut Funds; Star Funds; The
Starburst Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; Trademark Funds;
Trust for Financial Institutions; Trust For Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations; The
Virtus Funds; World Investment Series, Inc.
SHARE OWNERSHIP
Officers and Directors as a group own less than 1% of the Fund's outstanding
shares.
As of September 18, 1995, the following shareholder(s) of record owned, in
nominee name accounts for the benefit of their customers, 5% or more of the
outstanding shares of the Municipal Cash Series: McDonald & Co. Securities,
Inc., Cincinnati, OH, owned approximately 168,477,776.85 shares (36.07%); BHC
Securities Inc., Philadelphia, PA, owned approximately 28,378,693.28 shares
(6.07%); and Hanifen Imhoff Clearing Corp. owned approximately 23,777,872.88
shares (5.09%).
Directors Compensation
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
CORPORATION CORPORATION*# FROM FUND COMPLEX +
John F. Donahue, $0 $0 for the Fund and
Chairman and Director 68 other investment companies in the Fund Complex
Thomas G. Bigley, $2,395 $20,688 for the Fund and
Director 49 other investment companies in the Fund Complex
John T. Conroy, $3,515 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
William J. Copeland, $3,515 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
James E. Dowd, $3,515 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D., $3,225 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
Edward L. Flaherty, Jr., $3,515 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
Peter E. Madden, $2,749 $90,563 for the Fund and
Director 64 other investment companies in the Fund Complex
Gregor F. Meyer, $3,225 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
John E. Murray, Jr., $1,600 $0 for the Fund and
Director 64 other investment companies in the Fund Complex
Wesley W. Posvar, $3,225 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
Marjorie P. Smuts, $3,225 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
*Information is furnished for the fiscal year ended May 31, 1995.
#The aggregate compensation is provided for the Corporation which is comprised
of 4 portfolios.
+The information is provided for the last calendar year.
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 Fund'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,
1995, 1994, and 1993, the adviser earned $2,619,462, $2,737,684, and $2,573,092,
respectively, of which $264,144, $315,012, and $132,140, respectively, were
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 years ended May 31, 1995, 1994, and 1993, the Administrators earned
$396,587, $441,902, and $389,931, 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 a director of Commercial Data
Services, Inc., a company which provides computer processing services to
Federated Administrative Services.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES AGREEMENT
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services, to stimulate distribution
activities and to cause services to be provided to shareholders ^ by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to,
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 Directors expect 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 ending May 31, 1995, payments in the amount of $523,892
were made pursuant to the Distribution Plan, all of which was paid to financial
institutions. In addition, for this period, the Fund paid Shareholder Services
fees ^ in the amount of $1,309,731. ^
Custodian and Portfolio Recordkeeper. State Street Bank and Trust Company ,
Boston, MA, is custodian for the securities and cash of the Fund. Federated
Services Company, Pittsburgh, PA, 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 yield is calculated based upon the seven days ending on the day of the
calculation, called the "base period." This yield is computed by: determining
the net change in the value of a hypothetical account with a balance of one
share at the beginning of the base period, with the net change excluding capital
changes but including the value of any additional shares purchased with
dividends earned from the original one share and all dividends declared on the
original and any purchased shares; dividing the net change in the account's
value by the value of the account at the beginning of the base period to
determine the base period return; and multiplying the base period return by
365/7.
The Fund's yield for the seven-day period ended May 31, 1995, was 3.37%.
EFFECTIVE YIELD
The effective yield is calculated by compounding the unannualized base period
return by: adding 1 to the base period return; raising the sum to the 365/7th
power; and subtracting 1 from the result.
The Fund's effective yield for the seven-day period ended May 31, 1995, was
3.43%.
TAX-EQUIVALENT YIELD
The Fund's tax-equivalent yield for the seven-day period ended May 31, 1995, was
5.58%.
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 1995
MULTISTATE MUNICIPAL FUNDS
FEDERAL INCOME TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%
JOINT $1- $39,001- $94,251- $143,601- OVER
RETURN 39,000 94,250 143,600 256,500 256,500
SINGLE $1- $23,351- $56,551- $117,951- OVER
RETURN 23,350 56,550 117,950 256,500 256,500
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%
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional state and
local taxes paid on comparable taxable investments were not used to
increase federal deductions.
The chart above is for illustrative purposes only. It is not an indicator
of past or future performance of Fund shares.
* Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income 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 computed by multiplying
the number of shares owned at the end of the period by the net asset value per
share at the end of the period. The number of shares owned at the end of the
period is based on the number of shares purchased at the beginning of the period
with $1,000, adjusted over the period by any additional shares, assuming the
monthly reinvestment of all dividends and distributions.
The Fund's average annual total returns for the one- year period and five-year
period ended May 31, 1995, and for the period from August 15, 1989 (start of
performance) through May 31, 1995 were 2.84%, 3.10%, and 3.48%, 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 offering price. 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.
ABOUT FEDERATED INVESTORS
Federated is dedicated to meeting investor needs which is reflected in its
investment decision making--structured, straightforward, and consistent. This
has resulted in a history of competitive performance with a range of competitive
investment products that have gained the confidence of thousands of clients and
their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts, and
traders dedicated to specific market sectors.
In the money market sector, Federated gained prominence in the mutual fund
industry in 1974 with the creation of the first institutional money market fund.
Simultaneously, the company pioneered the use of the amortized cost method of
accounting for valuing shares of money market funds, a principal means used by
money managers today to value money market fund shares. Other innovations
include the first institutional tax-free money market fund. As of December 31,
1994, Federated managed more than $31 billion in assets across approximately 43
money market funds, including 17 government, 8 prime and 18 municipal with
assets approximating $17 billion, $7.4 billion and $6.6 billion, respectively.
J. Thomas Madden, Executive Vice President, oversees Federated's equity and high
yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federated's domestic fixed income management. Henry A.
Frantzen, Executive Vice President, oversees the management of Federated's
international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $2 trillion to the more than 5,500 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL
Federated meets the needs of more than 4,000 institutional clients nationwide by
managing and servicing separate accounts and mutual funds for a variety of
applications, including defined benefit and defined contribution programs, cash
management, and asset/liability management. Institutional clients include
corporations, pension funds, tax-exempt entities, foundations/endowments,
insurance companies, and investment and financial advisors. The marketing
effort to these institutional clients is headed by John B. Fisher, President,
Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios.
The marketing effort to trust clients is headed by Mark R. Gensheimer, Executive
Vice President, Bank Marketing & Sales.
*Source: Investment Company Institute
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated mutual funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.
FINANCIAL STATEMENTS
The financial statements for Municipal Cash Series for the fiscal year ended May
31, 1995 are incorporated herein by reference to the Annual Report to
Shareholders of Municipal Cash Series dated May 31, 1995.
9080102B-MCS(9/95)
<PAGE>
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 short-term 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, 1995, 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, which is in paper form only, or a paper copy of this
prospectus, if you have received your prospectus electronically, 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, 1995
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1 Transfer Agent and Dividend
- ------------------------------------- Disbursing Agent 10
Independent Auditors 10
FINANCIAL HIGHLIGHTS--PRIME CASH
SERIES 2
- ------------------------------------- NET ASSET VALUE 10
-------------------------------------
GENERAL INFORMATION 3 INVESTING IN THE FUND 10
- ------------------------------------- -------------------------------------
INVESTMENT INFORMATION 3 Share Purchases 10
- -------------------------------------
Through a Financial Institution 10
Investment Objective 3 By Wire 10
Investment Policies 3 By Mail 11
Acceptable Investments 3 Systematic Investment Program 11
Variable Rate Demand Notes 4
Bank Instruments 4 Minimum Investment Required 11
Asset-Backed Securities 4 Certificates and Confirmations 11
Short-Term Credit Facilities 4
Dividends 11
Ratings 4 Capital Gains 11
Repurchase Agreements 5
Credit Enhancement 5 REDEEMING SHARES 11
-------------------------------------
Demand Features 5
When-Issued and Delayed
Delivery Through a Financial Institution 12
Transactions 5
Receiving Payment 12
Lending of Portfolio Securities 5
By Wire 12
Restricted and Illiquid By Mail 12
Securities 6
By Writing a Check 13
Concentration of Investments 6 By VISA Card 13
Investment Risks 6 Telephone Redemption 13
Investment Limitations 7 By a Systematic Withdrawal
Program 13
Regulatory Compliance 7
Accounts with Low Balances 14
CASH TRUST SERIES, INC. INFORMATION 7
- ------------------------------------- SHAREHOLDER INFORMATION 14
-------------------------------------
Management of the Cash Trust Voting Rights 14
Series, Inc. 7
Board of Directors 7 TAX INFORMATION 14
-------------------------------------
Investment Adviser 7
Advisory Fees 8
Adviser's Background 8 Federal Income Tax 14
Distribution of Shares 8 Pennsylvania Corporate Personal
Property Taxes 14
Distribution and Shareholder
Services 8 Other State and Local Taxes 14
Supplemental Payments to Financial
Institutions 9
PERFORMANCE INFORMATION 15
-------------------------------------
Administration of the Fund 9
Administrative Services 9
ADDRESSES 16
Custodian 10 -------------------------------------
<PAGE>
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).................................. 0.30%
12b-1 Fee (after waiver) (2)....................................... 0.10%
Total Other Expenses............................................... 0.59%
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 in the table above are based on expenses
expected during the fiscal year ending May 31, 1996. The total Fund
operating expenses were 0.99% for the fiscal year ended May 31, 1995, and
would have been 1.19% 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.
<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.
<PAGE>
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 14, 1995, on the Fund's
financial statements for the year ended May 31, 1995, 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,
-----------------------------------------------
1995 1994 1993 1992 1991 1990(A)
- --------------------------- ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------
INCOME FROM INVESTMENT OP-
ERATIONS
- ---------------------------
Net investment income 0.05 0.02 0.03 0.04 0.07 0.06
- ---------------------------
LESS DISTRIBUTIONS
- ---------------------------
Distributions from net
investment income (0.05) (0.02) (0.03) (0.04) (0.07) (0.06)
- --------------------------- ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PE-
RIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------- ------ ------ ------ ------ ------ ------
TOTAL RETURN (B) 4.60% 2.48% 2.61% 4.37% 6.99% 6.56%
- ---------------------------
RATIOS TO AVERAGE NET AS-
SETS
- ---------------------------
Expenses 0.99% 0.99% 0.99% 0.98% 0.94% 0.73%(c)
- ---------------------------
Net investment income 4.57% 2.45% 2.58% 4.21% 6.50% 7.82%(c)
- ---------------------------
Expense
waiver/reimbursement (d) 0.20% 0.18% 0.15% 0.22% 0.44% 0.46%(c)
- ---------------------------
SUPPLEMENTAL DATA
- ---------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Net assets, end of pe-
riod
(000 omitted) $1,027,083 $791,147 $796,832 $750,016 $562,465
$189,254
- -----------------------
</TABLE>
(a) Reflects operations for the period from August 18, 1989 (date of initial
public investment) to May 31, 1990.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
Further information about the Fund's performance is contained in the Fund's
Annual Report dated May 31, 1995, which can be obtained free of charge.
<PAGE>
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, diversified portfolio investing in
short-term money market securities. A minimum initial investment of $10,000 is
required, except for 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 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 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; and
. other money market instruments.
<PAGE>
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 Ratings Group ("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."
<PAGE>
REPURCHASE AGREEMENTS. Certain securities in which the Fund invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell securities to the 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.
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 or 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 into transactions to
sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at
later dates. The 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
<PAGE>
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. There
is the risk that when lending portfolio securities, the securities may not be
available to the 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.
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. Concentrating investments in
one industry may subject the Fund to more risk than if it did not concentrate.
INVESTMENT RISKS
ECDs, ETDs, Yankee CDs, Canadian Commercial Paper, and Europaper are subject
to different risks than domestic obligations of domestic banks or
corporations. Examples of these risks include international economic and
political developments, foreign governmental restrictions that may
<PAGE>
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
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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. An 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.
<PAGE>
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. Federated Advisers, a Delaware business trust,
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors. All of the Class A (voting) shares of Federated Investors are
owned by a trust, the trustees of which are John F. Donahue, Chairman and
Trustee of Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son,
J. Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated 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. With over $72 billion invested across
more than 260 funds under management and/or administration by its
subsidiaries, as of December 31, 1994, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,750 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.
Both the Company and the adviser have adopted strict codes of ethics governing
the conduct of all employees who manage the Fund and its portfolio securities.
These codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance
and periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial
public offerings; and prohibit taking profits on securities held for less than
sixty days. Violations of the codes are subject to review by the Directors,
and could result in severe penalties.
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.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
DISTRIBUTION AND SHAREHOLDER SERVICES. 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
<PAGE>
Distribution Plan. The distributor may select financial institutions such as
banks, fiduciaries, custodians for public funds, investment advisers, and
broker/dealers to provide sales services or distribution-related support as
agents for their clients or customers.
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.
In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under
which the Fund may make payments up to .25 of 1% of the average daily net
asset value of the Fund to obtain personal services for shareholders and for
the maintenance of shareholder accounts. Under the Shareholder Services
Agreement, Federated Shareholders Services will either perform shareholder
services directly or will select financial institutions to perform shareholder
services. From time to time and for such periods as deemed appropriate, the
amounts stated above may be reduced voluntarily. 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, the distributor, or Federated
Shareholder Services, as appropriate.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. The distributor may also pay
financial institutions a fee for providing certain services to shareholders or
as financial assistance for providing substantial marketing and sales support.
The support may include sponsoring sales, educational, and training seminars
for employees of the financial institution, providing sales literature, and
engineering computer software programs that emphasize the attributes of the
Fund. Such financial assistance will be predicated upon the amount of shares
of the Fund the financial institution sells or may sell and/or upon the type
and nature of sales or marketing support furnished by the financial
institution. Any payments made in addition to the amounts paid under the
Plan(s) may be reimbursed by the adviser or its affiliates, and not the Fund.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting 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
<PAGE>
mutual funds advised by affiliates of Federated Investors. Federated
Administrative Services may choose voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, MA is custodian for
the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Boston, MA is transfer agent for the shares of, and dividend disbursing agent
for, the Fund.
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. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, 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, 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. 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 3:00 p.m. (Eastern time) that same day. Federal funds should
be wired as follows: Federated Services Company, c/o State Street Bank and
Trust Company, Boston, MA; Attention; EDGEWIRE; For Credit to: Prime Cash
Series; Fund
<PAGE>
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: Federated Services Company, Prime Cash Series, P.O. Box 8600, Boston, MA
02266-8600. 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 at any Automated Clearing House member institution 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. The minimum initial investment for
retirement plans is $1,000. Minimum subsequent investments must be $500.
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.
<PAGE>
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.
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 MAIL
Shares may be redeemed by sending a written request to: Prime Cash Series,
P.O. Box 8600 Boston, MA 02266-8600. 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 should be sent by insured mail
with the written request to: Federated Services Company, 500 Victory Road-2nd
Floor, North Quincy, MA 02171.
Shareholders requesting 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 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.
<PAGE>
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, a checking account for
redeeming shares will be established. For further information, contact State
Street Bank and Trust Company.
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 Company to redeem shares. Cancelled checks are sent to
the shareholder each month.
BY VISA CARD. At the shareholder's request, State Street Bank and Trust
Company 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 and
Trust Company, will be charged to the account for this service. For further
information, contact the Fund.
TELEPHONE REDEMPTION
Shares may be redeemed by telephoning the Fund. Telephone instructions may be
recorded and if reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions. An
authorization form permitting the Fund to accept telephone requests must first
be completed. Authorization forms and information on this service are
available from Federated Securities Corp.
If the redemption request is received before 12:00 noon (Eastern time), the
proceeds will be wired the same day to the shareholder's account at a domestic
commercial bank which is a member of the Federal Reserve System, and those
shares redeemed will not be entitled to that day's dividend. A daily dividend
will be paid on shares redeemed if the redemption request is received after
12:00 noon (Eastern time). However, the proceeds are not wired until 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 12:00 noon (Eastern time).
In the event of drastic economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If such a case should occur,
another method of redemption, such as "By Mail," should be considered. If at
any time the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders would be promptly notified.
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 Automated Clearing House member.
Shareholders may apply for participation in this program through their
financial institution.
<PAGE>
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 Fund gives the shareholder one vote in Director elections
and other matters submitted to shareholders for vote. All shares of each
portfolio in the Company have equal voting rights, except that in matters
affecting only a particular portfolio, only shares of that portfolio 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.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
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.
<PAGE>
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, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
<PAGE>
PRIME CASH SERIES
PROSPECTUS
A Diversified Portfolio of Cash Trust
Series, Inc., an Open-End Management
Investment Company
Prospectus dated September 30, 1995
[LOGO] Federated Securities Corp.
Distributor
A subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
CUSIP 147551105
9080101A (9/95)
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"), a portfolio of Cash Trust Series, Inc.
(the "Company") dated September 30, 1995. This Statement is not a
prospectus. To receive a copy of a prospectus, write or call the Fund.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Statement dated September 30 1995
Federated Securities Corp.
Distributor
A subsidiary of Federated Investors
TABLE OF CONTENTS
FUND HISTORY 1 Investing in Minerals3
INVESTMENT POLICIES 1 BROKERAGE TRANSACTIONS 3
Acceptable Investments 1 Cash Trust Series, Inc.
Bank Instruments 1 MANAGEMENT 4
When-Issued and Delayed The Funds 8
Delivery Transactions 1 Share Ownership 8
Repurchase Agreements 1 Directors Compensation 8
Reverse Repurchase Agreements 1 Director Liability 9
Lending of Portfolio Securities2
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 and
Directors 3
Investing in Options 3
INVESTMENT ADVISORY SERVICES 9
Investment Adviser 9
Advisory Fees 9
State Expense Limitations 9
FUND ADMINISTRATION 10
DISTRIBUTION PLAN AND
SHAREHOLDER SERVICES AGREEMENT 10
DETERMINING NET ASSET VALUE 10
REDEMPTION IN KIND 11
THE FUND'S TAX STATUS 11
PERFORMANCE INFORMATION 11
Yield 11
Effective Yield 11
Total Return 11
Performance Comparisons 12
ABOUT FEDERATED INVESTORS 12
Mutual Fund Market 12
Institutional 12
Trust Organizations 12
Broker/Dealers 13
FINANCIAL STATEMENTS 13
FUND HISTORY
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
Board of Directors without shareholder approval. Shareholders will be notified
before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of the
security, the issuer of any demand feature applicable to the security, or any
guarantor of either the security or any demand feature.
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 the Fund will invest 25% or more of the value of its total
assets in commercial paper issued by finance companies.
The Fund may invest 25% or more of the value of its total assets in cash or
cash items (including 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), securities issued or guaranteed by the
government of the United States or its agencies, or instrumentalities, 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 net 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 AND DIRECTORS
The Fund will not purchase or retain the securities of any issuer if the
Officers and Directors of the Company 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 certificates of
deposit and demand and time deposits 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 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 Fund 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, present positions with
Cash Trust Series, Inc., and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
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.; Chief Executive Officer and Director,
Trustee, or Managing General Partner of the Funds. Mr. Donahue is the father of
J. Christopher Donahue, Executive Vice President and Director of the Company.
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Director
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's Hospital of
Pittsburgh; Director, Trustee, or Managing General Partner of the Funds;
formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
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
Birthdate: July 4, 1918
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
Birthdate: April 11, 1949
Executive 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 Executive 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 Company.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Director
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Director
Professor of Medicine and Member, Board of Trustees, University of Pittsburgh;
Medical Director, University of Pittsburgh Medical Center -- Downtown; Member,
Board of Directors, University of Pittsburgh Medical Center; formerly,
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore Hospitals;
Director, Trustee, or Managing General Partner of the Funds.
Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center -- Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Director
Attorney-at-law; Shareholder, Henny, Kochuba, 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
70 Westcliff Road
Westin, MA
Birthdate: March 16, 1942
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.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center -- Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Director
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Director
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Director
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director, Trustee, or Managing General Partner of the Funds; President Emeritus,
University of Pittsburgh; founding Chairman, National Advisory Council for
Environmental Policy and Technology and Federal Emergency Management Advisory
Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Director
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
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
Birthdate: October 22, 1930
Executive Vice President
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;
Executive Vice President of the Funds.
David M. Taylor *
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President, Controller, and Trustee, Federated Investors; Controller,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., and Passport Research, Ltd.; Senior Vice President, Federated
Shareholder Services; Senior Vice President, Federated Administrative Services;
Treasurer of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive 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.; Executive Vice President and
Secretary of the Funds.
* This Director is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the Board
of Directors handles the responsibilities of the Board of Directors
between meetings of the Board.
THE FUNDS
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; 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
Institutional Trust; Federated Master Trust; Federated Municipal Trust;
Federated Short-Term Municipal Trust; Federated Short-Term U.S. Government
Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated Total Return
Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S. Government
Securities Fund: 1-3 Years; Federated U.S, Government Securities Fund: 3-5
Years; 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; 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; Money Market
Management, Inc.; Money Market Obligations Trust; Money Market Trust; Municipal
Securities Income Trust; Newpoint Funds; 111 Corcoran Funds; Peachtree Funds;
The Planters Funds; RIMCO Monument Funds; The Shawmut Funds; Star Funds; The
Starburst Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; Trademark Funds;
Trust for Financial Institutions; Trust For Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations; The
Virtus Funds; World Investment Series, Inc.
SHARE OWNERSHIP
Officers and Directors as a group own less than 1% of the Fund's outstanding
shares.
As of September 18, 1995, , the following shareholder(s) of record owned, in
nominee name accounts for the benefit of their customers, 5% or more of the
outstanding shares of the Prime Cash Series: BHC Securities Inc., Philadelphia,
PA, owned approximately 172,622,442.07 shares (13.05%); Primevest Financial
Services, St. Cloud, MN, owned approximately 144,268,789.05 shares (10.91%);
Hanifen Imhoff Clearing Corp., Denver, CO, owned approximately 88,736,811.95
shares (6.71%); and Stern, Agee & Leach, Birmingham, AL, owned approximately
71,587,287.26 shares (5.41%).
Directors Compensation
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
CORPORATION CORPORATION*# FROM FUND COMPLEX +
John F. Donahue, $0 $0 for the Fund and
Chairman and Director 68 other investment companies in the Fund Complex
Thomas G. Bigley, $2,395 $20,688 for the Fund and
Director 49 other investment companies in the Fund Complex
John T. Conroy, $3,515 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
William J. Copeland, $3,515 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
James E. Dowd, $3,515 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D., $3,225 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
Edward L. Flaherty, Jr., $3,515 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
Peter E. Madden, $2,749 $90,563 for the Fund and
Director 64 other investment companies in the Fund Complex
Gregor F. Meyer, $3,225 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
John E. Murray, Jr., $1,600 $0 for the Fund and
Director 64 other investment companies in the Fund Complex
Wesley W. Posvar, $3,225 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
Marjorie P. Smuts, $3,225 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
*Information is furnished for the fiscal year ended May 31, 1995.
#The aggregate compensation is provided for the Corporation which is comprised
of 4 portfolios.
+The information is provided for the last calendar year.
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 Fund'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,
1995, 1994, and 1993, the adviser earned $4,431,610, $4,069,739, and $3,977,466,
respectively, of which $1,803,372, $1,478,163, and $1,193,205, respectively,
were 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 years ended May 31, 1995, 1994, and 1993, the Administrators earned
$670,946, $621,911, and $600,408, 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 a director of Commercial Data
Services, Inc., a company which provides computer processing services to
Federated Administrative Services.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES AGREEMENT
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services, to stimulate distribution
activities and to cause services to be provided to shareholders ^ by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to,
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 Directors expect 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 ending May 31, 1995, payments in the amount of $833,391
were made pursuant to the Distribution Plan, all of which was paid to financial
institutions. In addition, for this period, the Fund paid Shareholder Services
fees ^ in the amount of $2,215,805. ^
Custodian and Portfolio Recordkeeper. State Street Bank and Trust Company ,
Boston, MA, is custodian for the securities and cash of the Fund. Federated
Services Company, Pittsburgh, PA, 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 yield is calculated based upon the seven days ending on the day of the
calculation, called the "base period." This yield is computed by: determining
the net change in the value of a hypothetical account with a balance of one
share at the beginning of the base period, with the net change excluding capital
changes but including the value of any additional shares purchased with
dividends earned from the original one share and all dividends declared on the
original and any purchased shares; dividing the net change in the account's
value by the value of the account at the beginning of the base period to
determine the base period return; and multiplying the base period return by
365/7.
The Fund's yield for the seven-day period ended May 31, 1995, was 5.28%.
EFFECTIVE YIELD
The effective yield is calculated by compounding the unannualized base period
return by: adding 1 to the base period return; raising the sum to the 365/7th
power; and subtracting 1 from the result.
The Fund's effective yield for the seven-day period ended May 31, 1995, was
5.42%.
TOTAL RETURN
Average annual total return is the average compounded rate of return for a given
period that would equate a $1,000 initial investment to the ending redeemable
value of that investment. The ending redeemable value is computed by multiplying
the number of shares owned at the end of the period by the net asset value per
share at the end of the period. The number of shares owned at the end of the
period is based on the number of shares purchased at the beginning of the period
with $1,000, adjusted over the period by any additional shares, assuming the
monthly reinvestment of all dividends and distributions.
The Fund's average annual total returns for the one- year period and five-year
period ended May 31, 1995, and for the period from August 15, 1989 (start of
performance) through May 31, 1995 were 4.60%, 4.20%, and 4.75%, 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 offering price. 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.
ABOUT FEDERATED INVESTORS
Federated is dedicated to meeting investor needs which is reflected in its
investment decision making--structured, straightforward, and consistent. This
has resulted in a history of competitive performance with a range of competitive
investment products that have gained the confidence of thousands of clients and
their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts, and
traders dedicated to specific market sectors.
In the money market sector, Federated gained prominence in the mutual fund
industry in 1974 with the creation of the first institutional money market fund.
Simultaneously, the company pioneered the use of the amortized cost method of
accounting for valuing shares of money market funds, a principal means used by
money managers today to value money market fund shares. Other innovations
include the first institutional tax-free money market fund. As of December 31,
1994, Federated managed more than $31 billion in assets across approximately 43
money market funds, including 17 government, 8 prime and 18 municipal with
assets approximating $17 billion, $7.4 billion and $6.6 billion, respectively.
J. Thomas Madden, Executive Vice President, oversees Federated's equity and high
yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federated's domestic fixed income management. Henry A.
Frantzen, Executive Vice President, oversees the management of Federated's
international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $2 trillion to the more than 5,500 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL
Federated meets the needs of more than 4,000 institutional clients nationwide by
managing and servicing separate accounts and mutual funds for a variety of
applications, including defined benefit and defined contribution programs, cash
management, and asset/liability management. Institutional clients include
corporations, pension funds, tax-exempt entities, foundations/endowments,
insurance companies, and investment and financial advisors. The marketing
effort to these institutional clients is headed by John B. Fisher, President,
Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios.
The
*Source: Investment Company Institute
marketing effort to trust clients is headed by Mark R. Gensheimer, Executive
Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated mutual funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.
FINANCIAL STATEMENTS
The financial statements for Prime Cash Series for the fiscal year ended May 31,
1995 are incorporated herein by reference to the Annual Report to Shareholders
of Prime Cash Series dated May 31, 1995.
9080101B-PCS(9/95)
<PAGE>
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 short-term 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, 1995, 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, which is in paper form only, or a paper copy of this
prospectus, if you have received your prospectus electronically, 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, 1995
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1 INVESTING IN THE FUND 7
- ------------------------------------- -------------------------------------
FINANCIAL HIGHLIGHTS--TREASURY CASH Share Purchases 7
SERIES 2 Through a Financial Institution 7
- ------------------------------------- By Wire 7
By Mail 8
GENERAL INFORMATION 3 Systematic Investment Program 8
- ------------------------------------- Minimum Investment Required 8
Certificates and Confirmations 8
INVESTMENT INFORMATION 3 Dividends 8
- ------------------------------------- Capital Gains 8
Investment Objective 3 REDEEMING SHARES 8
Investment Policies 3 -------------------------------------
Acceptable Investments 3
Repurchase Agreements 3 Through a Financial Institution 9
When-Issued and Delayed Delivery Receiving Payment 9
Transactions 3 By Wire 9
Investment Limitations 4 By Mail 9
Regulatory Compliance 4 By Writing a Check 10
By VISA Card 10
FUND INFORMATION 4
- ------------------------------------- Telephone Redemption 10
By a Systematic Withdrawal
Program 10
Accounts with Low Balances 11
Management of the Fund 4
Board of Directors 4
Investment Adviser 4 SHAREHOLDER INFORMATION 11
Advisory Fees 5 -------------------------------------
Adviser's Background 5
Distribution of Shares 5 Voting Rights 11
Distribution and Shareholder
Services 5
TAX INFORMATION 11
-------------------------------------
Supplemental Payments to
Financial Institutions 6
Federal Income Tax 11
Administration of the Fund 6
Administrative Services 6 Pennsylvania Corporate and
Custodian 7 Personal Property Taxes 11
Transfer Agent and Dividend Other State and Local Taxes 12
Disbursing Agent 7
Independent Auditors 7 PERFORMANCE INFORMATION 12
-------------------------------------
NET ASSET VALUE 7
- ------------------------------------- ADDRESSES 13
-------------------------------------
<PAGE>
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).................................. 0.42%
12b-1 Fee (after waiver) (2)....................................... 0.10%
Total Other Expenses............................................... 0.47%
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 1.07% 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.
<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.
<PAGE>
TREASURY 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 14, 1995, on the Fund's
financial statements for the year ended May 31, 1995, 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,
-----------------------------------------------------
1995 1994 1993 1992 1991 1990(A)
- ----------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------
INCOME FROM INVESTMENT
OPERATIONS
- -----------------------
Net investment income 0.04 0.02 0.02 0.04 0.07 0.02
- -----------------------
LESS DISTRIBUTIONS
- -----------------------
Distributions from net
investment
income (0.04) (0.02) (0.02) (0.04) (0.07) (0.02)
- ----------------------- ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
PERIOD ------ ------ ------ ------ ------ ------
- -----------------------
TOTAL RETURN (B) 4.34% 2.37% 2.47% 4.24% 6.83% 2.42%
- -----------------------
RATIOS TO AVERAGE NET
ASSETS
- -----------------------
Expenses 0.99% 0.99% 0.99% 0.98% 0.88%
0.60%(c)
- -----------------------
Net investment income 4.26% 2.33% 2.46% 4.18% 6.39%
7.75%(c)
- -----------------------
Expense waiver/
reimbursement (d) 0.08% 0.10% 0.04% 0.04% 0.22%
0.44%(c)
- -----------------------
SUPPLEMENTAL DATA
- -----------------------
<CAPTION>
Net assets, end of pe-
riod
(000 omitted)
- ----------------------- $424,091 $427,005 $532,334 $638,761 $713,430 $127,800
</TABLE>
(a) Reflects operations for the period from February 7, 1990 (date of initial
public investment) to May 31, 1990.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
Further information about the Fund's performance is contained in the Fund's
Annual Report dated May 31, 1995, which can be obtained free of charge.
<PAGE>
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, diversified portfolio investing only
in short-term U.S. Treasury securities. A minimum initial investment of
$10,000 is required, except for 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, broker/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.
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
<PAGE>
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 or 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 into transactions to
sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at
later dates. The 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 its
total 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. An 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.
<PAGE>
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. Federated Advisers, a Delaware business trust,
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors. All of the Class A (voting) shares of Federated Investors are
owned by a trust, the trustees of which are John F. Donahue, Chairman and
Trustee of Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son,
J. Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated 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. With over $72 billion invested across
more than 260 funds under management and/or administration by its
subsidiaries, as of December 31, 1994, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,750 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.
Both the Company and the adviser have adopted strict codes of ethics governing
the conduct of all employees who manage the Fund and its portfolio securities.
These codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance
and periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial
public offerings; and prohibit taking profits on securities held for less than
sixty days. Violations of the codes are subject to review by the Directors,
and could result in severe penalties.
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.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
DISTRIBUTION AND SHAREHOLDER SERVICES. 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,
<PAGE>
custodians for public funds, investment advisers, and broker/dealers to
provide sales services or distribution-related support as agents for their
clients or customers.
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.
In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under
which the Fund may make payments up to .25 of 1% of the average daily net
asset value of the Fund to obtain personal services for shareholders and for
the maintenance of shareholder accounts. Under the Shareholder Services
Agreement, Federated Shareholders Services will either perform shareholder
services directly or will select financial institutions to perform shareholder
services. From time to time and for such periods as deemed appropriate, the
amounts stated above may be reduced voluntarily. 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, the distributor, or Federated
Shareholder Services, as appropriate.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. The distributor may also pay
financial institutions a fee for providing certain services to shareholders or
as financial assistance for providing substantial marketing and sales support.
The support may include sponsoring sales, educational, and training seminars
for employees of the financial institution, providing sales literature, and
engineering computer software programs that emphasize the attributes of the
Fund. Such financial assistance will be predicated upon the amount of shares
of the Fund the financial institution sells or may sell and/or upon the type
and nature of sales or marketing support furnished by the financial
institution. Any payments made in addition to the amounts paid under the
Plan(s) may be reimbursed by the adviser or its affiliates, and not the Fund.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting 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
<PAGE>
mutual funds advised by affiliates of Federated Investors. Federated
Administrative Services may choose voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, MA, is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Boston, MA, is transfer agent for the shares of, and dividend disbursing agent
for, the Fund.
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. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, 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, 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. 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 3:00 p.m. (Eastern time) that same day. Federal funds should
be wired as follows: Federated Services Company, c/o State Street Bank
<PAGE>
and Trust Company, Boston, MA; 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: Federated Services Company, Treasury Cash Series, P.O. Box 8600,
Boston, MA 02266-8600. 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 at any Automated Clearing House member institution 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. The minimum initial investment for
retirement plans is $1,000. Minimum subsequent investments must be $500.
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.
<PAGE>
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.
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 MAIL
Shares may be redeemed by sending a written request to: Treasury Cash Series,
P.O. Box 8600, Boston, MA 02266-8600. 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 should be sent by insured mail
with the written request to: Federated Services Company, 500 Victory Road-2nd
Floor, North Quincy, MA, 02171.
Shareholders requesting 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:
. 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 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
<PAGE>
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, a checking account for
redeeming shares will be established. For further information, contact State
Street Bank and Trust Company.
With this checking account, shares may be redeemed by writing a check for
$100.00 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 Company to redeem shares. Cancelled checks
are sent to the shareholder each month.
BY VISA CARD. At the shareholder's request, State Street Bank and Trust
Company 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 and
Trust Company, will be charged to the account for this service. For further
information, contact the Fund.
TELEPHONE REDEMPTION
Shares may be redeemed by telephoning the Fund. Telephone instructions may be
recorded and if reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions. An
authorization form permitting the Fund to accept telephone requests must first
be completed. Authorization forms and information on this service are
available from Federated Securities Corp.
If the redemption request is received before 12:00 noon (Eastern time), the
proceeds will be wired the same day to the shareholder's account at a domestic
commercial bank which is a member of the Federal Reserve System, and those
shares redeemed will not be entitled to that day's dividend. A daily dividend
will be paid on shares redeemed if the redemption request is received after
12:00 noon (Eastern time). However, the proceeds are not wired until 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 12:00 noon (Eastern time).
In the event of drastic economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If such a case should occur,
another method of redemption, such as "By Mail," should be considered. If at
any time the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders would be promptly notified.
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 Automated Clearing House member.
Shareholders may apply for participation in this program through their
financial institution.
<PAGE>
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 Fund gives the shareholder one vote in Director elections
and other matters submitted to shareholders for vote. All shares of each
portfolio in the Company have equal voting rights, except that in matters
affecting only a particular portfolio, only shares of that portfolio 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.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
Shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.
<PAGE>
OTHER STATE AND LOCAL TAXES. The Fund will limit its investments to those
which, if owned directly, pay interest exempt from state personal income tax.
However, under the laws of some states, the net investment income distributed
by the Fund may be taxable to shareholders. 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, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
<PAGE>
ADDRESSES
- --------------------------------------------------------------------------------
Cash Trust Series, Inc. Federated Investors Tower
Pittsburgh, PA 15222-3779
- --------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- --------------------------------------------------------------------------------
Investment Adviser
Federated Advisers Federated Investors Tower
Pittsburgh, PA 15222-3779
- --------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company
P.O. Box 8600 Boston, MA
02266-8600
- --------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company
P.O. Box 8600 Boston, MA
02266-8600
- --------------------------------------------------------------------------------
Independent Public Accountants
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, PA 15222
- --------------------------------------------------------------------------------
<PAGE>
TREASURY CASH SERIES
PROSPECTUS
A Diversified Portfolio of
Cash Trust Series, Inc., an Open-End
Management Investment Company
Prospectus dated September 30, 1995
[LOGO] FEDERATED SECURITIES CORP.
DISTRIBUTOR
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
CUSIP 147551402
0010801A (9/95)
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"), a portfolio of Cash Trust Series,
Inc. (the "Company") dated September 30, 1995. This Statement is not a
prospectus. To receive a copy of a prospectus, write or call the Fund.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Statement dated September 30, 1995
Federated Securities Corp.
Distributor
A subsidiary of Federated Investors
TABLE OF CONTENTS
FUND HISTORY 1 SHARE OWNERSHIP 7
INVESTMENT POLICIES 1 DIRECTORS COMPENSATION 8
WHEN-ISSUED AND DELAYED DIRECTOR LIABILITY 8
DELIVERY TRANSACTIONS 1
REPURCHASE AGREEMENTS 1
REVERSE REPURCHASE AGREEMENTS 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 RESTRICTED
SECURITIES 2
INVESTING IN COMMODITIES 2
CONCENTRATION OF INVESTMENTS 2
DIVERSIFICATION OF INVESTMENTS 2
UNDERWRITING 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 AND
DIRECTORS 2
INVESTING IN OPTIONS 2
INVESTING IN MINERALS 3
BROKERAGE TRANSACTIONS 3
CASH TRUST SERIES, INC.
MANAGEMENT 3
THE FUNDS 7
INVESTMENT ADVISORY SERVICES 9
INVESTMENT ADVISER 9
ADVISORY FEES 9
STATE EXPENSE LIMITATIONS 9
FUND ADMINISTRATION 9
DISTRIBUTION PLAN AND
SHAREHOLDER SERVICES AGREEMENT 9
DETERMINING NET ASSET VALUE 10
REDEMPTION IN KIND 10
THE FUND'S TAX STATUS 10
PERFORMANCE INFORMATION 11
YIELD 11
EFFECTIVE YIELD 11
TOTAL RETURN 11
PERFORMANCE COMPARISONS 11
ABOUT FEDERATED INVESTORS 11
MUTUAL FUND MARKET 12
INSTITUTIONAL 12
TRUST ORGANIZATIONS 12
BROKER/DEALERS 12
FINANCIAL STATEMENTS 12
FUND HISTORY
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 November 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
Board of 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.
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.
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 purchase or sell securities which are restricted as to resale
under federal securities law.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets in any one
industry. The U.S. government is not considered to be an industry.
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, or if it would
own more than 10% of the outstanding voting securities of that issuer.
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.
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 AND DIRECTORS
The Fund will not purchase or retain the securities of any issuer if the
Officers and Directors of the Company 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 certificates of
deposit and demand and time deposits 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 Fund 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, present positions with
Cash Trust Series, Inc., and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
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.; Chief Executive Officer and Director,
Trustee, or Managing General Partner of the Funds. Mr. Donahue is the father of
J. Christopher Donahue, Executive Vice President and Director of the Company.
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Director
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's Hospital of
Pittsburgh; Director, Trustee, or Managing General Partner of the Funds;
formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
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
Birthdate: July 4, 1918
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
Birthdate: April 11, 1949
Executive 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 Executive 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 Company.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Director
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Director
Professor of Medicine and Member, Board of Trustees, University of Pittsburgh;
Medical Director, University of Pittsburgh Medical Center -- Downtown; Member,
Board of Directors, University of Pittsburgh Medical Center; formerly,
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore Hospitals;
Director, Trustee, or Managing General Partner of the Funds.
Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center -- Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Director
Attorney-at-law; Shareholder, Henny, Kochuba, 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
70 Westcliff Road
Westin, MA
Birthdate: March 16, 1942
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.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center -- Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Director
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Director
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Director
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director, Trustee, or Managing General Partner of the Funds; President Emeritus,
University of Pittsburgh; founding Chairman, National Advisory Council for
Environmental Policy and Technology and Federal Emergency Management Advisory
Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Director
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
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
Birthdate: October 22, 1930
Executive Vice President
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;
Executive Vice President of the Funds.
David M. Taylor *
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President, Controller, and Trustee, Federated Investors; Controller,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., and Passport Research, Ltd.; Senior Vice President, Federated
Shareholder Services; Senior Vice President, Federated Administrative Services;
Treasurer of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive 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.; Executive Vice President and
Secretary of the Funds.
* This Director is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the Board
of Directors handles the responsibilities of the Board of Directors
between meetings of the Board.
THE FUNDS
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; 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
Institutional Trust; Federated Master Trust; Federated Municipal Trust;
Federated Short-Term Municipal Trust; Federated Short-Term U.S. Government
Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated Total Return
Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S. Government
Securities Fund: 1-3 Years; Federated U.S, Government Securities Fund: 3-5
Years; 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; 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; Money Market
Management, Inc.; Money Market Obligations Trust; Money Market Trust; Municipal
Securities Income Trust; Newpoint Funds; 111 Corcoran Funds; Peachtree Funds;
The Planters Funds; RIMCO Monument Funds; The Shawmut Funds; Star Funds; The
Starburst Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; Trademark Funds;
Trust for Financial Institutions; Trust For Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations; The
Virtus Funds; World Investment Series, Inc.
SHARE OWNERSHIP
Officers and Directors as a group own less than 1% of the Fund's outstanding
shares.
As of September 18, 1995, , the following shareholder(s) of record owned, in
nominee accounts for the benefit of their customers, 5% or more of the
outstanding shares of the Treasury Cash Series: Woodward & Lothrop Inc.,
Alexandria, VA, owned approximately 100,049,000 shares (16.57%); BHC Securities
Inc., Philadelphia, PA, owned approximately 60,955,654.46 shares (10,09%); and
Corptrust & Co., Bank of America, Chicago, IL, owned approximately 17,136,965.16
(6.15%).
Directors Compensation
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
CORPORATION CORPORATION*# FROM FUND COMPLEX +
John F. Donahue, $0 $0 for the Fund and
Chairman and Director 68 other investment companies in the Fund Complex
Thomas G. Bigley, $2,395 $20,688 for the Fund and
Director 49 other investment companies in the Fund Complex
John T. Conroy, $3,515 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
William J. Copeland, $3,515 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
James E. Dowd, $3,515 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D., $3,225 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
Edward L. Flaherty, Jr., $3,515 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
Peter E. Madden, $2,749 $90,563 for the Fund and
Director 64 other investment companies in the Fund Complex
Gregor F. Meyer, $3,225 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
John E. Murray, Jr., $1,600 $0 for the Fund and
Director 64 other investment companies in the Fund Complex
Wesley W. Posvar, $3,225 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
Marjorie P. Smuts, $3,225 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
*Information is furnished for the fiscal year ended May 31, 1995.
#The aggregate compensation is provided for the Corporation which is comprised
of 4 portfolios.
+The information is provided for the last calendar year.
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 Fund'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,
1995, 1994, and 1993, the adviser earned $2,165,237, $2,413,838, and $3,022,161,
respectively, of which $351,246, $475,263, and $242,785, respectively, were
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 years ended May 31, 1995, 1994, and 1993, the Administrators earned
$327,818, $441,499, and $469,245, 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 a director of Commercial Data
Services, Inc., a company which provides computer processing services to
Federated Administrative Services.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES AGREEMENT
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services, to stimulate distribution
activities and to cause services to be provided to shareholders ^ by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to,
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 Directors expect 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 ending May 31, 1995, payments in the amount of $433,048
were made pursuant to the Distribution Plan, all of which was paid to financial
institutions. In addition, for this period, the Fund paid Shareholder Services
fees ^ in the amount of $1,082,621. ^
Custodian and Portfolio Recordkeeper. State Street Bank and Trust Company ,
Boston, MA, is custodian for the securities and cash of the Fund. Federated
Services Company, Pittsburgh, PA, 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 yield is calculated based upon the seven days ending on the day of the
calculation, called the "base period." This yield is computed by: determining
the net change in the value of a hypothetical account with a balance of one
share at the beginning of the base period, with the net change excluding capital
changes but including the value of any additional shares purchased with
dividends earned from the original one share and all dividends declared on the
original and any purchased shares; dividing the net change in the account's
value by the value of the account at the beginning of the base period to
determine the base period return; and multiplying the base period return by
365/7.
The Fund's yield for the seven-day period ended May 31, 1995, was 5.13%.
EFFECTIVE YIELD
The effective yield is calculated by compounding the unannualized base period
return by: adding 1 to the base period return; raising the sum to the 365/7th
power; and subtracting 1 from the result.
The Fund's effective yield for the seven-day period ended May 31, 1995, was
5.26%.
TOTAL RETURN
Average annual total return is the average compounded rate of return for a given
period that would equate a $1,000 initial investment to the ending redeemable
value of that investment. The ending redeemable value is computed by multiplying
the number of shares owned at the end of the period by the net asset value per
share at the end of the period. The number of shares owned at the end of the
period is based on the number of shares purchased at the beginning of the period
with $1,000, adjusted over the period by any additional shares, assuming the
monthly reinvestment of all dividends and distributions.
The Fund's average annual total returns for the one- year period and the five-
year period ended May 31, 1995, and for the period from February 7, 1990 (start
of performance) to May 31, 1995 were 4.34%, 4.04%, and 4.26%, 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 offering price. 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.
ABOUT FEDERATED INVESTORS
Federated is dedicated to meeting investor needs which is reflected in its
investment decision making--structured, straightforward, and consistent. This
has resulted in a history of competitive performance with a range of competitive
investment products that have gained the confidence of thousands of clients and
their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts, and
traders dedicated to specific market sectors.
In the money market sector, Federated gained prominence in the mutual fund
industry in 1974 with the creation of the first institutional money market fund.
Simultaneously, the company pioneered the use of the amortized cost method of
accounting for valuing shares of money market funds, a principal means used by
money managers today to value money market fund shares. Other innovations
include the first institutional tax-free money market fund. As of December 31,
1994, Federated managed more than $31 billion in assets across approximately 43
money market funds, including 17 government, 8 prime and 18 municipal with
assets approximating $17 billion, $7.4 billion and $6.6 billion, respectively.
J. Thomas Madden, Executive Vice President, oversees Federated's equity and high
yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federated's domestic fixed income management. Henry A.
Frantzen, Executive Vice President, oversees the management of Federated's
international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $2 trillion to the more than 5,500 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL
Federated meets the needs of more than 4,000 institutional clients nationwide by
managing and servicing separate accounts and mutual funds for a variety of
applications, including defined benefit and defined contribution programs, cash
management, and asset/liability management. Institutional clients include
corporations, pension funds, tax-exempt entities, foundations/endowments,
insurance companies, and investment and financial advisors. The marketing
effort to these institutional clients is headed by John B. Fisher, President,
Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios.
The marketing effort to trust clients is headed by Mark R. Gensheimer, Executive
Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/BEALER SUBSIDIARIES
Federated mutual funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.
FINANCIAL STATEMENTS
The financial statements for Treasury Cash Series for the fiscal year ended May
31, 1995 are incorporated herein by reference to the Annual Report to
Shareholders of Treasury Cash Series dated May 31, 1995.
*Source: Investment Company Institute
0010801B-TCS(9/95)
